The year ended on a high note for restaurant chains, as December 2014 recorded the best same-store sales in the past three years, according to TDn2K’s Black Box Intelligence, through its Restaurant Industry Snapshot based on weekly sales from over 20,000 restaurant units representing over $45 billion dollars in annual revenue.
The fourth quarter registered the best same-store sales results reported in six years of Black Box Intelligence tracking. These latest results contributed to the aggregate growth of 0.8 percent for 2014, a vast improvement over the 0.1 percent decline posted in 2013 by the industry.
“The relatively strong performance experienced during 2014 was somewhat tempered by the weather-induced drop in sales during the first quarter of the year, which was the worst quarter for the industry since [the second quarter of] 2010. Excluding this first quarter, same-store sales grew at an average 1.3 percent during the rest of the year, reflecting the current upswing in consumer optimism and the resurgence in the strength of some key economic indicators,” said Victor Fernandez, executive director of insight and knowledge at TDn2K.
Same-store sales grew 3.1 percent during December, an improvement of 1.6 percent compared with November’s growth rate. This was the best month for the industry since January 2012, and the sixth consecutive month with positive growth, a first for the industry in more than three years.
“Further evidence of the strength of the industry during the year is found in the fact that nine of the 10 months since March posted positive same-store sales growth,” Fernandez said.
Fourth-quarter same-store sales grew 2.5 percent, an increase of 1.1 percent compared with the growth experienced during the third quarter. The last time the industry experienced three consecutive quarters of positive same-store sales was in the period ending in the third quarter of 2012.
“Performance during Q1 of 2015 is expected to be positive based on current economic and consumer trends, and the fact that sales were so weak during the first quarter of last year. However, as was the case in 2014, the winter weather could play an important part reversing this trend,” Fernandez said.
Another encouraging sign for the industry was in same-store traffic growth at the end of the year. Traffic grew 0.6 percent during December, the best month for the industry since February 2012. For the first time in more than three years, the industry did not experience a decline in guest counts. Same-store traffic growth was 0.0 percent during the fourth quarter, a 1.0-percent improvement from the growth reported for third quarter, and the second-best quarter in six years of Black Box Intelligence reporting. The increases in same-store traffic mirror the jumps in same-store sales, meaning that it was a true improvement in sales fueled by attracting more guests into restaurants, and not just the effect of rising prices.
The improvement in sales has been widespread across the country, with all 11 regions posting positive same-store sales during the fourth quarter, which has not happened in any other quarter over the last three years. This trend continues at the individual market level where 167, or 87 percent, of the 192 DMAs tracked by Black Box Intelligence reported positive same-store sales during December.
Job growth, unit openings to continue
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Using a set of three key performance attributes (food, service and intent to return) Black Box found that the vast majority of online mentions are based on food items (88 percent of all mentions), while only 8 percent of the mentions are related to service, and 4 percent cover intent to return to the restaurant brand mentioned. Not only is food the attribute that was most commonly mentioned, but is also the one that generates the greatest percentage of positive comments versus negative or neutral (31 percent of comments mentioning food are positive).
In terms of change in the three attributes month over month, restaurants improved in food and intent to return, but dropped in service positive mentions. The industry segment that gets the highest percentage of online positive food-based comments is upscale casual/fine dining. Mentions about service generated 30 percent positive comments, with casual dining leading the other segments. Intent to return was 25 percent positive with upscale/fine dining the leader in this important attribute.
Regarding the restaurant workforce, the industry keeps creating new jobs at an accelerated pace. Those brands tracked by People Report posted a 4.1-percent year-over-year growth rate in number of restaurant jobs during November, a slight slowdown from the 4.3-percent growth reported for October. This small drop notwithstanding, the industry has been growing at a pace of over 3.0 percent year-over-year for more than a year, and reflects the expansion through unit growth strategy seen recently, especially in those rapid growth segments such as fast casual.
Adding to the challenge of recruiting all of these new employees, the industry continues to face rising turnover levels for both restaurant managers and hourly employees. Median turnover for hourly employees has maintained levels above 100 percent in several industry segments, clearly a signal that the post-recession lull in workforce pressure is over.
Expectations for the first half of 2015 persist for continued job growth, new unit openings and increasing turnover levels in restaurants, as well as rising labor costs as a result of minimum wage adjustments and implementation of new health care plans as defined by the Affordable Care Act.
Wallace B. Doolin, chairman of TDn2K said: “It was a very encouraging finish to a year that began terribly. Many of the best in class operators made adjustments to prepare to reap the benefits of a much anticipated better environment for revenue growth we hope we face in 2015. Clearly the consumer is reacting with more confidence based on a number of factors not the least of which is fuel cost impact on disposable income. We are optimistic that those best in class operators will benefit in 2015.”
The Restaurant Industry Snapshot is a compilation of real sales and traffic results from over 190 DMAs representing 110+ restaurant brands and over 20,000 restaurant units that are clients of Black Box Intelligence, a TDn2K company. Data is reported in five distinct segments: casual dining, upscale/fine-dining, fast casual, family dining and quick service. TDn2K is also the parent company to People Report. People Report tracks the workforce analytics of one million restaurant employees.
