Disappointing restaurant sales growth, at negative 1.3 percent in November, is the ninth consecutive month of negative same-store sales and the worst sales growth since July, according to a report in QSR magazine. This disappointing sales growth occurred at the same time that the economy is growing at the fastest pace in two years during the second quarter. Same-store sales for the third and further quarters, at the end of November, were both down 1.1 percent.
Traffic continues to be the main factor in disappointing restaurant sales growth. As of November, same-store traffic growth for 2016 has declined 3 percent in comparison to 2015 when traffic was down 0.8 percent. The 3.3-percent drop in November was only a marginal improvement from the 3.4-percent decline reported for October. This insight comes from data reported by TDn2K through The Restaurant Industry Snapshot, based on weekly sales from nearly 26,000 restaurant units and 130-plus brands, representing $65 billion in annual revenue.
Although traffic performance was very close to the prior month, sales growth deteriorated because of a drop in average guest checks. Same-store average guest check growth was 2.1 percent during November. It had been over 2.5 percent for all months since June.
Quick Service was again the best performing segment, reporting comparable store sales performance close to 2 percent. Quick service has been the top performer during every month since February. The only other two segments with positive sales in November were family dining and fine dining.
Restaurants faced challenges this year because menu prices have increased at a much faster rate than the prices for food at grocery stores. This has created additional competitive pressures for restaurants, as preparing food at home became much more attractive from a cost perspective.
“Consumer income growth is improving, but household spending on retail products, including restaurants, is not keeping pace. Families are buying vehicles and homes and debt payments are limiting spending on other products. Trump’s tax and spending proposals should add to growth but not until the second half of next year. The outlook is for income gains to improve and spending to rise, but the changing spending patterns should continue until the rising interest rates slow big-ticket consumer purchases. That may not happened until well into 2017,” said Joe Naroff, president of Naroff Economic Advisors and TDn2K economist.
