Restaurant Industry Snapshot™ – June 2021
Industry Comp Sales & Traffic
|Comp Sales||Comp Traffic|
|rolling 3 months||rolling 3 months|
*Unless otherwise indicated, numbers are reported using 2-year metrics
*All sales & traffic metrics are same store sales & traffic metrics, unless otherwise indicated
*Off-premise sales includes to-go, delivery, and drive-thru sales (where applicable)
Positive momentum continued for restaurant sales as the industry posted 6.6% sales growth in June; a 1% improvement over May and the fourth consecutive month of sales growth. The industry is consistently improving sales compared to the pre-pandemic norm at a historically high rate. Restaurant sales improved by 6.2% during Q2 2021.
Dine-in sales for limited-service restaurants was -40% in June, which improved from -46% in May. For full-service restaurants, dine-in sales growth was -11% in June, a small improvement from the -15% reported for May.
Traffic was –4.3% in June, tapering the enthusiasm for the industry’s tremendous sales growth. While June’s results are an improvement from May (-5.1%), it highlights the long road ahead for traffic to fully recover.
On a positive note, traffic performance did jump by double digits from one month to the next when stimulus checks were sent out in January and March. Since then, sales have remained between -5.6% and -7.1%. Same-store traffic growth for Q2 of 2021 was -4.7%
Regional & Market Performance
Forty-eight states saw sales growth in June, a record number since March 2020. The only two states with negative results in June were New York and Wisconsin and the District of Columbia continues performing worse than all fifty states when it comes to its sales growth.
The best regional results in June came from the Western region (which excludes California), the Southeast, Florida and the Southwest which have tended to outperform others over the last year; with the Western region being the only exception.
The worst performing sales regions were New York-New Jersey, New England, the Mid-Atlantic and Midwest. Interestingly, some of the regions that underperform through most of the pandemic are now beginning to see some gains in sales. The regions that saw their sales improve the most in June were New England and California. After suffering deep sales losses as recently as March, California has now posted three consecutive months of sales growth.
The Restaurant Workforce
job growth & turnover
Despite significant improvements in sales and traffic, the staffing crisis continues to hurt restaurants. The median limited-service restaurant location operated with one fewer hourly crew member in May of 2021 compared to 2019. For full-service restaurants, the staffing cuts continue to be bigger. The median full-service location had to operate with 6 fewer front-of-house hourly employees in May, while the back-of-house remained staffed with 3 fewer employees compared to 2019.
Meanwhile, guests are complaining about understaffed restaurants in online reviews. In full-service, the number of ‘understaffed’ online mentions has grown every month since March. For limited-service, there was a dip in June, but the number of ‘understaffed’ mentions has grown steadily since March with May being the peak.
The severe staffing crisis has translated into rapid wage growth for restaurant employees. While wages grew little at the beginning of the pandemic, hourly wages for limited-service restaurants rose by 7.5% for the 3 months ending in May 2021 compared to the same period a year ago. Over the same period, hourly wages for line cooks at full-service restaurants went up by 5.3%.
Average check per person or transaction is increasing at an unusually high pace. In June, year-over-year growth was 4.5%. According to the Bureau of Labor Statistics, the consumer price index for food away from home increased by 4% year over year in May. The data suggests product mix as well as larger orders in some cases are factors, but restaurants taking price accounts for most of this increase.
Average check grew by 11.8% compared to 2019. The rapid acceleration in check has only fluctuated between 11.4% and 11.8% since April.
Fine Dining the Top Performing Segment
For the second consecutive month, fine dining same-store sales greatly outperformed the rest of the industry, but limited-service restaurants are still posting significantly better results. Sales growth was 10.8% for limited-service restaurants in June, while sales growth for all full-service segments was only 3.9%.
Furthermore, despite food sales growth in full-service segments over the last three months, only the fine dining segment has posted a month of growth in alcoholic beverage sales compared to pre-pandemic levels.
Off-Premise Sales Lift the Industry while Dine-In Works to Recover
Off-premise sales continue growing at a historically high pace but there are signs of growth dropping as dine-in sales improve slowly. Limited-service restaurants off-premise sales grew by 28% in June, 2% less than May. Off-premise sales for full-service restaurants was 108% in June, a 14% drop from May.
The shift away from off-premise may have continued in June, but it was still a much larger percentage of the total than it was pre-COVID. For limited-service restaurants, off-premise sales represented 79% of total sales in June, a 7% increase from the numbers recorded prior to the pandemic.
For full-service restaurants, off-premise sales represented 25% of the total in June. This remains considerably higher than the pre-pandemic 14%, but also shows the trend moderating from the 35% share off-premise had in late April.
Alcohol Sales Growth Still Negative
The contribution of alcoholic beverages to overall restaurant sales remains low. Alcohol made up 12% of all sales in casual dining, upscale casual and fine dining in June. Although this represents a small improvement from the 11% sales mix reported during the last three months, it is still low compared with the 14% we typically saw pre-COVID.
Macroeconomic Environment Points to Great Opportunities with a Few Challenges
Commentary provided by Joel Naroff, President of Naroff Economic Advisors
With most states having ended pandemic restrictions we are transitioning to more traditional growth. That doesn’t mean the robust quarterly gains we have seen recently will slow dramatically but they will likely moderate consistently over the next 6 to 12 months. Restaurants should expect solid increases in patronage, but only for the next few months. Most of the government’s major stimulus programs are scheduled to run out in September, and it has been those transfer payments that have powered demand. The massive monthly job increases will also ease, further slowing income growth.
At the same time, there is little reason to think the elevated level of commodity inflation will ease sharply. There are still issues with the global supply chain and when it comes to food products, the demand will only rise as the rest of the work reopens. In addition, the labor markets are expected to remain tight. It is not clear how much the supplemental unemployment payments have affected labor supply. Studies indicate the extra funds may not have been important in keeping workers from returning to restaurant jobs. The takeaway is that the next 6 months is likely to be some of the best of times and some of the worst of times for restaurants, as demand continues to improve but labor and commodity costs keep rising.
Staffing will remain the biggest challenge for restaurants in the months ahead. One of the prevailing theories is that unemployment benefits are the primary barrier for people returning to restaurant work. Early data from the 26 states that elected to end the expanded benefits in June instead of September suggests that the number of people looking for jobs did not increase substantially. According to a recent Black Box Intelligence™ poll, beyond unemployment benefits, the answer to the restaurant industry’s staffing woes may lie in offering a competitive compensation in comparison to other industries, as well as improving the quality of life for those working for the industry.
May wage data revealed restaurants continue to aggressively increase their wages to try to win the talent wars. We will keep a close eye on June data to see if this is having a positive effect on staffing levels. But with commodity prices rising and this rapid increase in wages, restaurant pricing is expected to continue to rise rapidly. This continued boost in guest check growth will likely maintain sales growing at a healthy rate over 2019 but will also mean traffic will remain challenged and the industry will probably not see growth in its guest counts in upcoming months. The fact that prices for food away from home is now growing at a faster rate than for food at home does not help in generating additional dining occasions for restaurants.
With many guests feeling more comfortable dining out, the number of mask mentions dropping rapidly in June on restaurant reviews and online mentions and life reaching what seems to be the “new normal”, restaurants can return to what they do best: create and innovate through their menus, provide a sense of community and ‘experience’ for their guests and continue to feed their communities in whatever form that may take according to the guest’s needs.
The Black Box Intelligence Restaurant Industry Snapshot™ includes: industry leading financial performance metrics including sales and traffic from the largest set of real restaurant data at the region and market level. This monthly update also includes workforce trends, as well as expert commentary from Black Box Intelligence analysts. Each update provides context around economic conditions, regional benchmarks and a look at what’s to come.
Black Box Intelligence™ is the leading performance benchmarking provider for the restaurant industry connecting the dots on people, profits and performance. Their unparalleled data set reveals insight into financial, workforce, guest and consumer trends from over 300 brands and 87,000 restaurant units. Black Box Intelligence is also the producer of The Best Practices Conference held annually in Dallas, Texas.