Experts Predict Same-Store Sales Growth Unlikely to Change Soon

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It has been some time – more than a year, actually – since the chain restaurant business has marked same-store sales growth, and experts say it’s not likely that things will change soon.

According to data from TDn2K's Restaurant Industry Snapshot, same-store sales fell 1.1% across the chain restaurant industry in the first quarter of 2017. Same-store traffic dropped an alarming 3.4 percent. In the first quarter of 2017, only one-third of chains posted comparable sales growth, down from half the chains during the first quarter of last year

The industry agrees that there are too many units. Many chains continue to consolidate, but at the same time units keep proliferating. Even Chipotle, struggling to recover following an E. coli scandal in late 2015, opened 240 new restaurants last year. In addition, restaurants are facing new competition from food delivery options, meal kits, and independent restaurant growth which is outpacing chain restaurant expansion. Grocery chains are picking at the edges with greater in-house and take-home dining and drinking options as well.

April marked the third consecutive month of negative same-store sales, with results essentially unchanged compared to March. Same-store sales declined by one percent for the month, representing an improvement over March of just one-tenth of one percent. This and other insights come from data by TDn2K based on weekly sales from more than 27,000 restaurant units and 155 brands, representing $67 billion dollars in annual revenue.

Same-store traffic declined -3.3% during April, a modest improvement over March’s results. However, if sales remain at April levels for the balance of the second quarter, it would be the best quarterly performance in over a year.

“There are some reasons to be cautiously optimistic about the second quarter, at least in terms of improvement over what we’ve seen in the recent past,” said Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “The move of the Easter holiday meant that April’s results were likely softer than they would have been without this shift, meaning spending in restaurants was probably a little stronger than the numbers show. Furthermore, sales started softening considerably starting with June of last year. This translates into easier comparisons when calculating this year’s sales growth rates.”

“Unemployment remains very low and there are indications of wage growth given the tight labor market,” said Fernandez. “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.”

2016 was the worst year in the restaurant industry since the recession, and Fast Casual especially has a tough road ahead. Currently the largest dining segment in the industry, Fast Casual continues to increase its market share far more than other segments with more than an 8% net unit growth last year even with so many closures throughout the industry. That means competition for dollars and traffic is about to get especially fierce, say analysts.

The best performing segments in April (and the only segments with sales increases) were Fine Dining, Upscale Casual, and Family Dining. Upscale Casual and Fine Dining are at the top of the average guest check scale. It is important to note, the report said, that sales for all three of these segments appear to have been positively affected by the shift in the Easter holiday.

The weakest segments in April were Fast Casual and Quick Service. After years of positive growth, Quick Service has experienced a downturn in 2017. Struggles continue for Casual Dining, although the rate of decline has lessened somewhat. Average same-store traffic growth for 2017 was -2.9% vs. the -4.1% drop in the last 6 months of 2016.

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