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Restaurant Industry Snapshot™ September, 2018

Q3 Sees Best Restaurant Sales and Traffic Growth in Three Years


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Comp Sales & Traffic

Comp Sales

rolling 3 months

Comp Traffic

rolling 3 months

September was another month of relatively strong sales performance for the restaurant industry. Same-store sales growth for the month and for the third quarter of 2018 were both 1.2 percent. This quarterly result represents the strongest sales growth rates for restaurants in the last three years.

However, same-store traffic continues to be negative, a sign that restaurants are far from a true long-term recovery. Traffic growth year over year was -1.4 percent during September and -1.3 percent for the third quarter, also the best result for any quarter in the last three years.

Regional & Market Performance

Positive Markets 149 | 76% Negative Markets 47 | 24%

Strongest Region

  • Sales 5.74%
  • Traffic 4.31%

Weakest Region

  • Sales -0.02%
  • Traffic -2.83%

Although the industry had some assistance from the poor sales results a year ago due to the hurricanes in Texas and Florida, sales growth was robust across the entire country during September. All regions of the country posted positive sales growth during the month and the third quarter. As expected, Florida was the strongest region during the month, which was the most positively favored by the weak sales a year ago due to the extreme weather.

The relative strength of the industry is also evident at the market level. Of the 196 individual DMAs tracked by Financial Intelligence (formerly Black Box Intelligence), 149 (or 76 percent) were able to achieve positive same-store sales growth during September.


The Restaurant Workforce

job growth & turnover

Year/Year Job Growth*


Manager Turnover*

Q3 '18
Roll 12

Hourly Turnover*

Q3 '18
Roll 12
*Black Box Workforce Intelligence, August, 2018 Release

Job growth among chain restaurants has been accelerating in recent months. The number of restaurant employees grew by 2.0 percent year over year in August according to the latest results from Black Box Intelligence (formerly TDn2K)’s Workforce Intelligence (formerly People Report). This represents an acceleration from the 1.7 percent growth reported for July.

Although August saw a small drop in turnover rates for restaurant hourly employees and managers, these rates remain at historically high levels and remain a big concern for restaurant operators.


Q3 Sees Best Restaurant Sales and Traffic Growth in Three Years

The third quarter of 2018 was relatively strong for the restaurant industry. Same-store sales were up 1.2 percent in September, the fourth consecutive month of growth. The industry had not experienced a quarter in which all months had positive sales since the fourth quarter of 2015. Sales for the third quarter were also up 1.2 percent, the highest since the third quarter of 2015. 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 $71 billion in annual sales.

“Top line numbers were good for the latest quarter and months,” commented Victor Fernandez, vice president of insights and knowledge for Black Box Intelligence (formerly TDn2K), “but the question is ‘how strong is the restaurant industry really?’ The data suggests restaurants are doing much better, but the industry is still struggling with significant challenges.”

The Weather Effect

Restaurant sales benefited from strong tailwinds in the form of easy comparisons to soft sales last year when major storms hit Texas and Florida. In fact, the third quarter of 2017 is tied for weakest sales performance in the last three years. In 2017 both Florida and Texas reported quarterly sales below -3.0 percent.

“It is easy to attribute the current strength to the bad weather that impacted some of the largest economies in the country last year,” continued Fernandez. “However, the fact that all regions posted positive sales in the third quarter of 2018 (the first time this has happened in any quarter over the last three years) and six of the eleven regions achieved growth of 1.0 percent or better suggests that the relative strength goes beyond just the easy comparisons in the hurricane areas. Excluding Texas and Florida, the quarter would have been 1.0 percent vs. the 1.2 percent reported.”

Restaurants Guest Erosion

Even if the sales occasionally climb into positive territory and hint at a true recovery, the reality is that the industry continues to lose guests. It is only through rising guest checks that restaurants are able to post top line growth.

Traffic declined -1.4 percent in September and dipped -1.2 percent for the third quarter of 2018. The fact that this is the best traffic quarter in the last three years highlights the magnitude of the continued marketshare battle for guest traffic.

The Two Year View is Still Troubling, But Some Signs of Improvement Appear

In the third quarter of 2018, sales were down -1.2 percent compared with the same quarter two years ago. Even more troubling, same-store traffic declined -5.7 percent over that same two year period.

As disappointing as these results may be, there are signs of improvement. Two-year sales performance averaged -1.0 percent over the last two quarters, a slight improvement from the concerning -2.5 percent for the previous four-quarter period.

Warning Signs From the Economy, Despite Current Strength

“The economic expansion is the broadest-based in nearly two decades,” explained Joel Naroff, president of Naroff Economic Advisors and Black Box Intelligence (formerly TDn2K) economist. “Growth has moved from manufacturing and large corporations into the small business sector. Looking forward, though, there are warning signs.”

Firms seem intent on raising benefits, not wages, and household income is still growing at a disappointing pace. That should continue to restrain consumer spending. Rising energy costs are diverting funds into gasoline and utility purchases. A softening in the housing sector, which typically leads the economy, indicates that households are becoming more conservative. And the Fed has signaled that rates will likely rise through next year. Together, these trends imply that the retail battle for share of consumer wallets will only intensify in what is likely to be a more moderate growth environment.

Workforce Challenges Persist

The national unemployment rate dropped again in September and is currently at 3.7 percent. With the economy at full employment, recruiting and retaining employees remains a leading concern for operators. Adding to recruitment pressures is the continued growth in the number of restaurant positions. According to Black Box Intelligence (formerly TDn2K)’s Workforce Intelligence (formerly People Report), the number of employees in the industry grew 2.0 percent year over year in August after increasing 1.7 percent the previous month.

However, August did hint at good news from a workforce perspective. Turnover for both hourly employees and restaurant managers decreased in August. After years of continual climbing, turnover rates in recent months are beginning to drop slightly. This trend, however, is not expected to reduce turnover rates enough for retention to lose its status as a critical issue haunting operators.

Wallace Doolin, chairman of Black Box Intelligence (formerly TDn2K), commented “the evidence grows in our analysis of Black Box Intelligence (formerly TDn2K) White Box Guest Satisfaction data cross-referenced with Financial Intelligence (formerly Black Box Intelligence) sales and traffic data. There is one aspect of the restaurant experience that separates Top Box performing companies from the rest: the guest perception on service. Those are the same companies that we find in the Workforce Intelligence (formerly People Report) data that are successful at retaining their top talent and effective in staffing every shift.”

Reducing historically high turnover rates and staffing for sales growth will likely be at the forefront of successful restaurant operators’ strategy discussions as they plan for next year.

Black Box Intelligence (formerly TDn2K) is the parent company of Workforce Intelligence (formerly People Report), Financial Intelligence (formerly Black Box Intelligence) and Guest Intelligence (formerly White Box Social Intelligence). Workforce Intelligence (formerly People Report) provides service-sector human capital and workforce analytics for its members monthly. Financial Intelligence (formerly Black Box Intelligence) provides weekly financial and market level data for the restaurant industry. Guest Intelligence (formerly White Box Social Intelligence) delivers consumer insights and reveals online brand health. Black Box Intelligence (formerly TDn2K) membership represents 43,000 restaurant units, 2.5 million employees and nearly $71 billion in sales. They are also the producers of leading restaurant industry events including the Global Best Practices Conference held annually each January in Dallas, Texas.