After disappointing restaurant sales in October, momentum was regained as same-store sales growth returned to positive territory during November. Although the 0.5 percent sales growth experienced in November can be considered relatively modest, especially compared with the average 2.2 percent same-store sales growth reported for the first nine months of the year, the 0.6 percent upward swing compared with the 0.2 percent same-store sales growth decline reported for October is encouraging. This improvement from last month’s year-over-year sales growth rate is the largest reported by the industry since June 2015. This insight comes from data reported by TDn2K’s Black Box Intelligence through The Restaurant Industry Snapshot, based on weekly sales from over 22,000 restaurant units, 120-plus brands, representing $55 billion in annual revenue.
“At a national level, many of the key economic indicators are still positive: job growth is expected to be reported as strong for November, unemployment is still slowly declining and consumer sentiment continues to be relatively strong compared with previous years. It is not surprising that the restaurant industry was able to rebound and post positive same-store sales growth during November, albeit small, especially when factoring the effect of increasing average guest checks,” says Victor Fernandez, executive director of insights and knowledge for TDn2K. “However, it is difficult to be too optimistic for the fourth quarter, given the declining trend in same-store sales growth we have been reporting on throughout the year. Growth continues to be positive, but we are definitely experiencing a slowdown in restaurant sales.”
At the end of November, quarter-to-date same-store sales growth is 0.2 percent; a big drop from the 1.5 percent posted during the third quarter. Year-to-date same-store sales growth is now 1.8 percent as we head into the last month of the year.
There is favorable news for the industry observed in the increase of same-store sales during November as a result of an improvement in traffic and not because of companies increasing their prices. Same-store traffic growth was down 1.7 percent during November, a significant 1.1 percent improvement over the 2.8 percent drop reported for October. “However the chain restaurant industry as a whole continues to have a chronic traffic problem,” continues Fernandez, “and it has worsened during the last couple of months. The average same-store traffic growth for October and November was [negative] 2.2 percent, compared with an average [negative] 1.1 percent for the first nine months of the year.”
The steady drop in average guest check growth is a key component in the slowdown in sales experienced since July. While the average guest check growth in comparable stores during the first six months of the year was 3.4 percent, the average for the five months since then was only 2.5 percent. Furthermore, the 2 percent growth posted in November is the lowest year-over-year increase in average guest check reported by the industry since June 2014. A factor behind this decrease in average guest check growth seems to be a decline in same-store beverage sales, which have reported negative growth during the last three quarters while food sales growth has been able to remain positive.
As has been the case during most of this year, the segments in limited service (Quick Service and Fast Casual) were the top performers based on same-store sales growth during November, significantly outpacing the sales growth of the full-service segments of the industry.