Black Box: Same-store sales fell in Q3

Restaurants continue to depend on check growth as customer count falls.
Photograph: Shutterstock

Restaurants’ same-store sales declined 0.4% in the third quarter, according to the most recent Black Box Intelligence index, the industry’s first quarterly decline in two years.

Same-store sales rose 0.1% in September despite some tougher comparisons, according to the index, which comes from a monthly survey of more than 170 brands representing more than 31,000 locations.

The growth, which followed two straight months of declining same-store sales, came entirely on higher average check. Traffic fell 3% in the month, and 3.5% for the third quarter.

“This is something we were expecting given the underlying, relentless erosion of guest counts and the fact that the industry was headed towards tougher previous-year sales comparisons as we went into the second half of 2019,” said Victor Fernandez, vice president of insights and knowledge for the restaurant information firm TDn2K.

On a two-year basis, the industry has not moved much. Same-store sales rose 0.7% over two years in the third quarter, roughly the same as the 0.8% average this year.

Fine dining was the best-performing sector, fueled by business spending and an economy that’s particularly strong for wealthier consumers. Family dining was the only other industry segment to see same-store sales growth last quarter.

All sectors saw traffic declines last quarter, however.

Same-store sales and traffic did improve sequentially from where they were in August, providing some slight recovery from a weak late summer for the industry.

Still, it comes amid growing economic uncertainty and slowing income growth. It also comes as the restaurant industry overall has slowed its hiring dramatically this year, suggesting a broader slowdown in the pace of growth.

Joel Naroff, president of Naroff Economic Advisors and a TDn2K economist, said that the outlook for the economy is uncertain and dependent on tariffs. “The negative effects of the trade war are spreading across the economy, largely driven by business uncertainty,” he said in a statement. Job growth has slowed because of the lack of available workers and household incomes are growing more slowly.

All that said, turnover for nonmanagement employees increased in August and remains at historically high levels, according to TDn2K’s People Report. While the industry has slowed its hiring, that apparently hasn’t kept people from jumping to other jobs.

“A large percentage of restaurants remain understaffed,” TDn2K said. Back-of-house positions have become especially difficult to fill, emerging as a major pain point for the industry.

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