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Restaurant Industry Reports 1st Quarter of Growth After 2 Years

In November, the industry reported positive improvements for the second consecutive month, and that improvement continued through December of 2017. Same-store sales increased 0.3% across the industry in the quarter, based on weekly sales from more than 30,000 units and a total of $68 billion in revenue.

The 0.3% same-store increase was the second-best percentage based on sales growth since March 2016. Same-store traffic dropped 1.9% in the fourth quarter of 2017, which is also the best result in the last 2 years. The industry has enjoyed a steady incline since same-store sales and traffic plummeted 2.8% and 4.7%, respectively, in July of last year.

Guest checks increased 2.1 percent, year-over-year, compared with a 2.5 percent for the previous two months.  December of 2016 had stagnant same-store sales and traffic results but those results didn’t signify a future problem. Victor Fernandez was the executive director of insights and knowledge at TDn2K and stated, “over a longer view, same-store sales declined by 2% during the 4th quarter of 2017 when compared with that same quarter in 2015. Furthermore, the trend of declining guest traffic continues to plague the industry and is one that seems unlikely to reverse anytime soon.”

Fine dining and upscale casual dining were the best performing segments based on sales in the fourth quarter. Casual and family dining all achieved positive sales for the quarter. Those segments had not seen growth since the first quarter of 2016. Casual dining had eight consecutive quarters of negative sales growth before reporting positive in this recent quarter. Joel Naroff, president of Naroff Economic Advisors and TDn2K economist, stated that “the economy ended the year on a high note. Still, with the optimism sky high and incomes rising, consumer spending was strong during the holiday season.”

As the tax cuts slowly increase worker paychecks, the improvement in consumption is expected to continue. With business investment likely to improve, we could see some growth of the economy in 2018. For the third consecutive month, the industry reported small decreases in turnover rates in November. “Restaurants have not been able to reverse the trend of rising management turnover rates which have afflicted the industry since the end of the recession. Management retention is one of the metrics that is closely related to a restaurant’s sales and traffic performance and a big differentiator for top performing brands,” states the report.

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