Despite a slight improvement in May restaurant sales, the industry has still not returned to positive territory. Sales were -0.3 percent a—0.7 percent improvement from April. May was the third consecutive month of declining sales, which have continued to slide since the fourth quarter of 2015. The average growth rate for the last eight months is -0.2 percent, with only three positive months during the period seeing modest growth of roughly 0.5 percent. 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 $64 billion dollars in annual revenue.

Same-store traffic was down -2.7 percent in May. Despite the large drop, this was a 0.8 percent improvement from April, which saw the worst sales and traffic performance in over two years.

“The industry faced much different consumer behavior in the first half of 2016,” says Victor Fernandez, executive director of Insights and Knowledge for TDn2K. “As a comparison, guest counts fell only by an average -0.5 percent in the first five months of 2015 while restaurants were able to engineer strong check increases of roughly 3.1 percent. Today, the industry struggles as traffic was down -2.6 percent in the first five months of 2016 and average guest checks grew at a much more moderate 2.3 percent.”

“The May employment report was surprisingly weak, but it should not be taken as a signal that the economy has slowed sharply or that consumers will stop spending,” says Joel Naroff, president of Naroff Economic Advisors and TDn2K economist. “The pressures on the labor market are still building, despite the slowing in hiring. That bodes well for income growth. In addition, consumers remain confident about the future. Rising income and confidence imply that household spending should improve as we go through the summer. Indeed, projections are for a strong summer travel season that should lead to increased traffic at restaurants.”

Regional differences provide some perspective on results. Six of the 11 regions had positive sales in May, and on average their same-store sales growth was 1.2 percent. In contrast, the average growth for the five regions with negative sales was -2.4 percent. “The underwhelming performance at the national level in May is largely a result of several regions reporting soft results, particularly the Southwest, Mountain Plains, and Texas,” Fernandez says. “We saw some improvement, but most regions are seeing slowing sales and some are dropping into negative territory.”

Results also vary at the segment level. Quick-service brands have been successful this year and have generally posted strong results. At the other end of the spectrum, casual dining has struggled and consistently trailed other segments.

Regarding the workforce, People Report results indicate the restaurant industry may be following the overall trend in the economy as year-over-year job growth in restaurants slowed during April. Growth in jobs was 3.8 percent for the month, a drop from the 4.4 percent reported for March and the average 4.1 percent in the second half of 2015. Although this slowdown provides some relief to operators, rising turnover levels mean there is always a steady stream of vacancies. A survey of TDn2K members indicate that ‘finding qualified employees’ is their top HR-related concern for 2016.

Rolling 12-month turnover for hourly employees increased again during April. It has trended up for almost three years and is a critical focus for most operators. Management turnover was unchanged in April. It has also been trending up for years in each segment and is higher than the years prior to the recession.

Minimum wage increases are also a major concern. According to a recent survey conducted by People Report, 75 percent of brands indicate they have or will plan to increase menu prices to offset the increases in minimum wage.

In May, White Box Social Intelligence guest satisfaction scores increased as well. All three guest satisfaction attributes (“food,” “service,” and “intent to return”) saw increases in the percentage of online mentions that reflect positive guest sentiment. This is interesting in particular for service scores, which have been increasingly negative for the past few months. The biggest change was “intent to return,” with about 10 percent more positive mentions in May than in April.

Family dining had the most positive “food” mentions for the month. This was the first time family dining led all since White Box Social Intelligence started publishing metrics. Family Dining also saw the highest percentage of positive mentions for “intent to return” for the second consecutive month. These categories were previously dominated by Fine Dining.

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