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Optimism Returns for Restaurants as Sales,
Traffic and Hourly Turnover Improve
Restaurant sales turned
positive for the first time since May of 2016.
Same-store traffic declined -1.5 percent, continued evidence that falling guest counts remain the biggest challenge for chain restaurants since the recession. However, October’s traffic results do represent the best month since February of 2016 and are significantly improved over the average -3.6 percent traffic decline in the first three quarters of the year.
“Another encouraging sign was that the October sales improvement was evident at the brand level and not only in the aggregate numbers,” stated Victor Fernandez, executive director of insights and knowledge for TDn2K. “Over half of the brands tracked by Black Box Intelligence™ had positive sales for the month. For comparison, fewer than a third of the brands were up in September.”
The economy’s resilience was seen in the solid October job increase and decline in the unemployment rate to the lowest level in seventeen years. The strong economy is allowing consumers to spend more and that demand is being spread around. However, there is a warning in the data. Wage gains remain muted and households are now pulling from savings to maintain their standard of living. Growth should be strong enough going forward to tighten the labor market further, but without better wage increases, it will be hard to sustain the recent strong growth in consumer spending through all of next year.
Check Growth Picking Up
Month for Table Service Brands
Has Been Strong in Texas and Florida
to Workforce Success: Focus on the General Manager
According to TDn2K’s People Report™, hourly employee turnover decreased slightly in September, signaling that perhaps turnover has reached a plateau. Unfortunately, management turnover continued to increase.
People Report research has shown that a primary reason restaurant managers leave their jobs is for higher compensation. This suggests rising labor costs in upcoming quarters as restaurants feel the pressure to pay more to attract and retain key employees. This research also underscores the critical importance of the general manager position. “We know that the success of the general manager will impact the key driver of service, and ultimately the guest’s intent to return,” commented Joni Thomas Doolin, CEO and People Report founder. “Companies that do a better job of attracting, compensating, retaining and developing this key position will continue to have a competitive advantage.”
“On the positive side, economic indicators such as improved GDP growth and strong consumer confidence point to a favorable macro environment. Also, we’ll be comparing to generally weak results from last year,” expressed Fernandez. “But retail sales can be a big factor, especially the degree to which online shopping impacts brick-and-mortar visits. Overall, we’re encouraged by depth and breadth of recent trends and are cautiously optimistic they will extend through the fourth quarter.”
TDn2K™ (Transforming Data into Knowledge) is the parent company of People Report™, Black Box Intelligence™ and White Box Social Intelligence™. People Report provides service-sector human capital and workforce analytics for its members on a monthly basis. Black Box Intelligence provides weekly financial and market level data for the restaurant industry. White Box Social Intelligence delivers consumer insights and reveals online brand health. TDn2K membership represents 37,000 restaurant units, over 2.1 million employees and $65 billion in sales. They are also the producers of leading restaurant industry events including the Global Best Practices Conference held annually each January in Dallas, Texas. www.tdn2k.com