Increase of 0.1 percent marks second month of positive comp sales
Black Box October restaurant sales are slightly positive, reported TDn2K. According to its sales measurement intelligence data, TDn2K announced that sales were up 0.1 percent from last year. Comparable traffic decreased 3.1 percent from last year. For the rolling three months, restaurants posted a negative comparable sales decline of 0.1 percent. And comparable traffic, which has been a weakness for the restaurant industry as a whole, decreased 3.3 percent for the rolling three months.
The latest Black Box results offer up continued hope to an industry that has been challenged by employee turnover and declining traffic inside the four walls of restaurants. There were 104 positive markets, while 94 markets posted negative comparable sales. In analyzing Black Box October restaurant sales, the Western Region was the best performing and Texas was the weakest. Also, more than half of all markets tracked by TDn2K posted positive comparable sales.
TDn2K breaks down the results
The Western Region posted comparable sales growth of 1.3 percent. However, the region’s traffic declined 1.4 percent. Texas posted a comparable sales decline of 0.9 percent. There, comparable traffic decreased 4.0 percent. Nationally, management turnover has become a concern again and has increased, while rank-and-file turnover in October decreased. Moreover, management staffing responds adversely to stagnant pay and a tight labor market.
TDn2K noted that October sales signal that we’re not in a recession quite yet. It should be recognized that the latest comparable sales results are headed in a positive direction. This, despite the fact that those results are lapping strong numbers from last year. A little known fact is that restaurant guests have been willing to spend more at restaurants. This has been a boon to average checks and negated some of the weak guest traffic. Net restaurant location growth is one of the reasons traffic has been “diluted among many options,” noted the Black Box October sales report.
“What is even more encouraging for the industry is that this small positive growth during the last two months has been achieved despite the industry lapping over two months with relatively strong performance in 2018,” said Victor Fernandez, vice president of insights and knowledge for TDn2K
The industry’s two-year same-store sales growth continues to be positive and stable. The industry grew its same-store sales by 1.0 percent compared with October of 2017, while the average two-year growth for the previous six months is also 1.0 percent.”
Off-premises business a significant dynamic for industry
Off-premises business continues to shift dining occasions to the home. TDn2K attributes the sales growth in October entirely to the growth of off-premise restaurant orders. A total of 86 percent of restaurant companies currently use a third party delivery app, up from 82 percent at the end of last year, noted a separate Black Box Intelligence report. The adoption by restaurants is quite high. The off-premises opportunity is also high and TDn2K is monitoring this shift away from in-restaurant sales closely, it said.
A study by Technomic, Inc., a food consultancy in Chicago, and the National Restaurant Association, found that 79 percent of consumers had ordered restaurant delivery in the prior month. Meanwhile, 53 percent had ordered third-party delivery in the previous month. Furthermore, 35 percent of consumers say using a third party app is faster than the alternative—a significant finding. Restaurant chains, including Outback and the Cheesecake Factory have renegotiated or put in place third party delivery with DoorDash, the leading third-party delivery company in the most recent quarter.
Segment performance, conclusions
Fine dining, family dining and upscale casual dining segments performed the best. However, casual dining continued to struggle, noted TDn2K. And management turnover on a rolling 12-month basis was one again on the rise. In QSRs, management pay had increased only 1.2 percent over the last four years on an inflation-adjusted basis. Even worse, In full-service dining, pay had actually decreased 3.5 percent when adjusted for inflation. Restaurants need to pay managers in a manner that helps retain them and provides for a more secure livelihood.
“Those that have provided a compelling employee value proposition and are effectively delivering on it are likely to remain the winners in the current environment and fare better should economic conditions deteriorate,” added Fernandez. Likely, the best outcome will be slightly positive sales in Q4. However, negative comparable sales are a “real possibility” noted TDn2K.
This Black Box October report comes from proprietary Black Box Intelligence data from TDn2K, based on weekly sales from over 31,000 restaurants producing $72 billion in annual sales.
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