Restaurants posted a 2.3-percent comparable sales increase
There’s a bright spot in January 2020 restaurant industry sales, but according to Black Box Intelligence, it may be short-lived. Although Black Box January comparable restaurant sales grew 2.3 percent—the best monthly result in four years—weather played a significant, albeit unseasonable, role. Unusually warm weather in several markets may have contributed to a surge in sales during January, a typically cold and stormy month.
47,000 restaurants that produce $75B in sales make up the reporting base sample of data that Black Box Intelligence uses in its reporting. The latest results are definitely driven by mild weather, and are not representative of a larger trend, says Victor Fernandez, vice president of insights and knowledge at Black Box Intelligence.
Hot markets boost sales
In fact, the five strongest sales-performance regions had mild January temperatures. These include the Mid-Atlantic, New England, the Midwest, New York-New Jersey and Mountain Plains. As a result, each of these regions posted comparable sales greater than 4 percent and pushed up the overall industry achievement.
But overall, restaurants posted a 0.7 percent decrease in traffic. In contrast, the five strongest markets grew their traffic. Also, for the first time in the past years, all industry segments were able to achieve positive same-store sales growth during January. Black Box notes the best performing segments, as measured by sales growth, were upscale casual, fine dining and casual dining.
Economic factors, consumer demand
Regarding economic growth, Joel Naroff, president of Naroff Economic Advisors and Black Box Intelligence economics, said “Q4 growth came in at the expected 2.1-percent pace, but the details make it clear that it will be difficult for conditions to improve sharply during the first half of the year. The key household and business components were soft and should stay that way.”
He also said the wild card is the impact of coronavirus on world economic growth. Naroff noted it will slow activity worldwide if it remains unchecked. He suggested that the next quarter or two could be soft. Consumer demand, however, is another story.
“Consumer confidence remains extremely high, the unemployment rate is at historic lows and while wage increases are moderating, they are still decent,” said Naroff. “Thus, the forecast for modest gains this year in restaurant demand remains in place.”
Labor, looking ahead at 2020
The double-edged sword of labor economics is also impacting restaurants. With unemployment under 4 percent, it remains challenging to find workers. This situation has also exacerbated turnover in the employee and management ranks, as of this fall. But restaurants need good workers with robust training to be able to deliver a high level of customer service. High service scores have set some restaurant concepts apart in the recent past, while high service scores correlate highly with strong sales performance.
The report conveyed, “During 2019, service was the attribute of the restaurant experience that most differentiated top performing restaurant brands based on same-store sales and those underperforming. According to Black Box Guest Intelligence, the gap in guest net sentiment between top and bottom performers was greater in service than it was for food, beverage, ambiance or even value.”
Black Box Intelligence expects comparable sales growth to be in the in the small single digits in the coming year. Since the first half of the year is lapping a strong first half of sales from last year, the first quarter may not be as strong. However, if warm weather persists during the winter, the results could be significantly different. The current consumer environment should help restaurants, but traffic will remain negative because of the multitude of food choices and overbuilt supply.
Photo credit: Dmitriy Frantsev
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