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Restaurant Industry Snapshot™ July, 2018

July Restaurant Sales Growth Positive but Disappointing


Zach Stanford, Senior Business Intelligence Analyst for Black Box Intelligence (formerly TDn2K), provides commentary on the July 2018 Snapshot.

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Comp Sales & Traffic

Comp Sales

rolling 3 months

Comp Traffic

rolling 3 months

The restaurant industry achieved small growth of 0.5 percent in same-store sales during July. Although growth is always welcome news, it is concerning that this modest growth was calculated based on a comparison to the sales of July 2017, the third weakest month in the last three years. Additionally, chain restaurants continue to lose traffic to their competitors. Same-store traffic was -1.8 percent during July.

Regional & Market Performance

Positive Markets 120 | 61% Negative Markets 76 | 39%

Strongest Region

  • Sales 2.22%
  • Traffic -0.36%

Weakest Region

  • Sales -0.64%
  • Traffic -2.77%

July restaurant sales growth was weaker compared with June at the national level and from a geographic standpoint. Out of 196 DMAs tracked by Financial Intelligence (formerly Black Box Intelligence), 120 (or 61 percent) were able to achieve positive sales growth during the month. As a comparison, 73 percent of these individual markets saw positive same-store sales growth in June. Furthermore, only eight of the eleven regions of the country posted positive same-store sales growth during July. Ten regions saw positive growth in June. The Western region of the country continued the trend through July of being the strongest based on same-store sales.

The Restaurant Workforce

job growth & turnover

Year/Year Job Growth*


Manager Turnover*

Q2 '18
Roll 12

Hourly Turnover*

Q2 '18
Roll 12
*Black Box Workforce Intelligence, June, 2018 Release

Staffing continues to be one of the major challenges for restaurant operators. The labor market has remained at full employment for months and restaurant turnover has stood at record highs. There is some relief in the possibility that restaurant hourly turnover may be starting to decline and stopping its relentless climb the industry has been experiencing for years. Even if it stops increasing, however, turnover for hourly employees is likely to remain at problematic levels through the rest of the year. But, for restaurant managers, turnover is still on the rise and a source of major concern for operators. According to Black Box Intelligence (formerly TDn2K) research, management turnover is linked to hourly retention, guest satisfaction and same-store sales growth.

July Restaurant Sales Growth Positive but Disappointing

The chain restaurant industry posted another month of positive same-store sales growth in July, but concern about the industry’s strength resurfaced. Same-store sales were up 0.5 percent for the month, which is a drop of about 0.5 percentage points vs. June. More discouraging was the fact that July’s modest results were comparing to weak comparable sales from 2017. These insights come from Black Box Intelligence (formerly TDn2K)’s Financial Intelligence (formerly Black Box Intelligence) data, based on weekly sales from over 30,000 locations representing 170+ brands and nearly $70 billion in annual sales.

“Restaurants had a terrible month in July of last year”, commented Victor Fernandez, vice president of insights and knowledge for Black Box Intelligence (formerly TDn2K). “With same-store sales down -3.0 percent, July of 2017 was the third worst month in the last three years. Only two winter months hit by extreme weather posted weaker results. Therefore, the small uptick in sales in July is far from being cause for celebration given the extremely easy comparison. If anything, it was a great missed opportunity for the industry to post its best results in years.”

Underlying the industry’s weak sales is the persistent decline in guest counts. Same-store traffic dropped -1.8 percent in July, which also highlights the relative weakness of the month considering last year’s -4.8 percent decline. Restaurants may be getting a bigger piece of the overall food spending than grocery stores, but price increases are driving the increased spending. When it comes to traffic, chains have been losing guest counts to their many competitors every year since the recession.

Slow Wage Gains Raise Concern Despite Economy’s Positive Momentum

“Significant economic momentum was carried into the summer that should allow solid growth to continue for the overall economy,” predicted Joel Naroff, president of Naroff Economic Advisors and Black Box Intelligence (formerly TDn2K) economist. “Despite a less than stellar July job gain, the three-month average was still extremely robust.”

“But wage gains remain limited and continue to expand at a lethargic pace. While that has yet to affect consumer spending, which is being hyped by the tax cuts, it raises questions about the ability to sustain the solid consumption over the next year. In addition, there are few indications the issues being created by the trade skirmishes will dissipate soon. Thus, while expectations are for restaurant spending to continue to expand slowly, the risks appear to be on the side of a moderation in demand as we go into 2019.”

Fast Casual and Casual Dining Show Most Improvement

The best performing industry segment based on sales in July was fast casual. Only two other segments, family dining and casual dining, reported positive sales for the month.

Furthermore, the strong results for fast casual and casual dining extend beyond just the latest month. After reporting the weakest sales performance in each of the last two years, fast casual and casual dining have seen the biggest improvement in same-store sales growth in 2018 vs. 2017. Fast casual is the only segment with six consecutive months of positive sales growth.

Turnover Stabilizing for Hourly Employees, Management Turnover Still Rising

The labor markets continue to be extremely tight, with the unemployment rate at 4.0 percent or lower in the last four months. To further complicate things, job growth in the industry accelerated according to Black Box Intelligence (formerly TDn2K)’s Workforce Intelligence (formerly People Report). The number of chain restaurant jobs increased by 1.7 percent year-over-year in June.

As a result, restaurant turnover for both hourly employees and managers continues at record high levels. New and replacement positions constantly become available and employers are always on the outlook for new ways to fill the vacancies. To no surprise, most operators still consider staffing to be one of their biggest pain points.

Amid all the difficulties that surround recruiting and retention in recent years, there is some small relief with respect to restaurant hourly employees. Though still extremely high, turnover rates for hourly employees have begun decreasing slightly. This potentially indicates that turnover may have reached a peak and could be beginning to plateau at slightly lower levels.

Unfortunately, rolling twelve-month turnover for restaurant managers continued to increase in June. This is a critical performance metric the industry should be focusing on, given its relationship with hourly turnover, guest service sentiment and its linkage to same-store sales growth.

Looking Ahead

One factor supporting the continued trend of positive sales for the rest of the third quarter is the soft comparisons vs. last year. Two major hurricanes disrupted major population areas in 2017 during the second half of the quarter.

“However, as July demonstrated, chains continue to face fundamental challenges and growth is highly dependent on being able to maintain check increases that offset declining guest counts,” said Fernandez. “As the industry laps over tougher comparable months in the fourth quarter, if consumers don’t start seeing some robust increase in their real disposable income, which the economy has been unable to deliver in the last two years, we may start seeing a reversal in the upward sales trend we have been experiencing this year.”

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