Keeping an eye on the restaurant forecast

Editor's note: This exclusive series to Nation’s Restaurant News provides C-level insights into the sales and traffic data from clients subscribing to Black Box Intelligence, a financial performance benchmarking company. The views expressed here do not necessarily reflect those of Nation’s Restaurant News.

It's March 2013 and as I write this, the East Coast braces for more winter weather — the same storm that recently pummeled the Midwest, hurting restaurant sales. It’s another dark grey winter day that is hampering travel and dining out, which leads me to ask, 'how much longer is winter and how bad will the storm be this time?'

I know almost all of you can relate to the impact of weather woes this season, and that if you have restaurants you see the impact on your revenue as well. But, while we know that spring will eventually get here, the bigger question for our industry is, 'how long will this downturn last?' Every management team, board and investor is surely asking, 'how bad is the current storm?'

There are plenty of issues that have impacted our guests' ability to enjoy our restaurants as often as they and you might like. Start with payroll taxes. We had the benefit of a payroll tax cut since 2010, and now we are paying for the reversal. The recent expiration of the cut is estimated to cost the average worker about $700 per year, according to the Tax Policy Center — and it isn’t coming back. Unless you are in upscale or fine dining you have felt this impact in January and February already.

Of course, we still have the uncertain impact of the Affordable Health Care Act, not just to our shareholders, but to our guests as well.

And how about fuel prices? Every time they reach $3.50 per gallon we see a drop in your sales and traffic in the Black Box Intelligence Index.

Delay in tax refunds is a timing issue, but I wonder if each day it is delayed the recipients use it for essentials rather than discretionary spending, such as dining out.

This “storm” is bad, and this month’s Black Box Intelligence Restaurant Industry Snapshot showed a same-store sales decline of 5 percent — the worst month since December 2009.

This “storm” is also broad: Just one DMA out of 172 reported positive sales. Additionally, even our top quartile performers in the index showed a 2.2-percent decline in same-store sales and a 2.6-percent drop traffic. It has been three years since we reported this level of performance.

What else are we dealing with at this point? I believe the least-mentioned reality we are still experiencing is the systemic issue of over supply and saturation. Or, said bluntly, too many restaurants!

I hate to be a downer. I’m a restaurant guy. I'm optimistic by nature. So I have to believe that this environment will help, in a strange way, to create some much needed turnover in weak concepts or management teams. As in any challenging situation, the weak will go away and the smart and strong will flourish. My only caveat to this is my long-held observation that even bad concepts and management can last too long with great real estate.   

For investors reading this, I believe there are good companies that have  figured out how to continue to build their brand by investing in their talent, culture and technology, and that will continue to separate them from the pack.

In the meantime, it appears we still have a long winter and unpredictable periodic “storms” ahead. We’ll keep our eyes on the forecast.  

Stay warm and positive.

Wallace B. Doolin
Doolin is chairman of Thomas Doolin and Associates LLC, the holding company of People Report, the leader in human capital business intelligence for the restaurant industry and Black Box Intelligence. He is the founder of Black Box Intelligence, a state of the art business intelligence product for the restaurant industry. Additionally, he serves as a trustee of the National Restaurant Association and is a past chairman of the National Restaurant Association's Education Foundation. Other current responsibilities include serving as a board director for Famous Dave’s a public company, SplickIt a mobile technology company,  Phasenext Hospitality a non traditional operator/franchisee and Share Our Strength a leading non profit.  Previously, Doolin served as CEO of Carlson Restaurants Worldwide and TGI Friday’s, Buca, Inc and La Madeleine.

The Restaurant Industry Snapshot is a compilation of real sales and traffic results from 172  DMAs from 100+ distinct restaurant brands and approximately 15,000+ restaurants that are clients of Black Box Intelligence. Currently, data is reported in four distinct segments: casual dining, upscale/fine-dining, fast casual, and family dining. Black Box Intelligence is a sister company to People Report, which tracks one million restaurant employees on workforce analytics. The Restaurant Industry Snapshot also includes the Restaurant Industry Willingness to Spend Index from Consumer Edge Research, which is a monthly household survey of more than 2,500 consumers. Consumer Edge Insights is a marketing partner with Black Box Intelligence and People Report.