January, 2017Restaurant Industry SnapshotTM
0%Comp Sales
-2%Rolling 3 Months
-2.5%Comp Traffic
-4.1%Rolling 3 Months
2.4%Per Person Average/PTA
2.2%Rolling 3 Months
FoodComp Sales
Jan
Rolling 3 Months
AlcoholComp Sales
Jan
Rolling 3 Months
Mid-AtlanticBest Region
Sales 6.90% Traffic 4.8%
TexasWorst Region
Sales -4.30% Traffic -6.3%
72Markets
Sales
37%
123Markets
Sales
63%
0%Year/Year Job Growth*
0%November
ManagementTurnover*
Q4 '16
Roll 12
Dec
YTD
HourlyTurnover*
Q4 '16
Roll 12
Dec
YTD
*People Report, Human Capital Intelligence, December, 2016 Release
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Flat Sales, Welcome Change for Restaurant Industry in January

Published

The restaurant industry kicked off 2017 in a much more uplifting fashion than it ended 2016. While same-store sales growth was flat (zero percent) in January, it represented a welcome break from the ten consecutive months of negative sales growth experienced by the industry through the end of last year. January’s jump of 4.3 percentage points was the biggest month-to-month improvement in same-store sales growth in almost 4 years. This insight comes from data reported by TDn2K™ through The Restaurant Industry Snapshot™, based on weekly sales from nearly 26,000 restaurant units and 130 + brands, representing $65 billion dollars in annual revenue.

“Although positive sales growth is always welcome, we have to be cautious about getting too optimistic about these latest results,” commented Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “On one hand, it is common to see some large swings in comp sales during the winter, as significant weather events create fluctuating year-over-year comparisons. For example, sales were up between 20 and 65 percent in three of the regions on the East coast during the third week of the month, clearly weather related.”

“In addition to weather, there were unusual events in January that likely had some impact on restaurant sales. The year started with a federal holiday on January 2, which was unlike 2016. We also witnessed the effect of the presidential inauguration and the massive marches the following days. The combined impact is difficult to gauge, but operators will closely watch performance in upcoming weeks to get a sense if the downward trend in sales has been reversed or was simply obscured in all the noise.”

Consumer Spending and Millennial Impact

Growth slowed in the final quarter of the year, but the overall number was misleading,” explained Joel Naroff, President of Naroff Economic Advisors and TDn2K economist. “Consumer spending was quite solid and demand for domestic goods was strong. Incomes, including wages and salaries, grew at a solid pace and the gains accelerated in the second half of the year. With the labor market continuing to tighten, that trend should continue this year. That bodes well for consumer spending, which could be even stronger in 2017. Millennials are moving into their thirties and that means they should start forming households and having families. While they have greatly altered restaurant demand already, their aging could lead to another round of changes. Though any new trends that may emerge may be a few years off, it needs to be tracked starting now.”

Traffic and Average Guest Checks

Same-store traffic dropped by -2.5 percent in January. Although still negative, this was the best month for the industry since last May. Average guest checks grew by 2.4 percent during the first month of the year. On average, guest checks have grown at a pace of 2.3 percent year-over-year since August 2016.

Two-Year Growth Comparisons

A two-year view of sales performance offers another perspective of the slowdown in sales and reveals January’s sales growth to have been relatively weak. Same-store sales fell by about -0.8 percent compared with January of 2015. Two-year sales growth rates have been negative for all months since October of 2016. In contrast, same-store sales calculated on a two-year basis grew by an average 2.5 percent during the first six months of 2016 and by an average 3.0 percent for all months of 2015.

Segment Performance

Three segments experienced positive sales growth in January: upscale casual, family dining and quick service. Quick service has been consistently in the top spot, but had slipped the past two months and rebounded in January.

January sales declined in fine dining and fast casual. For the first time in over five years, fast casual was the weakest performing segment based on sales growth.

Also noteworthy is the fact that casual dining was able to achieve flat results in January, breaking a streak of thirteen consecutive months of negative same-store sales growth.

Restaurant Turnover

Restaurant industry woes continue to extend beyond the declining sales and into the increasingly difficult task of keeping restaurants staffed. According to TDn2K’s People Report™, in December restaurants once again suffered an increase in their hourly employee and restaurant manager turnover.

Turnover rates for managers and hourly employees started increasing in 2010. Currently those rates are at the highest levels reported in over ten years. Turnover is clearly correlated to the overall unemployment rate, which means that, at close to full employment, continued employment pressures are expected through the year.

Terminated Managers Remain In the Industry

A recent survey by People Report revealed that 62 percent of responding restaurant companies estimate that over half of their terminated managers leave to go work for another restaurant company. “Right now, there are many vacancies appearing every day for restaurant managers, and they are mostly getting filled by people leaving their current restaurant jobs,” said Fernandez. “Many restaurant managers are not finding what they are looking for in their current jobs and are very willing to go look for it at another restaurant company.”

TDn2K™ (Transforming Data into Knowledge) is the parent company of People Report™, Black Box Intelligence™ and White Box Social Intelligence™. People Report provides service-sector human capital and workforce analytics for its members on a monthly basis. Black Box Intelligence provides weekly financial and market level data for the restaurant industry. White Box Social Intelligence delivers consumer insights and reveals online brand health. TDn2K membership represents 37,000 restaurant units, over 2.1 million employees and $65 billion in sales. They are also the producers of leading restaurant industry events including the Global Best Practices Conference held annually each January in Dallas, Texas.

White Box Social Intelligence

Restaurant Guest Satisfaction Index 192,537 Units analyzed
Food
Service
Intent to Return
Positive
Mentions
+/- Last Month
Top Segment
43.3%
1.02%
Fine dining
44.49%
5.89%
Fine dining
49.25%
3.38%
Fine Dining
11.4MMNumber Of
Mentions
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