Unlike the first six months of 2014, the second quarter started off on the right track for the restaurant industry as same-store sales returned to positive growth in July, according to the latest Restaurant Industry Snapshot from TDn2K’s Black Box Intelligence and People Report.

Same-store sales grew by 0.5 percent in July, which represents a 0.6-percent increase over June’s results. Four out of the five months since March have shown positive same-store sales growth for the restaurant industry, and expectations point toward similar growth rates throughout the rest of the third quarter. This is also the first time since March that the industry’s year-over-year growth has improved over the previous months’ results.

“When warmer weather arrived in March, the industry’s sales experienced a huge boost,” commented Victor Fernandez, executive director of insights and knowledge for TDn2K, parent company of Black Box Intelligence and People Report. “However, every month since then we’ve seen this sales growth slowing down when compared with the previous month. The strong results posted by July, which reversed this trend, seem to be welcome news for the industry.”

However, looking at the same-store sales trend over a two-year period, combined with traffic trends, tells the real story, according to Wally Doolin, chairman and founder of TDn2K.

“Same-store sales growth on a two-year basis was only -0.1 percent for July, the first time this growth rate has been negative since February 2014,” he noted.



Underlying these less-than-stellar sales results is the fact that the industry keeps losing traffic in comparable stores. Same-store traffic fell 1.0 percent in July, which means it remained essentially flat compared to the results reported for June. These traffic growth numbers reported for June and July are the worst since February.

“The latest traffic results highlight the fact that there are still some major challenges for the restaurant industry,” said Fernandez. “These challenges come from a macroeconomic level in the form of a stubborn unemployment rate, gas prices that are still above $3.50, and disposable income continuing to grow at a very slow pace.

On a two-year basis, traffic growth in comparable stores shows how critical the situation is: At -3.7 percent in July, it was the worst month since February.

“Beyond this there is also the challenge of changing preferences in consumers,” Fernandez noted. “As an example, growth in the dinner and late-night dayparts has been declining considerably over the last year and may be a direct indicator that consumers are not favoring traditional chain restaurants when it comes to those critical dining opportunities.”

There are considerable differences in sales performance across different regions of the country, which highlights the very different environments regional operators face. The best-performing region during July both on a year-over-year and a two-year basis was the Western region, with 2.2 percent and 3.9 percent same-store sales growth, respectively. A very different picture exists in the Northeast, where the worst region year-over-year was New York-New Jersey, with same-store sales falling 1.6 percent, and the Mid-Atlantic, which reported a very concerning same-store sales decline of 4.4 percent compared with July 2012.

Despite the challenges, the industry continues to open new restaurants as a way to fuel growth. As a consequence, job growth in restaurants as reported by the latest People Report data grew to 3.8 percent year-over-year in June, compared with the 3.5 percent reported for May. This is the largest increase in jobs registered in over two years.

Beyond the added difficulty of ramping up recruiting for these new jobs, restaurant operators are also facing the long-standing trend of rising turnover levels for both unit level managers and hourly employees. Expectations are for the staffing and retention pressures to continue to increase during the third quarter.

The Restaurant Industry Snapshot is a compilation of real sales and traffic results from over 185 DMAs representing 110+ restaurant brands and over 18,000 restaurants that are clients of Black Box Intelligence, a TDn2K company. Currently, data is reported in five distinct segments: casual dining, upscale/fine-dining, fast casual, family dining and quick service. Black Box Intelligence is a sister company to People Report, which tracks the workforce analytics of one million restaurant employees. TDn2K reports on over 30,000 restaurant units, one million employees and 45 billion dollars in sales. The Restaurant Industry Snapshot also includes the Restaurant Industry Willingness to Spend Index from Consumer Edge Research, a monthly household survey of more than 2,500 consumers.