New data released by market analysts at TDn2K shows that the traditional holiday month of December was anything but jolly for restaurant operators, who saw their worst quarter of sales in more than five years, according to the research company.
The data showed that that the industry’s overall fourth quarter sales dropped 4.3 percent in December, reducing the month’s same-store sales result to -2.4 percent for the quarter — the worst since 2011, according to TDn2K.
“Restaurants have now posted four consecutive quarters of declining year-over-year sales,” TDn2K Executive Director of Insights and Knowledge Victor Fernandez said on the company’s website. “The last time the industry experienced a year with all negative quarters was 2009 when the economy was suffering the effects of the great recession.This was also the last year in which we experienced a quarter with a sales decline worse than -2.0 percent as we did for the fourth quarter of 2016.”
The findings are part of the company’s “Restaurant Industry Snapshot,” which is based on weekly sales at nearly 26,000 restaurant locations for more than 130 brands.
The research indicated that the problem stems from a reduction in foot traffic (a decline of 6.4 percent) but also a slowing in average guest check growth, which sputtered out over the last three quarters of 2016, growing only 2.1 percent year over year in Q4.
Additionally, the company said over a two-year period, 2016 sales increased 0.9 percent, compared to 2015, but that change was largely the result of menu price increases.
“Without those price increases, many companies would have a very tough time maintaining sales growth and margins,” Fernandez said on the website. “However, the question remains: Can brands continue to raise prices at the same pace in an environment of declining traffic and increased competition from alternatives, such as inexpensive groceries, a new breed of independents, and home delivery?”
October and November job growth also slowed after growing more than 3.5 percent in the first halfof 2016, according to the company. Likewise, turnover increased, particularly in management, surpassing pre-recession levels and showing no signs of abating.
Rising payroll costs remain a huge concern for restaurateurs, who have to deal with not only a substantial turnover problem but also the fact that 19 states are set to increase minimum wage this year. The only somewhat encouraging news — at least for those signing the paychecks at restaurant brands nationally — is that the substantial changes that would be brought about by the new overtime regulations that had been set to activate Dec. 1 are now on hold,with little chance of much support from the current administration or Congress if they fail to make it through the courts.
