Restaurant Quarterly Update - Winter 2020

December restaurant survey data indicated that same-store sales (SSS) have hit their worst industry result in over two years, with an overall 2019 SSS decrease of 0.1%. This slight decline, relative to significantly decreasing traffic figures, represents how rising guest checks have impacted the sector. Although the industry would rather see strong positive sales growth consistently at 1%-2% every month before confirming the sector’s recovery, there may be no further clarity in the coming months, as only modest growth is expected in the face of declining traffic and rising turnover.

2018 proved to be a strong year in consistent SSS growth, but since then the industry’s movement has been unpredictable. The third quarter of 2019 experienced a 3.5% decline overall in guest traffic, but restaurant sales improved 0.3% from Q3 to Q4 of 2019. 

In reality, the industry has not moved much over the past two years. Given the traffic challenges restaurants are battling, long-term sustained sales growth is likely not feasible. The only element offsetting decreasing traffic numbers is higher check averages, which are likely due to large groups ordering takeout and delivery.

The only subsector performing extremely well throughout the declining third quarter is fine dining, which is stimulated by business spending and a typically wealthier consumer market. Family and upscale dining is the only other segment to experience SSS growth during the fourth quarter.

Outlook for the restaurant industry remains predicated on uncertainty in the overall economy, where income growth is slowing. Unlike in the past two years, restaurant employment has also slowed down as the available workforce is shrinking.

Source: Nation’s Restaurant News, TDn2K’s Black Box Intelligence report and The Wall Street Journal.