Restaurants in Worst Tailspin since 2009/2010

Friday, April 14, 2017
By Paul Martin

by Wolf Richter
Apr 13, 2017

This thermometer for discretionary spending is the first to react when consumers hit their limits.

Foot traffic at chain restaurants in March dropped 3.4% from a year ago. Menu prices couldn’t be increased enough to make up for it, and same-store sales fell 1.1%. The least bad region was the Western US, where sales inched up 1.2% year-over-year and traffic fell only 1.7%, according to TDn2K’s Restaurant Industry Snapshot. The worst was the NY-NJ Region, where sales plunged 4.6% and foot traffic 6.3%.

This comes after a dismal February, when foot traffic had dropped 5% year-over-year, and same-store sales 3.7%. The February debacle was blamed on $65 billion in delayed tax refunds from the IRS, as mandated by Congress, to allow the IRS to get its arms around a large-scale identity-theft problem. But by mid-February, the floodgates opened and record amounts of tax refunds started pouring out. By the end of February, the IRS was pretty much caught up. So March, with all this money sloshing around in bank accounts, was expected to be better. But no.

TDn2K’s Restaurant Industry Snapshot:

March’s results were disappointing for an industry desperately trying to reverse performance trends; sales have been negative in 11 out of the last 12 months.

This left first quarter foot traffic down 3.6% and same-store sales down 1.6% – with both food and alcohol sales down – the fifth quarter in a row of year-over-year sales declines. According to the report: “The last time the industry experienced a similar period was in 2009 and the first half of 2010.”

In Q4 2016 – which also should have been a stronger quarter, given the now dashed hopes of the economy picking up some steam – sales had already dropped 2.4%, “highlighting the difficult operating environment currently facing many operators.”

Average restaurant checks inched up in Q1 by 1.9%, down from the 2016 average increase of 2.3%. The report blames more promotions to bring in customers and “conservative menu price increases in response to continual declines in traffic.”

The Rest…HERE

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