The latest MillerPulse index came out with some surprising news and, unfortunately for restaurateurs, not good news. After two months of increased same-store sales, July unexpectedly took a tumble, nullifying predictions that sales would continue to improve and stabilize.
Same-store sales had been falling consistently in 2017 by as much as 1.6 percent until May and June brought an increase of 0.3 percent and 0.5 percent respectively. That trend was expected to continue. July, however, fell by 0.4 percent.
When separated out between quick-service and casual dining, quick-service showed an increased decline with same-store sales falling by 0.5 percent. Casual dining came in at 0.3 percent.
Traffic has been on the decline for both segments for the last several years and July was no exception. Casual dining was down by 1.2 percent while quick-service traffic fell by 2.5 percent. Traffic has been on a steady decline for the past 17 months and flat for the past two years.
With the increase in jobs and wages starting to make a shift, experts in the industry are wondering why the continued loss in sales. Some point to diminishing retail sales while others suggest falling prices at the supermarket are tempting consumers to eat in. Still others are suggesting that the generations hitting the consumer market have different tastes and preferences than their predecessors. Maybe it’s Economy 101: supply versus demand.
Lunch traffic appears to be in a particular slump, which would coincide with the rise of online shopping. According to NPD, lunch traffic in 2016 dropped by about 2 percent.
With restaurant prices increasing at a higher rate than grocery stores, those without much discretionary income will probably choose to barbeque at home instead of paying the double figure pricetag at their favorite dining establishment.
Supply versus Demand
Supply and demand may be at the core of the decline. The population continues to expand with more people than ever before, and the latest generation is said to enjoy “experience” as compared to “stuff” meaning that dining out is part of their preferences. But as supply increases, individual restaurants suffer. An article in Business Insider quoted Victor Fernandez, the executive director of insights for the restaurant-industry tracker TDn2K as saying, “We believe there is an oversupply of restaurants out there.”
The New Generations
Some point their fingers at the millennial consumer who may choose to cook at home more frequently than their elders, but they also use delivery services on a more frequent basis. Restaurants, however, are competing more and more with meal-delivery kits that offer subscription services at reasonable costs.
With the weakest two-year growth rates in over three years, the industry is still facing the downward trend that began in 2015. While households continuing to spend cautiously, experts are hopeful that, with wage gains, early winter will see an increase in restaurant sales. Time will tell.