Last week, the big Burger King franchisee Carrols Restaurant Group reported some surprising numbers—surprising, in that they slowed down.
In July, for instance, Carrols’ more than 1,000 Burger King locations generated 2.1% same-store sales growth. That slowed to 1.2% in August and then a 0.8% decline in September. But it was October that was the problem: a 3.2% decline.
Such numbers are common, of course, because we remain in a pandemic that has limited the amount of service that most restaurants can provide, which has sent many chains’ sales stumbling. But Carrols’ numbers came amid a backdrop of fast-food improvement. Many chains are up. More than a few are up rather big.
CEO Dan Accordino told investors part of the reason was comparisons. A year ago, Burger King started selling its Impossible Whopper in August, making comparisons more difficult. In addition, “increased competitive pressures in the fast-food segment” caused the chain some headaches.
But there may be broader concerns, he said.
“We believe that customers exhausting their stimulus checks and constrained in their spending due to a weakening Main Street economy had a negative impact on sales in the latter part of the third quarter into October,” he said, according to a transcript on financial services site Sentieo.
It is true that competition in the fast-food business has grown intense in recent months. McDonald’s same-store sales surged in September, thanks to the Travis Scott meal. Wendy’s has been doing some promotions of its own. All of that could have hurt Burger King—and indeed, we remain convinced some of Burger King’s morning consumers went to Wendy’s last quarter.
That doesn’t necessarily explain the slowdown into October, which was echoed by the company’s Popeyes’ locations. Carrols only operates 65 Popeyes units, making it more of a random sample than a legitimate trend, but after surging 11.2% in September, its Popeyes same-store sales slowed to 1.9% in October.
Other data on October appears mixed. McDonald’s, for instance, said its same-store sales were up in the “mid-single-digits,” a slowdown from the double-digit September, but one probably explained by the end of the Travis Scott promotion.
Wendy’s similarly saw same-stores sales rise 6.6%, a very moderate slowdown from its 7% third quarter. Both Starbucks and Dunkin’ Brands suggested “continued momentum” into October.
Other data, however, suggests that general improvement in the restaurant business has stalled, at the very least.
Same-store sales according to Black Box Intelligence declined 7.5% in October, the best number since February. But that was just a 0.6-percentage-point improvement from September, suggesting something of a stall.
And according to financial data site Facteus, consumer spending slowed from a 1% increase in the first week of October to a 9% decrease in the first week of September. Fast-food sales, however, remain elevated and were up an average of nearly 16% in October, up from 14% in September.
All that said, it would hardly be out of the realm of reason to suggest that consumers ran out of money and slowed their spending.
It’s important to remember that the economy remains a problem. Congress and the president are apparently not going to pass a stimulus package anytime soon. Some consumer cutback could certainly be expected in the coming months, especially with the virus raging. At this point, however, it’s too early to tell if consumers really are slowing their dining.
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