Better weather and a discounting war in the quick-service sector brought more people into restaurants in February, helping the industry to 3.2-percent same-store sales growth for the month, according to the latest MillerPulse index.
Traffic in the month increased 1.5 percent, the most since the weather-aided month of January 2015.
Traffic was particularly strong in the quick-service segment, where restaurants’ customer bases increased by 2.9 percent — the best traffic growth for that sector in four years.
“It was better than we were expecting,” said Larry Miller, co-founder of the MillerPulse index. “I didn’t expect business to accelerate this month.”
Some traffic growth could be attributed to good weather. There were relatively few major weather events during the month, and good weather tends to generate higher sales in the wintertime — or at least, the lack of bad weather ensures customers can eat out unabated by the elements.
This is especially true for quick-service restaurants. “The weather was very mild this February,” Miller said.
Yet same-store sales in the industry were especially impressive on a two-year basis, increasing 6.9 percent — the strongest two-year number in years. Measuring same-store sales on a two-year period factors out one-time events like weather and provides a clearer picture of a restaurant’s overall performance.
The 6.9-percent two-year growth accelerated from 6.3 percent in January.
“The two-year [growth] was awesome,” Miller said.
Quick-service sales rose 8 percent on a two-year basis.
Miller believes the biggest factor in the February increase was the discounting strategy that McDonald’s, Burger King, Wendy’s and others have undertaken — and the broad response by many of their competitors.
Quick-service restaurant sales grew 3.7 percent. That was an improvement over recent months, but not quite as high as it was in some months over the summer. And Miller noted that average check grew at a low rate.
That, along with the high traffic number, suggests that quick-service restaurants are drawing lots of people who are not paying as much as they once did.
“What turned the dial was that value messaging drew people to restaurants,” Miller said. “It’s the right time for that. You’ve got benign commodity inflation; you’ve got mediocre traffic at best. You can’t raise prices. But you can be more aggressive on promotions and not really impair the margins.
“The only pressure on the margin side is wage pressure, and it’s not prohibitive wage pressure. The environment is very conducive to these types of promotions.”
Quick-service restaurants also generated higher sales than casual-dining restaurants during the month. In January, casual-dining chains generated higher sales than quick-service concepts, a rarity over the past decade amid a gradual decline in dine-in business.
Casual-dining same-store sales increased 2.7 percent for the month. But traffic was flat, the best traffic performance for that sector in a year.
The strong traffic in February was “a long time coming,” Miller said. Gas prices have been low, although they have been increasing more recently. And job growth is steady.
Perhaps, he said, consumers that have been buying cars at a rapid rate in recent months have adjusted their budgets to the new car payments. And they’re eating out more often as a result.