Consumers spent a lot of money at restaurants in October, establishing yet another record. Their spending growth easily outpaced growth in spending at grocers. And it easily outpaced menu price increases.
Restaurants and bars generated $97.3 billion in total sales in the month, according to retail sales data released on Friday.
By comparison, grocers and liquor stores generated $87.2 billion in total sales. Consumers, in other words, spent 12% more at restaurants in the month than they did at grocery stores.
Many people, however, may point out restaurant prices, and that said prices may be behind the growth in restaurant sales. But that’s not entirely true, particularly last month.
Restaurant sales increased 0.7% month over month in October. By comparison, menu prices at restaurants increased just 0.2%. So, 0.5% of that growth came in the form of sales that were not there in September. That’s some combination of more people visiting existing restaurants, new restaurants, or they’re buying additional items. Growth in delivery may play a role, too.
Regardless, the data once again serves as a reminder that the industry is doing better than it might have appeared for much of the year.
Restaurants and bar sales are up 5% so far this year. By comparison, grocery and liquor store sales are up 2.2%. Restaurant sales so far this year are up more than almost any other sector of retail. Overall retail sales are up 2.8% so far in 2024, as consumer spending continues to drive the overall economy.
Federal retail sales data captures the broad business of foodservice sales, so it includes much more than chain restaurants. It includes independent restaurants but also sales at schools or stadiums or hospitals.
Sales for food outside the home have been going up faster than sales for food consumed in the home. But there has been considerable talk this year about grocers winning that battle more recently, because they’ve been raising their prices at a much slower rate for well over a year than have restaurants.
Yet, while grocery prices have slowed, consumers visiting those grocery stores have been self-budgeting, buying cheaper items because their own spending is tight. So their sales don’t necessarily show the growth you’d expect when executives at chains like McDonald’s are saying they’re losing sales to customers eating at home more often.
What’s more, a large swath of consumers still have the capacity to spend on dining out. The overall economy has been growing this year. Stocks are up, as are house values. People have jobs. And though they may not like rising menu prices, higher-income consumers may want to eat out more than they hate those price hikes.
That’s why chains like Wingstop or Texas Roadhouse, Cava or Chipotle have all done just fine even as McDonald’s and Burger King lose customers. It’s also why third-party delivery companies appear to be doing fine.
And more recently, including October, sales at some of these previously struggling chains have appeared to improve. Traffic at fast-food chains increased 2.8% in October, according to Revenue Management Solutions. McDonald’s, Wendy’s, Burger King and others have all reported marked improvements in the month.
As we’ve been saying, the restaurant industry is in the early stages of a turnaround, driven by improving sales results and a financing environment that is increasingly favorable. The latest sales data is only one more proof point.