August marked a potentially pivotal moment for the restaurant industry.

After several challenging months, signs of recovery are beginning to appear. While performance metrics show a mixed picture, they suggest the worst may be behind us.

August Restaurant Performance Data: Sales and Traffic Trends

Same-store sales growth of -0.4% made August the third consecutive month of negative growth year over year.

Meanwhile, same-store traffic growth  was -3.6% in August, which is the second-worst month since January.

Which may not sound all that positive.

However, it is the momentum we are seeing in our data that supports the idea of a new upward trend for restaurants.

Same-store sales growth has improved by 2.0 percentage points in August relative to July.

In addition, same-store traffic growth accelerated by 1.1 percentage points month-to-month.

But, if that was the only supporting evidence, it would make for a weak case.

This is due to the fact that July was so negative. In addition, July was likely hurt by many adverse factors such as Covid surge, summer storms and unusual heat, and the first days of the Olympics.

But it’s the early September data that is providing most reason for optimism.

September So-far

On the tail of August’s Restaurant Performance, September is kicking off to a promising Q4.

We are three weeks in and the month is showing a return to positive same-store sales growth.

Additionally, same-store traffic growth is stronger compared to any other month since December.

Our expectation has always been for a stronger Q4 relative to Q3, and the latest data shows that the recovery may start earlier than expected.

With quick service, all segments have seen an improvement in their year-over-year same-store sales growth in August compared to July.

And, even in the case of this segment, the difference was a small 0.2 percentage point deceleration.

To put it in perspective, let’s break it down by the best and worst.

Segment Breakdown: Who’s Leading and Who’s Lagging

Top-Performing Segments

Looking at August’s Restaurant Performance, the best-performing segment was Fine Dining.

In addition, Fast Casual, and Upscale Casual were also successful.

All three saw the biggest check growth during the month of August.

Lagging Segments

In contrast, the worst performing segment was Family Dining.

Check Growth Breakdown

Average year-over-year check growth accelerated again during August, reaching 3.4% after two months in which it was less than 3.0%.

In addition, the month claimed the 2nd highest check growth so far this year. This was only behind May, which was higher at 3.7%

On the other hand, the segments with the smallest check growth were those in limited service (quick service and fast casual).

Staffing and Its Impact on Performance

Understaffed restaurants face a difficult choice: decrease their capacity and bring in fewer guests.

However, this will inevitable lead to reduced revenue. Or operate with lower standards which can tank their reputation, ultimately – also – reducing revenue.

Over the last few years, this lose-lose scenario has become all too real for restaurateurs.

Since COVID, restaurants have had a difficult time maintaining adequate employee levels.

But finally, many brands are beginning to see the light when it comes to staffing.

The Great Resignation & Skeleton Crews

Two years ago, according to the Black Box Intelligence’s annual Total Rewards Survey, only 10% of restaurant companies were fully staffed in back of the house hourly positions.

And, for front of house hourly positions? Only 5% of brands said they had enough employees.

At this time, the industry was still reeling from The Great Resignation.

Therefore, it was no surprise it saw record numbers of employees quitting their jobs.

High wage inflation and low unemployment rates favored “job switchers”.

The restaurant industry was hit especially hard.

Employers Starting to See Relief

Over the past two years, inflation numbers have been higher than ideal.

However, they have been declining.

So much so that last week the Fed cut the interest rate by half of a percentage point (the highest cut since 2008).

Thus this signaled optimism that inflation is finally stabilizing.

A factor behind this moderation in inflation has been the deceleration in wage growth. Moreover, this has translated into less pressure on overall prices.

Additionally, the unemployment rate has slowly, but steadily risen over the past year and reached 4.3 percent in July. Thus, it making it the highest it’s been since 2021.

Lower wage inflation rates and increasing unemployment favor “job stayers” and are a much more favorable environment for employers to operate in.

As a result, it is unsurprising that the average monthly number of unfilled food service and accommodation jobs has decreased by 13,000 since 2019.

In this year’s Total Rewards Survey, we’re also seeing a much more optimistic picture when it comes to staffing.

46% of companies say they are fully staffed in front of house hourly positions (up 41 percentage points from 2022) and 37% say they are fully staffed in back of the house positions (up 27 points from 2022).

There has been significant gains in those companies that have been able to alleviate their staffing deficiencies.

On the other hand, the reality remains that most companies are constantly operating without a full staff.

More than half of them typically have gaps in their front of house, while almost two thirds of restaurant companies are reporting the don’t have enough back of house staff.

It Pays to Be Fully Staffed

It might be stating the obvious, but a fully staffed restaurants perform better.

Moreover, since it has been so long since many brands have even approached these levels, it might be worth the reminder.

According to Black Box Intelligence’s financial data, brands that are fully staffed in back of house hourly positions recorded 2.6% better traffic growth.

In addition, brands also saw 3.3% better sales growth than their industry segment peers in Q2.

Meanwhile, brands that are fully staffed in front of house hourly positions saw a whopping 3.6% better traffic growth and 4.6% better sales.

Macroeconomic realities may continue to be rough for the restaurant industry, but when navigating unsteady waters, it’s best to have a full crew.

Conclusion

August – and more predominantly – early September restaurant performance shows what we are predicting will be a turning point for the industry.

While challenges remain, the improvements in sales, traffic, and staffing should give restaurateurs hope for a brighter future.

Fully staffed restaurants are showing better results, and the recovery may come sooner than expected.

As the industry continues to navigate uncertain economic waters, one thing is clear: data is your compass.

Use it to guide decisions around staffing, menu strategy, and operations, and you’ll be better positioned to thrive in the months ahead.

We’re here to help.