Technomic Index: Limited-service chains widen the gap

Sales rose 1.7% in April, thanks to strong improvement in quick-service and fast-casual chains, as dine-in remains a challenge.
Photograph: Shutterstock

It has become increasingly clear that consumers are much less likely to eat their food inside a restaurant, particularly when that restaurant is part of a large, national chain.

The latest evidence comes from the April Technomic Chain Restaurant Index, a monthly snapshot of the performance of the 200 largest chains in the U.S. using Technomic Transaction Insights data.

Sales in April rose by 1.7%, according to the index, an improvement over March as well as the trend for the past year—in which sales are up 1%.

All of that improvement came thanks to counter-service chains. Quick-service concepts’ sales rose 3.9%, leading all sectors, and fast-casual chains’ sales rose 1.2%. Sales fell at both Casual Dining (-4.9%) and Midscale, or Family Dining (-4.2%).

“April did see some positive results,” said Adam Roberts, program manager for Restaurant Business sister company Technomic. “It’s definitely driven more by the [limited service] segments.”

Technomic Index Sales and Traffic

Source: Technomic

The Technomic Index is a broad measure of restaurant sales among the 200 largest chains, as measured by the Technomic Top 500 Chain Restaurant Report. The data used in the index comes from Transaction Insights, which collects spending data from 4 million customers and about 24 million monthly restaurant visits.

While sales improved in April, traffic remains a broad-based industry challenge as chains raise prices and promote more premium items.

Overall, traffic declined 1% in April. QSRs’ traffic rose 0.2%. But every other sector was down, notably casual dining (down 8.1%) and Midscale (-4.4%). Fast-casual chains’ traffic declined 2.7% in the month, though that was an improvement from the sector’s three-month trend.

Limited-service chains, Roberts noted, have been more aggressive when it comes to price. QSR check average rose 3.8% in April, higher than the 3.3% industry-wide average. Fast-casual chains’ average check rose 3.6%.

Restaurant chains have struggled in recent years to generate traffic, amid shifting consumer patterns and a belief that the industry has grown saturated. Meanwhile, competitors outside of the restaurant industry, such as grocers and convenience stores, have improved their prepared food strategies to offer another level of competition.

With labor costs rising due to higher minimum wages and competition for workers, chains have raised prices more aggressively to maintain margins. These challenges are more acute in a fast-food business that has long relied on cheap labor to offer low-cost options.

“I would imagine that’s a mix of accounting for employee wage increases, but also as a good way to maintain sales growth through lower traffic gains,” Roberts said.

Still, the April numbers demonstrate a continued problem for restaurant companies that use wait staff and have historically relied on dine-in customers for their business. While many chains have used takeout and delivery to offset declines in that business, the figures demonstrate that it hasn’t been enough.

And while limited-service chains have raised prices aggressively, their more convenient nature fits better with current consumer trends.

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