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Technomic: October sales improve, but not for everybody

Customers flocked to chicken and steak chains and away from sports bars, according to the latest Technomic Chain Restaurant Index.
Photograph: Shutterstock

Chain restaurants had positive sales in October for the first time since July and only the second time since April, according to the latest Technomic Chain Restaurant Index, the latest potential sign of an industry environment that is easing heading into the crucial holiday season.

Sales for the 200 largest restaurant chains rose by 0.8% in October, according to the index. That’s a sequential improvement of 300 basis points over September.

Traffic improved by the same amount, but it still declined by 1.9% in the month. While the industry is improving, it is still losing customers and is highly competitive.

“September was disadvantaged with the weather, and also it had one less weekend day compared to September 2017,” said Adam Roberts, senior program manager for Technomic, a sister company of Restaurant Business. “But things still aren’t rosy.”

The Technomic Chain Restaurant Index compiles information from Technomic’s Transaction Insights, which collects data from 3 million customers and nearly 20 million monthly restaurant visits. It is based on sales at the chains on Technomic's Top 500 Chain Restaurant Report. The index measures total sales and traffic, rather than same-store figures.

Not everybody enjoyed the improvement in October. While most industry sectors had better sales and traffic in the month, a few appeared to take a step back as customers shift from some chains to others and restaurant company finances stumble.

For instance, it’s better to be a limited service than a full-service chain. Fast-casual chains sales rose 2.6% in the month and quick-service chains’ sales rose 1.9%.

By comparison, casual-dining chains’ sales dropped 3.7% and midscale or family dining chains’ sales fell 3.6%.

Even within those sectors, there were winners and losers.

For instance, it was good to be a steak or a seafood chain, where sales rose 2.9% and traffic increased 0.4%. Among dine-in chains, they were the only concepts to show an increase in those numbers, according to Technomic.

But it was not good to be a sports bar, where sales declined 7.3% and traffic fell 10.5%.

Such varied-menu casual-dining concepts have been beset by declining customer counts and store closures in recent years. And both their sales and traffic numbers declined from September.

Varied-menu casual-dining restaurants grew substantially over the past decade and are experiencing a pullback as consumers shift spending toward more specialized concepts, local restaurants or limited-service chains.

For instance, while market leader Applebee’s has seen same-store sales improve considerably this year, including 7.7% in the third quarter, its unit count has declined by a similar amount this year.

“Applebee’s has closed somewhere between 6% to 8% percent of their stores since 2017 and now is reporting” positive same-store sales, Roberts said. “To me, that indicates that there had been some overbuilding.”

The weak sales and traffic environment could be pushing some companies to close restaurants and file for bankruptcy. In recent weeks, chains such as Papa Gino’s and Taco Bueno have filed for bankruptcy protection, and others, such as Luby’s Restaurants, have shuttered locations.

“It’s not too hard to come across a bankruptcy or announcement for closures these days,” Roberts said. “I would think that is an outcome you get with a trend like we’re seeing.”

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