Chain restaurant same-store sales fell during March, plunging into negative growth territory for the second time in the last three months. At -0.7 percent same-store sales growth, March represented the second worst month since February of 2014. Only January 2016 was slightly weaker at -0.8 percent sales growth. This insight comes from data reported by TDn2K’s Black Box Intelligence through the Restaurant Industry Snapshot, based on weekly sales from over 24,000 restaurant units, 120-plus brands, representing $61 billion dollars in annual revenue.

“In recent years March has typically been strong for restaurant sales as weather becomes nicer at the beginning of spring, some pent up demand from the winter months is probably acted upon, heating costs go down, and spring breaks generate some additional spending,” says Victor Fernandez, executive director of insights and knowledge for TDn2K. “Average weekly sales per restaurant were between 9 and 10 percent higher than the average for the preceding six months for March 2014 and 2015. However, in 2016 the industry lift in average sales per week was only 8 percent higher than the average for the previous six months.”

The weakness in March results is also evident when looking at results from an aggregate two-year perspective. Although the Black Box Intelligence restaurant index was averaging over 3 percent same-store sales growth over the previous six months on a two-year comparable basis, the two-year growth for March was only 0.7 percent.

With negative sales growth reported in two of three months, Q1 of 2016 broke the streak of seven consecutive quarters with positive same-store sales. Sales growth during the quarter was -0.4 percent, which represents a 0.8 percent drop from the rate reported for the fourth quarter of 2015.

“Although weather continued to be a factor in some regions of the country, the slowdown in restaurant sales appears to go beyond just that,” Fernandez says. “It also goes beyond just a few brands or regions having a tough time.” Out of all restaurant brands tracked by Black Box Intelligence, half of them reported negative same-store sales growth during Q1, up from 40 percent of brands reporting negative growth in Q4 of last year. In addition, over 60 percent of brands reported data showing their same-store sales growth worsening in Q1 compared with their Q4 results. Finally, seven of the country’s 11 regions posted negative same-store sales growth during Q1; as a comparison only five and three regions reported decreasing sales in Q4 and Q3 2015 respectively.

“The consumer has pulled back recently,” adds Joel Naroff, president of Naroff Economic Advisors and TDn2K economist. “The March retail sales report was weak and restaurant demand dropped sharply. Over the past four months, consumer behavior has been varying wildly and it is not clear why. The willingness to spend on most goods, especially eating out, seems to wane and then come back. This may turn out to be only a temporary pattern as confidence remains high, incomes are growing and job growth is solid. It would be expected, given the economic fundamentals, that household spending should rebound as we move into the summer, but the odd spending patterns we have seen recently raise questions whether that upturn will be very strong.”


Chain restaurants continue to have a problem with their guest counts since the recession: same-store traffic growth during Q1 was -2.4 percent, a 0.3 percent drop from Q4 2015 and the worst quarter in the last two years. This problem is very widespread; 71 percent of the brands tracked by Black Box Intelligence reported negative traffic growth during Q1. “It seems that as restaurants experienced sales growth slowing throughout 2015, they became less prone to significant price increases or started using promotions more aggressively,” Fernandez says. “Average guest check growth was 2 percent year-over-year during Q1, compared with an average 2.8 percent for all quarters in 2015. However, the marginal effect this has had on traffic (56 percent of brands reported some improvement in their traffic growth results, even though in most cases their growth rate remained negative despite the improvement) has not been substantial enough to offset the decrease in average guest checks.”

Regarding the restaurant industry’s workforce, according to TDn2K’s People Report job growth continues to be robust, outpacing the overall growth of jobs in the economy. After three months of job growth over 4 percent, the restaurant industry year-over-year employment growth rate slowed down to 3.5 percent during February. This dip notwithstanding, the number of jobs in the industry has increased by an average 4.2 percent during the last eight months.

According to People Report’s quarterly Workforce Index, recruiting difficulty is the largest challenge for restaurant companies. A recent survey conducted by TDn2K shows most companies consider finding enough qualified employees to be their most pressing concern in 2016. A big part of this challenge is the result of rising turnover levels experienced by the industry at both the hourly employee and management level. Rolling 12-month restaurant hourly employee turnover rose again in February and has increased during 29 of the last 30 months (turnover remained flat in January of this year). Restaurant management turnover also increased during February and has now been rising or flat for 22 of the last 29 months.

According to TDn2K’s White Box Social Intelligence, based on a sample of over 10 million online mentions covering almost 100,000 individual restaurant locations, there have been some interesting shifts in online conversations from restaurant guests since the beginning of 2015. Although most guests typically mention “food” in their online comments (from a set of three key guest satisfaction attributes tracked for the Restaurant Industry Snapshot (“food,” “service,” and “intent to return”—White Box Social Intelligence also tracks six “beverage,” “ambiance,” and “value”), the percentage of food mentions has steadily declined, while increasingly more conversations are tending to be based on service and “intent to return.”

“Social media and review-based sites are becoming a richer source of broad-based guest feedback that goes beyond just commenting on the food. Additionally, TDn2K research has demonstrated correlations between restaurant-level turnover and guest service perception, suggesting that service based online interactions should become increasingly more prevalent as the labor market continues to tighten and restaurant turnover skyrockets. We believe we are seeing the canary in the coal mine of turnover impacting service, resulting in declines of sales and traffic,” says Wallace B. Doolin, chairman and founder of Black Box Intelligence and TDn2K.

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