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New year, new trends. This week, Black Box Intelligence (formerly TDn2K) hosted its first Restaurant Industry Update webinar of 2016 to take a look in the rearview mirror at the ups and downs of the final quarter of 2015 as well as predict the coming trends for the new year. The webinar featured veteran speakers Victor Fernandez, Executive Director of Insights and Knowledge at Black Box Intelligence (formerly TDn2K), and Joel Naroff, Chief Economist at Naroff Economic Advisors. The session was moderated by Wally Doolin, Chairman and Co-Founder of Black Box Intelligence (formerly TDn2K).

The beginning of 2016 has been characterized by a lot of uncertainty fueled by the weakness in the equity markets. Naroff discussed the variety of factors that play into this trend, emphasizing that the US economy will not follow the downfall seen in the stock market. In his words, “Wall Street and Main Street are operating in parallel universes right now”. Those factors that are hurting the equity markets, such as the slowdown of the Chinese economy, the fall of oil prices, and the changes in the value of the dollar shouldn’t have the same impact on the health of the economy, particularly as it relates to restaurant spending.

Other key trends discussed were:

Financial Intelligence (formerly Black Box Intelligence) data has shown a high correlation between year-over-year personal income growth and restaurant comp sales. Furthermore, fluctuations in this personal income growth rate explain a lot of the differences seen in restaurant sales throughout the country at the regional and state level.

– The decline in oil prices has resulted in lower comp sales for those states highly dependant on the energy sector as income growth slowed down considerably in those areas of the country. States in the oil patches, such as in the Southwest region, had both some of the lowest comp sales and lowest personal income growth during Q3. Meanwhile, the California and Northwest regions rank among the highest in both categories. However, there are states in which this relationship between income growth and restaurant sales is not as apparent. This suggests that restaurant comp sales trends go beyond just simply personal income growth – they are also related to other important factors such as changing consumer preferences and trends, as well increasing competition from outside chain restaurants.

— Recent data from Workforce Intelligence (formerly People Report) comparing rolling 12-month turnover rates between now and 2007 show that in both the quick service and fast casual/family dining segments, we still aren’t seeing turnover levels as high as they were in 2007. Meanwhile, the unemployment rate is higher than what we experienced before the recession, which means there’s still room for the labor market to tighten and potentially for restaurant turnover rates in all segments to increase.

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— Eight states had already increased minimum wage by January 1st of this year. Two states will increase minimum wage by the end of 2016 and six states have already increased minimum wage and will increase it again by the end of the year. In short, the wage pressures are on. However, the pressure will come from more than just minimum wage adjustments: as the labor market tightens and turnover continues rising, restaurants will have to begin accelerating their wage and salary increases to fill their vacancies.

Despite these bleary prospects, Naroff and Fernandez also had some good news to share.

— As wages rise, so will sales in retail and foodservice. Consumer confidence from higher wages will potentially result in increasing traffic and check sizes.

— 2015 was the only year since Financial Intelligence (formerly Black Box Intelligence) began reporting that every single quarter had positive comp sales, with the exception of 2011. “When you look at the overall growth for the year, this is the best year we’ve reported on based on comp sales since 2009,” said Fernandez.

— All segments had positive comp sales throughout 2015, which hasn’t happened in over two years. Additionally, the casual dining, family dining and fine dining segments reported significant improvements in their year-over-year comp sales growth.

— Fernandez noted the opportunity for employment in the teenager demographic. The current unemployment rate for teens is around 16 percent, so this is good news for operators looking to fill entry level positions.

Expectations for 2016 from all speakers participating in the webinar point towards continued growth in restaurant sales, even if growth will likely be moderate compared with 2015, while employment pressures will result in high turnover rates for both restaurant managers and hourly employees throughout the year. Those brands that succeed in 2016 will be those that really listen to their customers, leverage their available data to identify which are the key metrics that drive performance for their brand in this highly competitive marketplace, and are able to synthesize all of this data into actionable knowledge that can be executed down to the individual restaurant unit.

View the full Financial Intelligence (formerly Black Box Intelligence) Restaurant Industry Snapshot for December 2015 here. Questions? Please contact Victor Fernandez at victor.fernandez@tdn2k.com