Despite a rocky beginning to 2018, there were signs of hope for restaurant operators. Taken from a helicopter view, strong sales to close the previous year led analysts to ask this question: Is a sudden downturn evidence of a fresh trend, or just Mother Nature’s latest cruel twist?

March’s results would, thankfully, point to the latter. In March, TDn2K’s Industry Snapshot, which gathers data from weekly sales of more than 30,000 restaurant units and 170-plus brands, showed same-store sales growth of 0.8 percent across the industry. That’s the best month based on sales growth since October 2017. It comes after a February where comps dropped 0.8 percent versus the same period in 2017, and traffic declined 3.1 percent. January’s sales dipped 0.3 percent to break a three-month run of flat or positive sales growth for the industry.

Yet now that comps have turned positive once again, we can view the industry’s recent performance from a wider perspective. Four of the past six months have reported positive sales growth. From a quarterly perspective, the industry has notched two consecutive quarters of positive sales growth for the first time since 2015 at 0.4 percent.

“Since the end of last year, we have been cautiously optimistic about what we believe is a strengthening in restaurant performance and increased consumer spending fueled by solid economic conditions,” Victor Fernandez, executive director of insights and knowledge for TDn2K, said in a statement. “Even if the first two months of the year were soft, we believed there were external factors that overshadowed some underlying momentum.”

Traffic remained in the red at negative 2.1 percent and is down 2.7 percent in the rolling three months. This is most pronounced in the Southwest, where sales declined 0.5 percent and traffic fell 2.6 percent in March. Florida, meanwhile, topped the markets with 1.9 percent sales growth a negative 1.4 percent traffic.

TDn2k points out that weather, while a much softer figure in this equation than in previous months, still wielded influence, particularly in the Northeast and parts of the Midwest. Florida, the Western region, and California all posted solid positive growth.

“California and other states on the West Coast have been experiencing some of the highest employment growth rates in the country, which is a good leading indicator for increased restaurant sales,” the report said.

Among the worst performers: the Midwest, New England, and the Southwest. But of the 196 designated market areas tracked by TDn2K, 120, or 61 percent, achieved positive same-store sales growth in March.

Overall, March’s growth of 0.8 percent was 0.1 percent better than the prior year.

The traffic decline of 2.1 percent was 0.9 percentage points higher than February. Traffic for the quarter dropped 2.7 percent.

“March’s results reinforce our view that we are in a period of gradual recovery for the industry. However, the upward trend in results will be modest at best until the industry solves its declining guest count problem,” Fernandez said.

Guest check has accelerated in recent quarters. The average for the first two quarters of 2017 was 2.1 percent. It upped to 2.3 percent in the second half of the year. Spending per guest increased in the first quarter as restaurants continue to increase menu prices and rely less on price promotions. The rate at which the average check increased, year-over-year, grew in the first quarter of 2018—guests spent on average 2.8 percent more, year-over-year, during the quarter.

And as was the case in 2017, those restaurants with the highest average checks led the industry in same-store sales growth. Fine dining and upscale casual have consistently reported positive in TDn2K’s data.

“In fact, a recent TDn2K study showed that top performers over the past two years have differentiated their brands in three key areas: alcoholic beverages, ambiance and service. It is precisely in these three guest satisfaction attributes that fine dining and upscale casual brands are poised to succeed when executing correctly,” the report said.

Casual dining and fast casual, which each experienced sales declines of 1 percent or more last year, showed positive in the first quarter of 2018, and have now achieved two consecutive quarters of growth.

On the workforce level, year-over-year job growth is up 0.4 percent, but declined 1 percent in January. Restaurant management turnover was flat in February, yet remains at historically high levels.

“Restaurant sales may be improving, but that only amplifies the challenge of keeping restaurants fully staffed to be able to meet the growing demand. Wages and salaries are expected to rise as a result, as restaurants offer more financial incentives to attract and retain employees in this increasingly difficult environment,” TD2nK said.

Can restaurants keep up with improving sales from a staffing perspective? According to a recent study by TDn2K’s People report, almost three out of every four restaurant brands said they were understaffed for customer facing, front-of-house positions. It’s even worse in the back of the house.

“People Report’s latest results show non-management, hourly turnover rates again increasing during February. For restaurant managers, rolling 12-month turnover rates remained flat during the month. This offers some sense of relief, no doubt, but is not expected to signify a reversal in the trend. Turnover for restaurant managers is at the highest it has been in recent memory and given the very tight labor market and the intense competition for talent within the industry, management retention is expected to continue to be a significant headache for restaurant companies,” It said.

Wages and salaries are showing signs of growth as well, especially as restaurants opt for financial incentives to lure in employees.

“Those brands that are more successful in their recruitment and retention strategies, the data shows, tend to also be those that do better in their top-line financial results,” Fernandez added. “More than ever, people need to be at the center of any successful restaurant strategy.”

In addition, consumer spending is on the rise, Joel Naroff, president of Naroff Economic Advisors and TDn2K economist, said.

“The consumer may be coming alive again after being somewhat dormant during the early winter,” Naroff said. “Vehicle sales rebounded in March and credit card debt is rising. It is likely that the retail sales figures for March will look very solid. In part, the rise is being funded by the slow but steady impact of the tax cuts. But more fundamentally, wage gains are accelerating as well. Personal income is increasing, providing the capacity to spend more.”

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