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Restaurant Industry Snapshot™ November, 2018

Restaurant Longer-Term Recovery Emerges as Upward Sales Momentum Continues


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Comp Sales & Traffic

Comp Sales

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Comp Traffic

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Increased sales momentum brings continued encouragement to the industry in hopes that these numbers will continue into the new year. Additionally, the signs indicate this growth is less of a short-term boost and could signal a more long standing recovery in sales. Much of the industry growth can be attributed to a rise in off-premise sales. There is also an uptick in to-go and catering sales during the holiday week, indicating that customers are more likely to utilize restaurants for their holiday meals.

Even with an increase of sales, however, restaurants are still seeing declines in traffic counts. Increased competition from independents, grocery and convenience stores is a constant challenge for operators. Nevertheless, best in class brands are achieving same-store traffic growth. Online sentiment analysis reveals these brands deliver on superior service, ambiance and consistency in execution to keep their dine-in customers.

Regional & Market Performance

Positive Markets 143 | 73% Negative Markets 54 | 27%

Strongest Region

  • Sales 3.25%
  • Traffic -0.45%

Weakest Region

New England
  • Sales -0.84%
  • Traffic -4.12%

Widespread positive same-store sales growth continued in November. Financial Intelligence (formerly Black Box Intelligence) tracks 196 individual DMAs. 143 of these DMAs saw positive sales growth during the month. This is 73 percent of the markets, continuing the same trend from the previous month. Between 73 and 76 percent of markets have reported positive sales growth for the last five months.

The Western region took over the Southeast as the strongest region during the month of November. New England was reported as the weakest region during the month, however, this region reported -0.04 percent same-store sales, compared to Florida showing -1.65 percent the previous month.

The Restaurant Workforce

job growth & turnover

Year/Year Job Growth*


Manager Turnover*

Q4 '18
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Hourly Turnover*

Q4 '18
Roll 12
*Black Box Workforce Intelligence, October, 2018 Release

Keeping restaurants staffed is a persistent issue for operators. The industry saw another increase in turnover rates for hourly employees as well as all levels of management. That there are more chain restaurant jobs available does not make things any easier. Chain restaurant jobs grew to 1.8 percent October, up from 1.7 percent in September. Additionally, customers’ expectations around service are proving to be a differentiator between those brands performing at the top and those that are struggling.

Meeting these expectations and delivering a consistent experience is more important than ever to maintain sales and traffic counts, and much more difficult to accomplish while understaffed. In an increasingly tight labor market, restaurants need to look for ways to attract and retain engaged employees at all levels. This points to a need for a focus on compensation, career and professional development opportunities and a work/life balance.

Restaurant Longer-Term Recovery Emerges as Upward Sales Momentum Continues

The restaurant industry is closing the year strong, driving optimism for the growing sales momentum seen through most of the year carrying into 2019. Same-store sales growth was 1.0 percent in November, which became the sixth consecutive month of positive sales growth for the industry. Excluding a very small dip in same-store sales during May, every month since March has posted positive same-store sales growth. This represents a period of expansion not experienced by the industry in over three years. 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.

“Although we have been excited to report on positive sales growth for most of the year, there was always the caveat of this only being a recovery from a short-term perspective,” commented Victor Fernandez, vice president of insights and knowledge for Black Box Intelligence (formerly TDn2K). “The industry’s sales were better than a year ago, but in reality, we were still negative compared with where we were two years prior. However, there is some encouraging news in the fact that, over the last two years, two months have posted same-store sales growth on a two-year basis. Those two months were October and November of this year. What is perhaps more reassuring is that those two months were among the three strongest based on sales growth last year, meaning it’s not a matter of the industry jumping over some easy hurdles. We are starting to see some longer-term recovery in restaurant sales.”

Recovery Not Complete Without Traffic Growth

Since the recession, no matter how optimistic the message may be when discussing restaurant sales, the sobering counterargument to the industry experiencing real recovery has always come in the form of declining traffic. Same-store traffic growth was -1.9 percent during November, which represented a small 0.3 percentage point improvement over October’s growth rate.

“Though chain restaurants as a whole are far from being able to solve their main problem of losing dining occasions to competitors outside the sector (independent restaurants, prepared food at grocery stores, convenience stores, etc.),” said Fernandez, “Financial Intelligence (formerly Black Box Intelligence) data shows that those restaurant brands in the top quartile of performance have continuously achieved positive same-store traffic growth. Additionally, Black Box Intelligence (formerly TDn2K) in it’s Guest Intelligence (formerly White Box Social Intelligence) research has revealed that it is factors such as superior service, an ambiance that meets expectations and consistency in execution throughout the system on all attributes of the restaurant experience that are enabling those brands to achieve traffic success.”

Economy Poised for Strong Holiday Season and Sustained Growth In First Half of 2019

“The economy remains solid and, most importantly, wage gains are rising,” explained Joel Naroff, president of Naroff Economic Advisors and Black Box Intelligence (formerly TDn2K) economist. “Though they still are not high, the tight labor market is forcing firms of all sizes, not just large ones, to raise salaries and hourly pay. That is sustaining consumer confidence and spending. It looks like the holiday season will be strong.”

“Looking toward 2019, while economic growth may moderate, it should remain above trend, which is another way to say it will be solid. That will likely mean further declines in the unemployment rate and faster increases in workers’ incomes. The real question is whether inflation accelerates. So far, the rise has been relatively modest and that is sustaining household spending power. But with the savings rate continuing to fall, any jump in prices would limit demand. The outlook for restaurant sales is for it to remain solid through much of the first half of 2019, but growth is likely to decelerate as we go through the second half.

As Consumer Preferences Change, Off-Premise Sales Fuel Growth

Though same-store sales have been strong in recent months from a top-line perspective, the location those restaurant meals are being consumed reveals some very important shifts in consumer behavior. Dine-in same-store sales growth has actually been negative in recent months, but strong growth in to-go and other forms of off-premise sales have lifted the industry into positive growth. Furthermore, the growth in to-go sales has been accelerating rapidly. For 2018 year to date, it is approaching 9.0 percent year over year. As a comparison, to-go sales in comparable stores grew by less than 4.0 percent in each of the two previous years.

Another interesting insight gleaned from the latest Financial Intelligence (formerly Black Box Intelligence) data is that consumers may be increasingly willing to buy their holiday-related meals from restaurants for consumption off-premise. Same-store sales growth for to-go, catering and banquets all posted double digit growth during the week of Thanksgiving compared with that same holiday week a year ago.

Job Growth and High Turnover: Workforce Headaches Persist

Guests are putting a premium on restaurants meeting their service expectations according to Black Box Intelligence (formerly TDn2K)’s Guest Intelligence (formerly White Box Social Intelligence). Moreover, it is in the consistency of execution that top performing brands thrive. Unfortunately, many restaurants are discovering it is very difficult to deliver on these premises when they are continuously understaffed. Turnover for restaurant hourly employees and all levels of management increased again in October based on Black Box Intelligence (formerly TDn2K)’s Workforce Intelligence (formerly People Report) numbers. This increase falls on top of already historically high turnover rates.

Besides keeping up with these vacancies, restaurants also need to recruit for new restaurant openings. Workforce Intelligence (formerly People Report) data shows chain restaurant jobs grew by 1.8 percent during October, up from 1.7 percent recorded for September.

In this increasingly tight labor market in which the war for talent is a roadblock for successful restaurant operations, companies need to answer the question: what will attract employees to work for us and become engaged contributors? The answer, according to the data, can usually be found in compensation, career development, work/life balance and culture.

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.