I was recently reminded of a conversation nearly a year ago in which I noted that the environment should be better this year, and operators more confident, at least because the election was over. I wish I could take that back.
The latest sign that all is not right with the restaurant business came courtesy of Circana, which said that 29% of all industry traffic is on a deal, the most in 50 years. What’s more, the increase in deal-based traffic since 2022 was the most since the Great Recession.
So not only is traffic down, but much of the traffic restaurants are getting is discounted in some form.
Value remains crucial for a lot of restaurant companies because it takes price-based promotions to get some customers in the door.
But the signs are just so ominous. The labor market is weakening, with hiring at levels we haven’t seen since 2009. Prices aren’t exactly falling right now. Nor are costs. And discounts are heavy.
Only the stock market, which continues to hit record after record, appears unphased by everything. Yet make no mistake: This “challenging industry environment,” as executives like to call it, is not getting less challenged anytime soon.
This week’s financial news
Speaking of ominous, the casual-dining chain Razzoo’s Cajun Café declared bankruptcy. It blamed discounts at Chili’s and Applebee’s. It’s the latest in a string of filings by mostly small restaurant chains.
That’s also another sign of our bifurcated economy.
Remember those old Burger King ads? They did the chain no favors. And now the company is now working to get out from under that era as it targets families and young consumers.
Starbucks’ latest closures put an end to an aggressive expansion era by the coffee shop giant. That era may have been too aggressive.
Only one of the five restaurant chains that went public in 2021 is trading above its offering price.
Wendy’s has entered the chicken tenders game.
Number of the week
As we said, Burger King’s old “Creepy King” ads did the chain no favors. This graphic shows the company’s average-unit volumes during that era. While that campaign won awards, it likely limited the chain’s market. Check out this graphic on the chain’s unit volumes during that period, compared with those of McDonald’s.
Quote of the week
“We moved away from the creepy king because he had limited appeal.” -Joel Yashinksy, chief marketing officer for Burger King in the U.S. and Canada.
On the blog
I wrote about the bifurcated economy, Starbucks’ closures, small companies’ struggles and the 2021 IPO class. Check out all my blog posts on The Bottom Line.
On the podcast
On A Deeper Dive I spoke with Scott Romanoff, managing partner of Franchise Equity Partners, on its recent investment in the 7 Brew franchisee 7 Crew. On The Week in Restaurants we talked about the economy, DoorDash and Starbucks.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.