Restaurant biz down, but not as bad as it looks

Oct. 13, 2017

Ever since Hurricanes Harvey and Irma roared through most of the nation's southern regions, analysts and others have been itching for numbers on the storms' overall impact on the restaurant business. And with third-quarter results showing a  year-over-year drop of 2.2 percent in same-store sales in the U.S. — including a 1.2 percent fall-off from this August alone — the answer is coming back and it's not good, according to TDn2K.

Most of Q3 decline stems from hurricanes

With same-store traffic down a significant 4.1 percent and the worst sales and traffic growth rates in more than five years, it's easy to see how the din of restaurant industry doomsayers is catching a lot of attention. But TDn2K said its three-pronged analysis indicated that the story may be more of a one-time hurricanes-induced appearance than a long-running tragedy about an overall downward trend.

"Hurricanes Harvey and Irma affected millions of people in two of the country’s largest economies during the quarter," TDn2K Executive Director of insights and Knowledge Victor Fernandez said in a a report about the analysis. "On the other hand, there were some signs of improvement throughout the quarter, especially when removing the effect of Texas and Florida on the national sales results.”

Those, of course, were the two states most greatly affected by the storms, and the data shows just how powerful a punch restaurants in their boundaries took from Harvey and Irma. Texas, for instance, saw same-store sales growth drop more than 5 percent in August, while Florida saw a bigger 6.2 percent drop with Irma in September with the most negatively affected sector in both areas proving to be fine dining.

But how big an impact can two states have on national numbers as a whole? TDn2K said if those states were excluded from sales growth data, same-store sales growth would actually have improved 0.2 percentage points in Q3 nationally. The impact is even greater for sales performance, the article said.

 "Clearly, sales are still declining year-over-year," said Fernandez, "but the rate at which they are falling has been decelerating."

The hurricanes also generated some significant sales, as well, as people and companies purchased supplies and equipment needed to repair, rebuild and replace those destroyed in the winds and flooding.  

"For example, vehicle sales surged in September, largely due to the replacement of damaged vehicles," TDn2K Economist Joel Naroff, said in the article.  "Going forward, rebuilding efforts will also temporarily add to economic activity. Thus, third and fourth quarter growth will likely be good, but we could pay for it in the first part of 2018."

But you can't blame it all on Mother Nature

TDn2K, however, is clear to point out that not all of the current restaurant woes can be pinned on the weather events, since that old food service nemesis, employee turnover, still is doggedly determined to do harm. That is especially the case now when unemployment in September fell to its lowest rate in nearly 17 years, of 4.2 percent.

After plateauing for the last few months, turnover rates for both restaurant management and hourly employees increased again during August, a sure factor behind growing concerns regarding restaurant staffing with an ever-tighter market being constantly tested by heightened competition for the few warm bodies available.Plus, the national unemployment rate dropped to 4.2 percent in September — the lowest it's been in almost 17 years.

Translation? Restaurant workers are moving a lot to get the best pay and working conditions for their lives and lifestyles. But even here a lot of the situation is regionally dependent.

"For example, Kentucky and Mississippi — which are among the states with the highest restaurant hourly turnover rates in the country — both have unemployment rates around 5.3 percent, well above the national number,” Fernandez said.


Topics: Business Strategy and Profitability, Financial Management, Financial News, Human Resources

Companies: TDn2K


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