Restaurant Industry Snapshot™ December, 2018

Strong holiday sales close best year for restaurants since 2015


Comp Sales & Traffic

Comp Sales

rolling 3 months

Comp Traffic

rolling 3 months

December closed the year strong for the restaurant industry. December’s same-store sales growth of 2.0 percent was the best monthly performance in over three years. The fourth quarter of 2018 was also encouraging for the industry. Not only was the quarter’s same-store sales growth of 1.4 percent the best in over three years, but the industry was able to achieve those results on top of the only quarter with positive sales growth in 2017. From an annual perspective, 2018 saw the industry return to a positive same-store sales growth of 0.7 percent, after two years of declining sales.

As upbeat as these sales results sound, the industry continues to suffer from declining guest counts. Same-store traffic growth was -0.9 percent in December. Traffic growth closed the year at -1.6 percent for the fourth quarter. It continues to be through an acceleration in average spending per guest that the industry can produce positive sales growth amid the persistently falling guest counts. Average guest checks grew by 3.1 percent during the fourth quarter year over year.

Regional & Market Performance

Positive Markets 165 | 84% Negative Markets 32 | 16%

Strongest Region

New England
  • Sales 4.21%
  • Traffic 0.92%

Weakest Region

  • Sales -0.01%
  • Traffic -2.24%

Restaurant sales were strong across most of the country during December, another positive sign for the industry. From the 197 DMAs tracked by Black Box Intelligence, 84 percent were able to post positive same-store sales growth. To put this number in perspective, as strong a year as the industry has had, the percentage of markets with positive sales growth never topped 76 percent during the first eleven months of the year.

Furthermore, from a wider, regional perspective, the strength of the industry’s sales growth also becomes apparent. All ten regions of the country except for Florida had strong positive same-store sales growth of 1.0 or better during December. In the case of Florida, sales growth was essentially flat.

The Restaurant Workforce

job growth & turnover

Year/Year Job Growth*


Manager Turnover*

Q4 '18
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Hourly Turnover*

Q4 '18
Roll 12
*People Report, Human Capital Intelligence, November, 2018 Release

According to TDn2K research, one of the keys to restaurant success in the marketplace is delivering superior service. However, this is increasingly difficult to accomplish given the rising staffing difficulties facing the industry. It is not surprising to hear most operators say most of their restaurants are understaffed and it is harder today to find enough qualified employees.

Not only is the restaurant continuing to add a significant number of jobs (restaurant employment has grown by over 1.8 percent year over year during the last two months), but the number of vacancies that need to be filled because of turnover are still rising.

Among the solutions companies are employing to aid in their retention are adjustments to their compensation offerings, improving engagement for their managers and providing training and development opportunities throughout their employee ranks.

Strong Holiday Sales Close Best Year for Restaurants Since 2015

2018 Year End Results

December Q4 2018
Comp sales 2.0% 1.4% 0.7%
Comp traffic -0.9% -1.6% -1.9%
Guest check 3.0% 3.1% 2.6%

The restaurant industry had plenty to celebrate during the holiday season. December’s same-store sales growth of +2.0 percent was the highest since August of 2015. December became the seventh consecutive month of positive growth, which highlights the industry’s strength throughout the year. By comparison, the industry was only able to post positive sales growth during two months in all of 2017. These insights come from TDn2K’s Black Box Intelligence™ data, based on weekly sales from over 31,000 locations representing 170+ brands and nearly $72 billion in annual sales.

“Perhaps the most encouraging news for the industry came in the form of the unusually strong fourth quarter results,” said Victor Fernandez, vice president of insights and knowledge for TDn2K. “Same-store sales growth during the fourth quarter was +1.4 percent, which was the highest in over three years. Moreover, the industry was able to post these results on top of the only quarter with positive sales growth last year. The industry’s recovery from a longer-term perspective also continued to show some upward momentum. Same-store sales during the fourth quarter increased by slightly over 1.4 percent compared with the same period in 2016. Two-year sales growth had been negative for the past eight consecutive quarters.

Annual same-store sales growth for 2018 was +0.7 percent. Though only moderate growth, this is also the best performance by the industry since 2015.

Guest Counts Continue to Erode, But Small Improvement Cause for Some Optimism

According to government numbers, as a country, Americans have spent more on food away from home than on food at home over the last few years. But an acceleration in restaurant prices compared with groceries and a growing field of competing dining options continue to translate into what seems to be the new normal in chain restaurant performance. Even when sales are up, the industry continues to suffer from declining same-store guest counts.

Same-store traffic growth during December was -0.9 percent, while traffic growth for the fourth quarter was -1.6 percent. The latter represented a +0.4 percentage point decline from the previous quarter’s growth rate.

“Although the importance of persistently declining guest counts cannot be overlooked, there are some small signs of recovery in the latest results,” commented Fernandez. “Two-year same-store traffic growth was -3.6 percent during the fourth quarter of 2018. The average two-year growth for the first three quarters of the year was -5.8 percent.

Price Increases and Reduced Discounting Fuels Sales Momentum

How was the industry able to post its best sales results in years during the fourth quarter, yet traffic growth worsened compared with the previous quarter? The answer is the rate at which restaurant guests are spending per visit accelerated during the quarter. Average guest checks grew by 3.1 percent year over year in the fourth quarter. During the previous three years, average guest check growth never topped 2.5 percent.

“While many brands utilized heavy discounting and price promotions in 2017, average guest checks only grew by 1.9 percent during the year for the industry. Restaurants seem to have eased off this tactic in 2018,” continued Fernandez. “Guest check growth for this year was a significantly higher 2.6 percent pointing to price increases and/or an upward shift in product mix.”

Fast Casual and Casual Dining Improve Most, Upscale Dining Still Dominates

Based on same-store sales growth, the best performing industry segments during 2018 were fast casual and casual dining. But the real story behind these segments’ performance is one of improvement after a previous year of abysmal results. These segments were the worst performers based on same-store sales growth during 2017. The fact that they had soft comparisons the previous year definitely helped boost their results in 2018.

From a consistency point of view, the real winners are the segments with the highest average checks: upscale casual and fine dining. Not only did both of these segments have strong positive growth in 2018, but they are also the only industry segments that were able to sustain positive sales growth averaged over the last three years.

The upscale casual and fine dining segments also have the best average traffic growth results since 2015, but even they cannot escape the trend of declining guest counts that plagues the rest of the industry.

Labor Market Helps Boost Wage Gains and Consumer Spending

“The chaos in the equity markets was not representative of the condition of the economy,” explained Joel Naroff, president of Naroff Economic Advisors and TDn2K economist. “Nothing made that clearer than the huge December increase in employment. Businesses are still hiring and that is causing wages to rise faster. As a result, consumer spending is holding up and should continue to do so, which is good news for the restaurant industry.”

“However, most indicators point to a moderation in growth going forward, but only from strong to a more sustainable, yet decent, pace. A recession does not appear to be likely anytime soon and if a major slowdown occurs, it probably would not come before late in the year. Though the moderate growth should support continued improvement in restaurant sales, it will also lead to lower unemployment rates and even greater pressure on wages.”

Staffing Difficulties Rolling into 2019

The extremely tight labor market, which undoubtedly helps on the sales side of the equation for restaurants, continues to disrupt the operations side through its effect on staffing levels. On one hand, in this environment operators are increasingly having difficulty finding enough employees to fully staff their restaurants. According to TDn2K’s latest People Report Workforce Index, 74 percent of companies reported increased difficulty finding qualified hourly employees. Perhaps most concerning, 59 percent said they are having a tougher time hiring people to manage those restaurants.

One reason the vast majority of restaurants reported they are constantly understaffed, especially in the back of the house positions, is that restaurant turnover continues to increase. Based on People Report research, during the first eleven months of 2018, median turnover increased for hourly employees and restaurant managers in both limited service brands (quick service and fast casual) and full service brands (casual dining, family dining, upscale casual and fine dining). All levels of restaurant employees have been experiencing historically high turnover rates. Given that turnover is rising proportionally more for restaurant managers than for hourly employees in both service styles (limited and full service), the expectation is for staffing headaches to carry into 2019. Management turnover, TDn2K research has revealed, is a leading indicator of hourly retention as well as restaurant sales and traffic performance. It is those brands that are successful at retaining and developing engaged managers who will be better positioned to win the market share battle in the new year.


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 monthly. 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 43,000 restaurant units, nearly 2.6 million employees and $72 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.


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