Quick-service restaurants reported strong same-store sales during October, leading the best month in at least three years for the NRN-MillerPulse survey.
Industry same-store sales rose 3.3 percent during the month, the first time in three years that the benchmark was above 3 percent. Sales rose 4.9 percent on a two-year basis, the best month for that figure in 18 months.
Traffic rose 0.2 percent, which, while modest, represents continued improvement and the second time in three months that traffic was positive.
“It was a pretty good month,” said Larry Miller, cofounder of the MillerPulse survey. “It wasn’t a great month. But in the backdrop of the past few years, it was pretty good.”
A big gap remains between segments. Quick-service restaurants continued to lead the industry in October, with same-store sales rising 4 percent during the month, according to the survey. Casual-dining same-store sales rose 1.6 percent, a 2.4-percent gap.
Quick-service traffic rose 0.5 percent, while traffic fell 2 percent at casual-dining restaurants. Quick-service restaurants are adding more customers and getting them to pay more.
QSRs have upped their game in recent years by revamping locations, increasing innovation and improving service, Miller said, putting them at a competitive advantage compared with casual-dining concepts.
“QSR has been executing better,” Miller said. “Those guys have been doing a good job on service and quality.”
Overall, the industry is picking up steam heading into the end of the year. Various indexes have been positive of late, and a succession of restaurant chains has reported strong third-quarter sales, despite weakness at quick-service market leader McDonald’s.
Gas prices may be one reason for the improvement. The cost of fuel has been decreasing for the past month and a half, which coincides at least partly with the uptick in restaurant sales, Miller said.
But restaurants might also finally be starting to benefit from an improving employment picture, he said. The economy is adding more than 200,000 jobs a month, and the unemployment rate is below 6 percent for the first time in six years.
“It’s been a long time, but I think restaurants are finally receiving the benefits of recovering all of those jobs,” Miller said. “And now you’re seeing some income growth, coupled with lower gas prices.”
While that hasn’t translated into flourishing traffic, Miller noted that the index isn’t far off from industry norms, which look for 1-percent growth in average check coupled with 1-percent growth in traffic, which yields 2-percent same-store sales improvement.
But customers seem to be willing to pay more. Average check rose during the month as consumers shifted more spending from value to premium items.
“For the first time since the recession, we saw value orders become neutral,” Miller said. “They’re starting to order differently.”
The outlook is good, too, as restaurants head into a period with easier comparisons. The Polar Vortex last year hammered the nation in December and into the first few months of 2014. As long as this year isn’t a repeat, sales could continue to be positive.
“The weather was terrible the last part of last year and awful in the first quarter,” Miller said. “Is there reason for optimism? Yeah. Should we be giddy at this point? Absolutely not.”
MillerPulse results are based on a monthly survey of operators averaging more than $40 billion in industry sales, representing all regions of the country and across the quick-service, casual-dining and fine-dining segments. Restaurant chains and operators interested in participating in the MillerPulse survey for additional results and insight can register at the MillerPulse website.
Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze
