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Black Box: Same-store sales flat in November

The industry is on pace for its first positive quarter in two years, but weak traffic remains a problem.

The restaurant industry is on pace for its first positive quarter of same-store sales in two years, after comparable sales were flat in November, according to the latest monthly index from Black Box Intelligence.

The November results represent a 90-basis-point slowdown from October’s unexpectedly strong 0.9% showing. Still, average same-store sales in the two months was 0.4%, far higher than the 1.6% decline for the first nine months of the year.

In addition, comparisons ease in December, suggesting that restaurants could end the year on a positive note.

“When you look at the fundamentals underneath, the economy accelerated,” said Victor Fernandez, executive director of insights and knowledge for Black Box parent company TDn2K. “Consumer sentiment continues to be high. You have tax cuts. At least there’s more direction there.

“All of that is in place. The momentum is there. And then you factor in really soft comps for December [2016]. It’ll likely be a good month.”

While sales might be turning positive, there remains a problem in the form of weak traffic. Same-store traffic during the month declined by 2.5%, continuing a long-term problem: Restaurants keep losing customers.

Mostly, they’re losing customers to other restaurants. The industry has added locations at a pace far higher than population growth every year since the recession.

As such, the supply of restaurants has outpaced demand for them, spreading the customer base over a larger number of locations, not to mention convenience stores, grocery stores and home-delivered meal kits that are also vying for the prepared meal market.

“If you have one meal, a few years ago you had two restaurants around you, and now there’s five, even the good ones are going to get one less visit once in a while,” Fernandez said.

He said that overall sales for the industry continued to grow, if you take Black Box’s information and pair it with public company sales numbers. Total sales increased 3% in 2016 and in the first nine months of 2017. But a lot of that sales growth is coming from the additional locations.

“There’s too many out there, and from a same-store perspective it is hard to keep up,” Fernandez said.

The good news, he said, is that consumers appear willing to spend more money on their meals. Check average increased 2.4% in November, meaning consumers are spending more for their orders, either because consumers are ordering more expensive fare or because of price increases.

Meanwhile, the strongest segments during the month were fine dining and upscale casual dining.

Consumers on the higher end of the economic spectrum, as well as business travelers, continue to spend this year, which has helped drive sales at the top-tier restaurants—which also includes independents, Fernandez said.

On the other end, he said, family and casual dining fared worst. In particular, he said, bar-and-grill chains continue to underperform the overall market.

Consumers, Fernandez said, are either looking for convenience from chains such as McDonald’s Corp., or they want an experience, which is helping fuel sales at upscale chains and independents. The middle, meanwhile, is having some problems.

As for November, at least some of the slowdown from October can be attributed to the loss of the “hurricane rebound.”

Consumers in Florida and Texas ate out less in September because of hurricanes Harvey and Irma. They returned to restaurants in droves the following month as insurance adjusters and relief workers and construction crews flooded the areas and needed places to eat. That was less of a factor in November.

“October was very strong,” Fernandez said. “There were the better results in those regions hit by hurricanes.”

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