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Black Box: August same-store sales best in 3 years

But comparisons were easy and traffic remains down despite an improving economy.
Photograph: Shutterstock

Restaurant same-store sales rose 1.8% in August, according to the latest Black Box Intelligence index, the industry’s best performance in three years.

But that doesn’t mean it was all good. For one thing, comparisons were somewhat easy as a year ago the industry was dealing with a major hurricane in a big market, Texas.

For another, a lot of the improvement is from price increases and fewer discounts. Same-store traffic was down 0.8%, continuing a three-year-long trend in which the industry continues to lose customers.

“There’s a story of good news, bad news associated with chain restaurants,” said Victor Fernandez, vice president of insights and knowledge with Black Box parent company TDn2K. “But it’s better than the alternative of it all being bad news, which is what we had last year and the year before.”

A year ago, Hurricane Harvey flooded much of southern Texas, especially around Houston, hurting restaurant sales.

But Fernandez noted that the impact came during the last week of August a year ago. He said that same-store sales were up 1.5% in the first three weeks of the month this year. The last week of the month, same-store sales rose 2.9%.

Don’t count the fourth week, Fernandez said, and “that still would have been a strong month historically and the best since September 2015. From that perspective, the message is the restaurant industry is relatively strong.”

“The economy is stronger, consumer confidence is strong, and people are spending at restaurants.”

Spending more maybe, but not eating more.

Menu prices have increased 2.8% this year, according to federal data, meaning that same-store sales aren’t keeping pace with higher overall prices. And indeed the traffic decline suggests that consumers are eating out at restaurants less often.

“Even in the best of months we’ve seen, we’re not even close to getting positive traffic growth,” Fernandez said. “Average guest check keeps us above water. The underlying problems in the industry continue. We keep on losing traffic, no matter what.”

Those underlying problems include overall store growth, which has apparently outpaced consumers’ willingness to dine out. Competition from other sources of dining, such as convenience stores and grocers, could be pulling customers away. Small chains and independents that are not captured on these sales indexes are apparently drawing more sales.

Indeed, federal data from July indicated that year-over-year total restaurant sales rose 9.5%, suggesting that someone is getting additional customers. That someone, apparently, is not chain restaurants.

“Yes, we’re seeing some better results, some small, positive growth, but there are a lot of brands still struggling and facing significant headwinds,” Fernandez said, noting that only a quarter to a third of the brands Black Box surveys are showing positive traffic.

For the year, he said, same-store sales are up a meager 0.4%. That was better than the 1.5% decline a year ago, “but it’s hard to get excited about a less-than-half-percent increase in 2018.”

It won’t get any easier for chain restaurants to demonstrate their improvement. Comparisons get more difficult as the year comes to a completion.

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