Naturally, this is affecting segments differently. Family dining, fine dining, and upscale casual turned in the best results in Q4. After a challenging 2017, family dining has enjoyed a resurgence of late. Here’s a look at how Bob Evans has embraced a dynamic sector. And how IHOP became America’s largest sit-down chain in recent months.
Fine dining posted three consecutive years of sales growth, perhaps lending credence to the theory that today’s consumer is willing to spend more on experiences.
As Black Box points out, fine dining continues to focus on delivering superior dine-in service while much of the industry shifts toward off-premises business. So, suddenly, fine dining finds itself at an enviable point of differentiation.
“This segment is also driven by expense account users that continue to entertain their clients as a key business strategy,” Black Box said. “The attention to quality and service seems to resonate well with fine dining corporate and personal diners given the positive same-store sales growth achieved by this segment over the last three years.”
Upscale casual also recorded positive sales growth in Q4 but did notice a small dip in sales for the entire year compared to 2018.
By market, out of the 11 regions tracked by Black Box, the Western classification was the only to experience positive same-store sales in December. Texas, New York-New Jersey, and New England took the biggest hit. The latter witnessed a negative 7.64 percent decrease in traffic. In November, 71 percent of local markets reported positive. Just 22 percent did so in December.
While all of this unfolds, staffing difficulties continue to rise for restaurants. After a few months of flat and even improving employee retention, rolling 12-month turnover rates climbed again for hourly employees and restaurant managers during November, according to Black Box’s Workforce data. Turnover remains at historically high levels.
And, once again speaking to a consistent theme throughout 2019, the issue was compounded by the reality it is also becoming increasingly harder to find qualified employees to fill vacancies created by turnover. Per Black Box, by the end of Q3, 63 percent of restaurants said it was more difficult to recruit hourly staff versus the prior quarter; 58 percent said the same of restaurant managers.
This issue spiked at quick-service restaurants, with a higher percentage saying they are having a harder time finding hourly employees and managers than just three months ago.
“As a result, the percentage of restaurant locations that is understaffed is increasing. For an industry that relies heavily on its workforce, this can only mean bad news. Especially when taking into consideration guest sentiment,” Black Box said.
Joel Naroff, president of Naroff Economic Advisors and a Black Box Intelligence economist, said 2020 should mirror 2019 when it comes to the economy. “If you liked 2019, you will enjoy this year. If you were disappointed, then plan accordingly. While the fears of an all-out trade war seemed to have dissipated [and hopefully will not re-emerge], that does not mean the economy is likely to rebound sharply. In the U.S., consumer spending is being restrained by softening gains in wages, even as job growth remains solid and labor shortages continue to plague business. Globally, forecasts are for soft growth in China and Europe to continue.”
“There is little reason to expect a major upturn in business investment,” he added. “Government spending, a prime factor in growth, may be limited by the return of trillion-dollar budget deficits. In other words, there are few factors that would constrain growth significantly or cause it to accelerate sharply. For the restaurant industry, that implies modestly rising demand this year.”
Black Box did caution, however, political instability tied to an election year could challenge operators.