The Restaurant Industry Snapshot for June, released this week by Black Box Intelligence and People Report, reports a disappointing second quarter for the industry that can no longer be attributed to the weather. Same-store sales were 0.3% in positive territory, during Q2 2014, a 0.5% improvement over the Q1 results which were dramatically affected by the extreme winter weather. “However, even without the weather-related constraints, same-store sales growth for the quarter was pretty lackluster;” said Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K, parent company of Black Box Intelligence and People Report.
Expectations are for a stronger second half of the year from a same-store sales growth perspective, considering that same-store sales were negative during both Q3 and Q4 of last year, creating lower hurdles in 2014. However, considering the mid year performance of a meager +.06% comparable sales, one has to wonder if we will get the roll over benefit. On a two-year basis, sales in comparable stores grew by about 1.2% during the second quarter, while guest checks have grown at an average of 2.1% for all months during this same two year period. “The sales growth we are observing is not reflecting the full price increase amounts that brands have likely taken during the last two years given the growth in average check”, continued Fernandez. “The barrier continues to be the declining guest counts experienced by the industry.”
Traffic growth in comparable stores, negative once again during Q2 at -1.4%, was still the strongest result for the industry since Q2 of 2013. The industry has yet to post a quarter of positive same-store sales traffic since the recession. On a two-year basis, same-store traffic dropped by about 2.7% when compared with Q2 of 2012, further illustrating the chain restaurant industry’s main problem.
“Underlying this data is an environment that combines slow-moving improvements in the labor market, changing consumer preferences who seem to be more interested in different options beyond the traditional restaurant chains, and perhaps most importantly, disposable personal incomes that are not growing at a pace that allows for much spending growth on restaurants”, expressed Fernandez. According to the latest Restaurant Industry Willingness to Spend Index published by Consumer Edge Research, consumers’ expectations dropped during June and are pointing towards decreased spending in restaurants in the upcoming month.
When analyzing sales at the regional level, we uncover another sign of weakness for the industry. Although sales grew at the national level, same-store sales declined in 5 of the 11 regions tracked by Black Box Intelligence during Q2. The strongest region according to same-store sales growth was Mountain Plains at 1.9%, while New York-New Jersey’s sales growth of -1.6% classified the region as the worst in the country for the second consecutive quarter; again no longer attributable to winter storms.
The restaurant industry continues to add jobs as reflected by People Report’s latest findings. Job growth for May was 3.5% year-over-year; this represents the seventh consecutive month of restaurant jobs growing at more than 3.0%. Unfortunately, turnover for both restaurant managers and hourly employees also continues to tick upwards. Expectations of restaurant HR professionals, as tracked in the People Report Workforce Index are for increasing employment pressures in the form of rising vacancies and recruiting difficulties in Q3. Could be a long hot summer for restaurateurs.
The Restaurant Industry Snapshot is a compilation of real sales and traffic results from over 185 DMAs from 110+ restaurant brands and over 18,000 restaurants that are clients of Black Box Intelligence, a TDn2K company. Currently, data is reported in four distinct segments: casual dining, upscale/fine-dining, fast casual, and family dining. Black Box Intelligence is a sister company to People Report, which tracks the workforce analytics of one million restaurant employees. TDn2K reports on over 30,000 restaurant units, one million employees and 45 billion dollars in sales. The Restaurant Industry Snapshot also includes the Restaurant Industry Willingness to Spend Index from Consumer Edge Research, a monthly household survey of more than 2,500 consumers.