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Technomic: 2018 ended on a strong note

But prices, not traffic, continued to boost sales throughout the industry, according to the Technomic Chain Restaurant Index.
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The restaurant industry ended 2018 on a high note, according to the latest Technomic Chain Restaurant Index, as industry sales rose 1.3% and just about every sector saw sales improve.

But most of that improvement came from customers paying more for their food, either by menu price increases or larger orders. Traffic for the industry declined 3.2%, according to the monthly index.

Transaction size, meanwhile, increased 3.2%.

“It did end on a pretty strong note in December,” said Adam Roberts, senior program manager with Technomic, a sister company of Restaurant Business. “After a relatively flat [third quarter], the industry saw a slight uptick in Q4, driven by limited-service segments.”

The index compiles information from Technomic Transaction Insights, which collects data from 3 million customers and nearly 20 million monthly restaurant visits. It is based on sales at the 200 largest restaurants, as measured by the Technomic Top 500 Chain Restaurant Report. The report measures total sales and traffic, rather than comparable store data.

The Technomic numbers reflect what some early restaurant company earnings reports have indicated: that sales improved toward the end of the year, but traffic remained frustratingly sluggish.

Just about every sector reported positive sales and negative traffic, other than midscale restaurants (aka family dining), where sales rose 1.9% and traffic was up 0.1%.

Quick-service restaurants also had a 1.9% increase in sales, but a 2.4% decline in traffic—thanks to a 5% increase in transaction size. Fast-casual restaurants similarly saw sales rise 1.3% and traffic fall 3.6%.

Sales fell 1% for casual- and fine-dining restaurants, and traffic declined 5.5%.

Among limited-service chains, chicken and Mexican restaurants remain strongest, while sandwich chains performed weakest.

December sales for Mexican restaurants rose 7.2%, and 6.9% for chicken concepts. By comparison, sales fell 1.6% at sandwich chains—led by the declining sandwich giant Subway, which has struggled with weak sales and closing units.

Among full-service restaurants, meanwhile, sports bars and other varied-menu chains continued to weaken—sales for that group fell 4% in December. For the year, sports bars’ sales fell 5.2%.

On the other end, steak and seafood chains enjoyed a strong end to the year, with sales up 4.2% in December. Steak chains such as Texas Roadhouse and Outback Steakhouse have been some of the best-performing casual-dining restaurants in recent years.

Throughout the industry, traffic actually worsened in December. The 2.8% decline in traffic was slower than the quarter as a whole—traffic fell 2.5% in the last three months of 2018—and the year, when customer count fell by 2.2%.

Chain restaurants have seen customer count fall in recent years amid concerns that the industry is saturated following years of expansion, while growing independents and small chains and other competitors take away business.

Companies have also focused increasingly on takeout, delivery and mobile ordering, where order sizes are larger but customers might come in less frequently.

The issue is putting pressure on management teams at companies such as McDonald’s, where traffic fell 2.2% last year despite rising sales. Numerous companies have cited growing competitive pressures for traffic challenges.

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