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Technomic: Sales, traffic fall in September

Sales weakened as fall started, continuing a difficult pattern for chain restaurants, according to the latest Technomic Chain Restaurant Index.
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Chain restaurant sales declined 3% in September, according to the latest Technomic Chain Restaurant Index, as the summer’s difficult industry market extended into fall.

Traffic, which has fallen for much of the past three years, declined 5.6%, according to the monthly index, which tracks consumer spending at the country’s 200 largest restaurant chains.

There were declines in both sales and traffic across the board, but the worst performers were casual-dining concepts, whose sales fell 5% and whose traffic declined 8.5% during the month.

Technomic Chain Restaurant Index

A combination of bad weather, as Hurricane Florence hit the Carolinas in the month, and one fewer weekend than the year before might have contributed to the problem in September. Still, given the relatively easy comparisons—sales declined 2.7% in September of 2017—the figures are nevertheless disappointing.

The numbers suggest that consumers are continuing to opt for smaller chains and independents and perhaps away from larger concepts even as fast-food chains and others use promotions and deals to generate customers.

“There are certain chains being impacted by the migration to small chains and independents,” said Adam Roberts, senior program manager with Technomic. “There are a lot of options when it comes to smaller chains and independents.”

The Technomic 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 the Technomic Top 500 Chain Restaurant Report. The index measures total sales and traffic, rather than same-store figures.

The September numbers could be something of an anomaly, representing a steep slowdown from August, when sales were down 0.6%, or July, when they were up 1.3%.

But they suggest that the market remains more of a challenge. That’s especially true for casual dining, which has been slow all year. Yet a number of publicly traded chains have reported surprisingly strong numbers last quarter, including Applebee’s, Outback Steakhouse, Texas Roadhouse, Olive Garden, Chili’s and others.

The Technomic results suggest weak performance at many privately held concepts.

The industry has faced numerous challenges in the past couple of years, amid concerns of consumers shifting spending and fears that restaurants overbuilt during an aggressive, decadelong expansion.

Sales and traffic have been weak for three years despite a strong economy, including an unemployment rate less than 4% that is now generating personal income growth—figures that should portend to stronger industry performance.

But the industry appears to be broadly weak heading into the last three months of the year. Fast-casual chains, the best performing sector, had a 1% decline in sales in September and a 5.6% drop in traffic.

Quick-service chains, meanwhile, saw sales fall 2.8% and traffic decline 5.3%. Midscale, or family-dining concepts, had a 4.1% decline in sales and a 5.1% slowdown in traffic.

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