Restaurant sales improved in July after a difficult spring, but that doesn’t mean it was a great month.
Sales rose 3.4% in the month, according to the Technomic Chain Restaurant Index, which measures total sales performance at the 200 largest restaurant chains. That was up from a 1% decline in June and was the index’s best performance since April.
But the results are still disappointing on a same-store basis and suggest that many of the concerns that have dogged chain restaurants for the past three years have continued.
“July was a good month relative to May and June but to call it good, in and of itself, would be a stretch,” said Sara Monnette, vice president of innovation at Technomic, a sister company of Restaurant Business. “We are talking about 3.4% total sales growth for July, but if we factored in same-store, that would be quite a bit lower.”
Indeed, total industry traffic rose just 0.7% in the month. While that was an improvement over the 4.1% decline in June it remains relatively modest given the total increase in the number of locations and the state of the overall economy—where unemployment is 3.9%.
The weak traffic numbers, a hallmark of the restaurant industry in recent years, “continues to prove that getting customers back through the door is one of the biggest challenges operators face today.”
The Technomic index compiles information from Technomic’s Transaction Insights, which collects data from 3 million customers and nearly 20 million restaurant visits. It is based on sales at the 200 largest restaurant chains according to the Technomic Top 500 Chain Restaurant Report.
The index measures total sales and total traffic, rather than same-store sales that analyze performance at existing restaurants.
The performance for the month does show consumers returned to chains in July, though apparently not anywhere near the extent that federal data suggests that overall restaurant sales increased. Federal retail sales data pointed to a 9.7%, seasonally adjusted year-over-year increase in restaurant sales in July.
Chain restaurants have struggled in recent years to generate same-store sales and traffic growth amid concern about price competition with grocers and overbuilding. The federal data suggests that consumers are shifting more spending toward smaller concepts and independents even as they start spending more.
July was much better for limited-service concepts than it was for full-service chains.
Fast-casual chains’ sales rose 6.4%, and quick-service restaurants’ sales rose 4.4%.
By contrast, casual dining restaurants’ sales declined 1.2% and midscale restaurants’ sales fell 0.7%. Midscale is also known as family dining.
Casual and fine dining chains’ traffic declined by 4.7%, compared with 1.4% growth at fast-casual concepts and 1.1% at fast-food chains.
The results demonstrate that consumers continue to shift spending away from restaurants with wait staff to concepts that concentrate on to-go and takeout orders—a long-term trend that appears to have accelerated in recent years.
Monnette noted that performance varied widely by brand. “Some operators are knocking it out of the park, while others are really struggling,” she said.
For instance, Chick-fil-A, one of the 10 largest restaurant chains, continues to surge. Sales are up 15.5% so far this year and traffic is up 10%.
“Brands that truly understand their customers, anticipate their changing needs and know how to serve those needs continue to outperform their peers,” Monnette said.
“Many chains within casual dining failed to adjust to changing consumer needs quickly enough and that has continued to hurt their performance,” she added.