Financing

Black Box: 2018 ended on a strong note

Same-store sales rose 2% in December, the best month in more than three years.
Photograph: Shutterstock

Same-store sales rose 2% in December in the industry’s best month in more than three years, according to the latest Black Box Intelligence index from TDn2K.

The index, which measures weekly sales from more than 170 brands and 31,000 locations, was up 1.4% in the fourth quarter, which many expected to be the year’s toughest, given that the fourth quarter was the strongest period of 2017.

And 2018 finished positive, overall. Same-store sales for the year rose 0.7%. That’s still modest, but it was the best result since 2015, suggesting the industry is generating at least a moderate amount of momentum.

“There’s enough there to continue to be cautiously optimistic about where we are,” said Victor Fernandez, vice president of insights and knowledge from TDn2K. “Especially the performance for the fourth quarter, which was strong. That is definitely some encouraging news for the industry.”

To be sure, the increase came entirely from higher prices and customers making larger orders, as restaurants continued to raise prices and shift away from the discounting tactics they’d used in recent years to generate traffic.

Same-store traffic declined 0.9% in December and for the fourth quarter declined 1.6%. “The underlying message is the falling guest counts,” Fernandez said. “That is the new normal for the restaurant industry as a whole and especially the chain restaurant sector. It’s not something they’re going to be able to solve anytime soon.”

There are many reasons for the traffic challenges, Fernandez said. That includes too many competitors, both outside and inside the restaurant industry.

One element that might be influencing the state of sales is the shift in the business toward more takeout and less dine-in business.

Fernandez said that same-store sales for dine-in business actually declined, and that all of the 2% December increase came from a larger number of takeout orders.

It’s possible, therefore, that more of those takeout orders are for multiple people and are therefore larger—which could be resulting in a decrease in total traffic. That could also reflect some of the growth in delivery orders, which are also larger and are more likely for multiple people.

Casual-dining chains such as Texas Roadhouse have had to devise ways to deal with demand for takeout even though the company did little over the years to encourage that sort of business. And dine-in focused fast-casual chains such as Firehouse Subs and Noodles & Co. have also had to shift their business in recent years as more consumers ordered takeout.

“That is the trend,” Fernandez said. “They’re needing to, wanting to, order restaurant food. But where they’re consuming that has changed.”

He said demand for takeout has spanned every sector of the industry. “The percentage of sales coming from off-premise is up across the board across all segments,” he said. “If that’s where the guest wants to consume their food, that’s where they’re willing to spend money, and brands have to adjust.”

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