Local performance absorbed a blow in July, too, with only 88 markets posting positive sales compared to 108 in June. Texas was the weakest region, with negative 2.68 percent sales growth and traffic declines of 6.58 percent. The Western region topped, with positive comps of 1.12 percent and red traffic of 2.65 percent.
Only two of the 11 regions had positive same-store sales in July—the Western and the Southeast. All others were negative. TDn2K suggests a shift in August could be coming as customers settle back into their fall routines.
Regarding a trade war, could conflict with China ignite a recession?
“With the U.S. threatening China with tariffs on just about all its exports to the U.S. and China retaliating by devaluing its currency and stopping agricultural purchases, the longest-running expansion in American history is at risk,” said Joel Naroff, president of Naroff Economic Advisors and TDn2K economist, in a statement. “That is true despite decent income and job gains that powered robust consumer spending in the spring. It also indicates that if both parties back down, the fundamentals are solid enough to keep the economy from faltering.
TDn2K summed up this question clearly: “With political rather than economic factors driving the outlook, it is difficult to do more than speculate on how strong growth will be going forward.”
Basically, we have no real clue right now.
A full-on trade war, however, would likely trigger a recession. A stand-down could allow growth to continue, but at a sluggish pace. It’s all worth keeping an eye on.
The concern you can count on
Another month, another example of labor challenges. Even with the tightest labor market in five decades, operators plan to increase management and hourly staff in the coming months, TDn2K said. Forty-four percent of companies said they expect to up their number of restaurant managers, according to TDn2K’s People Report. Only 4 percent said the number of management staff will reduce. For hourly employees, the percentage expecting a rise in their staffing numbers is 52 percent, with only 5 percent planning a reduction.
Meanwhile, as staffing challenges persist and turnover rises, the number of new jobs continues to climb. According to TDn2K, 70 percent of companies reported an increase in their hourly employee headcount during the second quarter—the highest level of reporting in the last three years.
“Staffing difficulties will persist as companies continue increasing their headcounts and dealing with the rising turnover trend. The workforce challenges are not expected to ease unless there is a major slowdown in the economy that raises unemployment considerably,” TDn2K said.
Which brings us to another reality: “TDn2K analysis continues to show that it is those restaurant brands winning the market share battle are those that have succeeded in offering a compelling employment value proposition and deliver on best people practices, growing their guest counts and getting the most positive sentiment from their guests.”
It’s an ever-evolving, always difficult balance. But rising labor costs are best treated as an investment, TDn2K said, rather than something worthy to shed.
“Look for successful brands to continue investing in their people as the ultimate differentiator in the marketplace,” the company said.