The third quarter started on a positive note for the restaurant industry as July results represent the 13th consecutive month of positive comparable store sales. Same-store sales growth of 1.6% did drop 0.5% below June results. This insight comes from data reported by TDn2K’s Black Box Intelligence through The Restaurant Industry Snapshot, based on weekly sales from over 22,000 restaurant units and 120 brands representing $55 billion dollars in annual revenue.
“Even though sales growth slowed slightly from the previous month, results still reflect positive growth for the industry. Even more encouraging for chain restaurants is the fact that the industry experienced a small improvement in same-store traffic and relied less on increasing guest checks to achieve the positive July numbers”, commented Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “However, the industry continues to experience declining guest counts and this remains a top concern.”
Same-store traffic growth was -1.2% during July, which represents a 0.3% improvement from June’s results. Although still negative, July’s numbers represent the best traffic results in the last six months. Average guest check growth during the first six months of the year was 3.4% year-over-year, a combination of restaurant brands increasing prices, promotions and shifts in sales mix and type, particularly an acceleration in to-go and catering sales. This trend did diminish slightly during July, with average guest check growing at just 2.8% year-over-year.
“July seems to have been characterized with the economy once again showing mixed signals regarding its strength. On one hand, the labor market continued to improve, but income gains are still modest. Meanwhile, consumer confidence fell compared with June, albeit still at levels much higher than in recent years,” says Fernandez.
The best performing region in July was the Western region, with same-store sales growth of 3.7% and 0.3% for traffic. On the other end of the spectrum, the New York-New Jersey region posted the worst performance of -0.7% growth in same-store sales and -2.4% for traffic. On a market level, 135 of the 193 DMAs tracked by Black Box Intelligence (or 70% of all DMAs) reported positive sales growth in July. As a comparison, 78% of all DMAs tracked saw positive sales growth during June.
According to the latest research from TDn2K’s People Report, the restaurant industry continues adding jobs at a rapid pace. During June, employment in the chain restaurant industry grew by 2.8% year-over-year, comparable to the 3.0% growth reported in May. Preliminary estimates for the US economy suggest a slowdown in job creation during July, which hints at the restaurant industry continuing to add a considerable number of jobs during this month but probably at a lower rate than what has been reported for the last two months. This potential slowdown notwithstanding, the restaurant industry continues to generate jobs at a much higher rate than the overall economy, showing the enormous importance of the industry regarding employment.
Retention continues to be a critical challenge for the restaurant industry. Once again, restaurant manager and hourly employee turnover increased during June and is already at levels comparable and in some cases even higher than what People Report tracked before the recession. A very clear indicator of the magnitude of this challenge is the fact that 75% of all managers and hourly employee terminations are now voluntary, a response to the tightening labor market and increased number of opportunities for employees. “We don’t expect to see any downward movement in restaurant turnover rates anytime soon given the current dynamics of the labor market”, said Fernandez.
According to TDn2K’s White Box Social Intelligence, of the three key guest satisfaction attributes tracked (“food”, “service”, “intent to return”) from a sample of 6.1 million social media mentions during July, food is overwhelmingly the most common attribute based on number of mentions. However, the trend reported in previous months continues: while food mentions become relatively less common, service mentions are becoming increasingly important. For example, on average 88% of all mentions were food-based during the first two months of the year, while the average is only 76% during June and July. Meanwhile, only 8% of all mentions were based on service at the beginning of the year, while the percentage has grown significantly to 20% and 17% during June and July, respectively.
For the second consecutive month, the segment that generated the highest percentage of positive online mentions based on food and on intent to return was Casual Dining. For service, the segment that achieved the highest percentage of positive mentions during July was Fast Casual. This represents a departure from the trend of full service segments, primarily Casual Dining and Upscale Casual/Fine Dining, being the top performing segments based on percentage of positive service mentions. This is also the first time since December (when White Box Social Intelligence started reporting on these attributes) that Fast Casual is the best performing in terms of positive service mentions.
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 unparalleled consumer insights and reveals online brand health. Together they report on over 32,000 restaurant units, over one million employees and $55 billion in sales. They are also the producers of two leading restaurant industry conferences: Summer Brand Camp and the Global Best Practices Conference each held annually in Dallas, Texas.