Limited-service traffic down in April, fine dining traffic up

May 15, 2017

New data analyses from customer data company, TDn2K, suggests that the trend of top wage earners getting richer and the bottom levels pinching pennies, continues unabated. It reported that fine dining and other higher-cost restaurant categories saw increases, while the once ever-popular QSR segment dropped off. A news release covering the data from April 2017 shows restaurants logged a third straight month of negative same-store sales in April, dropping to -1 percent for the month, up just 0.1 percent from March. The "snapshot" is based on weekly sales culled from more than 27,000 restaurant locations across more than 155 brands. 

That data found that overall restaurant industry same-store traffic dropped -3.3 percent last month, just 0.1 percent more than March. Additionally sales for this year through April 30 are now down -1.5 percent, which is still better than the last quarter of 2016 when sales dropped -2.3 percent, said Victor Fernandez, executive director of Insights and Knowledge for TDn2K.

"Sales started softening considerably starting with June of last year. …" he said in a news release. "Unemployment remains very low and there are indications of wage growth given the tight labor market. Consumer confidence dropped in April, but still remains strong compared with recent years. However, as many have pointed out, the generally strong economy has not yet translated to sustained growth for the industry."

Consumers spending less overall
Joel Naroff president of Naroff Economic Advisors, said mediocre consumer spending led to a slow growth rate for the first quarter economically in the U.S. He said a real cutback in higher priced items like cars set in after almost two years of growth in that sector. 

"The rising household debt load is likely to suppress consumption, including eating out," Naroff said in the news release. "But the real issue for the economy is expectations. After the elections, companies and individuals start(ed) counting on tax cuts to drive the economy forward. 

"Those cuts are not expected to be passed until the end of the year and given the political uncertainty, it is not clear how extensive they will be. The hope that consumer and business spendin will surge is probably just that, hope. 


"That said, the economy should rebound this quarter, but it looks like we are in for another year of 2.25 percent growth. While that pace is not likely to make anyone happy, it is enough for the labor market to tighten further and the Fed to continue raisng rates, possibly as soon as June."

Restaurants popular with well-heeled are only real winners 
In  April, the only real restaurant industry winners were those specializing in fine dining, upscale casual and family dining. Upscale casual and fine dining top the average guest check scale with less price-sensitive customers than other segments. A shift in the date of the Easter holiday appears to have positively affected sales for all three segments, the study found. 

But in fast casual and QSR, it was a different story. After years of growth and top industry performance, QSR has been declining this year. To add to the fast food operators problems, fast casual concepts are now the fastest-growing segment, indicating that sector may be soaking up QSR's lost customers. 
Casual dining, meanwhile, continues to struggle though less severely in April. Average same-store traffic growth was down just 2.9 percent versus 4.1 percent in the last six months off 2016. 

And the labor pool is curdling atop the ice cream cake

Statistics like the following may do more to relay the hiring problems restaurants are having than anything else:

  • Four of every five terminations were voluntary last year. 
  • 40 percent of all hourly terminations happen in first three months of job. 

Employees are quitting and not long after they're hired. That is particularly the case in the positions in the kitchen and other back-of-the-house areas since TDn2K found that a recent People Report survey shows most restaurants get three times the number of applicants for dining floor and front-of-the-house positions than those behind the scenes. 

 

 


Topics: Business Strategy and Profitability, Financial News


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