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Restaurant industry sales in June may signal slowdown: TDn2K sales report

June paints a clearer picture that is cause for some concern

Restaurant industry sales growth continues to be somewhat anemic. June same store sales decreased 0.01 percent, with a rolling three-month increase of only 0.19 percent. This is according to data from a TDn2K June sales report. The analytics firm’s Blackbox intelligence has been showing a somewhat troubling trend, and the latest results are no comfort. It’s “bringing up new concerns for a sales slow down,” said the latest online report. June same store traffic decreased 3.14 percent, with a three-month rolling average of -2.88 percent.

Traffic is being dispersed by both consumer’s penchant for restaurant delivery and takeout, and due to an increase in restaurant locations. TDn2K suggests that price increases won’t be able to mask the loss in guest counts for long. For better sales performance, restaurant chains should increase the value proposition of “to-go offerings.” In other words, restaurants must make competing in the off-premises space an imperative, as it’s a golden opportunity.

Fifty-five percent of markets, as tracked by TDn2K, posted positive same store sales growth in June. Forty-five percent saw same store sales decreases. With respect to regions, New England was the strongest, posting same store sales growth of 1.12 percent. There, same store traffic declined 2.29 percent.

Texas performed the worst, posting a same store sales decrease of 1.57 percent. The Lone Star state saw same store traffic decline 4.83 percent. In fact, four of the eleven regions tracked posted negative same store sales. This group included Florida, Mid-Atlantic, New York-New Jersey and Texas.

“Although we would rather see strong positive sales growth consistently at 1-to-2 percent every month, the essentially flat sales growth during June and the small positive growth during the second quarter don’t indicate much change for the industry,” advised Victor Fernandez, vice president of insights and knowledge at TDn2K.

TDn2K June sales report says traffic, to-go trend root issues

He says the stronger economy has translated into higher average checks, which helped push same store sales into positive territory. This hides the negative impact of same store traffic decline. And a slowdown is emerging. This year, first quarter same store sales grew 0.9 percent, while second quarter same store sales grew only 0.2 percent.

Traffic is at the heart of the restaurant industry’s sales growth woes, says TDn2K. Traffic decreased 2.0 percent in the first quarter, and then dropped 2.9 percent in the second quarter. “As long as the industry is not able to at least hold on to current guest counts, achieving sustained same-store sales growth will not be possible, and we will likely continue to see anemic growth rates with 1.0 percent as a best-case scenario for sales,” said Fernandez.

To-go traffic has been strong, he notes, and the growth of to-go sales have far outpaced growth of dine-in sales. Said the June TDn2K sales report, “Looking ahead to the rest of 2019, the expectation is for more of the same: declining traffic in comparable stores offset by rapid guest check growth, restaurants passing their rising costs into menu prices and consumers electing to spend more given the relatively strong consumer sentiment.”

Also, staffing shortages, particularly in the general manager position, are further accelerating turnover because management is key to staff retention. It’s a very competitive labor market. Additionally, staffing,, historically, has impacted the guest experience in a big way. Shortages can impact repeat traffic negatively. Blackbox Intelligence from TDn2K uses data from 31,000 locations at 172 brands, which represent $72B in annual restaurant sales.

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Photo credit: Cosmo Wei

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