Restaurant sales slowed a bit in May after a sizzling spring start. TDn2K’s latest Restaurant Industry Snapshot, based on weekly sales from more than 30,000 restaurant units, showed flat same-store sales growth across the industry—a significant slowdown from April’s 1.5 percent lift, which marked the best performance since September 2015.

However, the trend remains positive as restaurants have charted three consecutive months of positive or flat same-store sales. Sales have also been positive year-to-date after two straight years of 1 percent declines.

And as has been the case in previous months, average guest checks, not improved guest counts, are driving sales. Same-store traffic dropped 2.9 percent, a 1.5 percent fall from April’s growth rate. However, year-to-date traffic growth at negative 2.5 percent is still an improvement from the 3.2 percent dip recorded for each of the previous two years. It was most pronounced in New England, where traffic fell 5.1 percent and same-store sales declined 2.4 percent. The Western region tracked the best with a 0.9 percent traffic slide coupled with 2.8 percent sales growth.

Meanwhile, average guest checks are up 2.8 percent for 2018. They were up 2.1 percent for all of 2017. “To put all this into perspective,” Victor Fernandez, vice president of insights and knowledge for TDn2K, said in a statement, “guests are spending more per visit but dining out less frequently. If it wasn’t for the growth in check average, we wouldn’t have seen any positive sales growth since the recession.”

TDn2K’s data showed some significant challenges ahead. While sales are flat year-over-year at the national level, 109 (56 percent) of the 196 designated market areas tracked by Black Box Intelligence reported negative same-store sales growth in May. The Mid-Atlantic and Midwest struggled along with New England. California and Florida tracked positive with the Western Region.

“There are two takeaways from May’s flat performance,” Fernandez said. “First, the stronger economy is lifting restaurant spending and 2018 should be better than the last two years. Same-store sales growth year-to-date is at 0.3 percent at the end of May, compared with [negative] 1 percent for both 2016 and 2017. Secondly, the fact that same-store sales growth dropped by 1.5 percentage points compared with April’s rate highlights the fact that the underlying challenges remain. It will be very hard for chain restaurant sales to rise beyond very modest positive gains. Those challenges include the oversupply of restaurants and the fierce competition from other sectors like grocery store prepared foods, convenience stores, and even independent restaurants.”

Fast casual, upscale casual, and fine dining were the top-performing segments. For fast casual, the recent run is a welcome sign after two years of declining sales. Fast casual’s growth results are up 2 percentage points compared to their 2017 rate. By comparison, other segments have only improved their results by an average of 0.5 percentage points compared with the previous year.

TDn2K also broke down daypart performance. Dinner, at 0.1 percent growth, has shown to be the weakest segment year-to-date. “For many brands, particularly those in full service, dinner is the biggest and, in some cases, only daypart. Lunch sales are also struggling and traffic in that daypart continues to decline. So where are restaurants finding success in driving incremental sales?” the report said.

Sales in the mid-afternoon, late night, and at breakfast have each grown more than 1 percent or more in 2018. Also, off-premises sales continue to rise.

Once again, TDn2K’s People Report proved labor to be a recurrent issue for operators. Restaurant turnover is currently the highest it has been in decades. Turnover for hourly employees as well as restaurant management increased again in April on a rolling 12-month basis.

“This is to be expected,” Fernandez added “considering that the national unemployment rate is now as low as it has been in the last 50 years. Furthermore, in 1969, restaurants were not up against companies like Uber or GrubHub when competing for employees. People Report data shows currently over 75 percent of restaurant companies are constantly understaffed.”

Year-over-year job growth is down 0.8 percent. It was up 1.8 percent in March. At 3.8 percent, the national unemployment rate is at the lowest level its been in the last 50 years, compounding the fact that finding qualified talent is one of the biggest obstacles restaurants face in today’s industry.

“The economy appears to have accelerated in the second quarter from its mediocre performance in the first part of the year,” Joel Naroff, president of Naroff Economic Advisors and TDn2K economist, said in a statement. “Consumer spending, which grew decently in the first quarter, has picked up further as the tax cuts added to household spending power. Business investment activity has also increased, though we are still not seeing as much of the tax benefits going to new spending on buildings, machinery or software as hoped for. That is just one of the two concerns facing the economy. The second is wage gains, which may be accelerating, but so is inflation and that means spending power continues to expand sluggishly. The expected stronger economy is coming and we could see growth in the next two quarters at or above 3.0 percent. But there is still little reason to believe that the improvement will be powered by sharp gains in consumer spending. Thus, look for restaurant sales to rise a bit further.”