This post is part of the On the Margin blog.
Diners spread their money around in the third quarter, at least according to companies’ most recent sales results.
Every sector we covered performed reasonably well in the late summer/early fall period: Burgers, beverages and snacks, pizza, family dining, fast casual and quick service all reported average same-store sales growth in the mid single digits.
The one exception was casual dining.
On average, same-store sales rose from 3.1 percent at quick-service chains, to 5.3 percent at coffee and snack concepts. But casual-dining concepts on average recorded a paltry 0.8 percent increase in same-store sales.
Only three out of 40 concepts outside of casual dining reported a decline in same-store sales in their most recent quarter.
By contrast, 12 of the 31 casual-dining concepts we track recorded same-store sales declines.
Consumers appear to be selective in their dining choices when it comes to wait staff. They apparently like breakfast and cheap prices, and so family dining chains averaged 4.3 percent same-store sales increases in the third quarter — continuing that sector’s remarkably strong 2015.
Sales at any other chain with wait staff was hit or miss. The Capital Grille, for instance, recorded a 7.2-percent same-store sales figure. Famous Dave’s corporate locations fell 9.8 percent. That’s a 1,700 basis point difference.
The variation was even evident within food types. Italian concepts, stung in recent years by low-carb diets and consumers abandoning gluten in products that aren’t pizza, performed poorly once again, with declines at Bravo Brio Restaurant Group’s two concepts and by Maggiano’s Little Italy and Carrabba’s Italian Grill.
But Olive Garden recorded a 2.7-percent same-store sales number in its fiscal first quarter.
The numbers only include publicly traded concepts. But there are some large-scale private chains that are grabbing market share, too. Red Lobster has apparently improved this year, apparently at the expense of chains like Bonefish Grill (down 6.1 percent) and Joe’s Crab Shack (down 6.6 percent).
And the numbers don’t reflect traffic, which has been more troublesome than sales. Many chains have increased sales at the expense of traffic, both at casual-dining and limited-service concepts.
Still, the numbers demonstrate just how much of a gap casual dining has with the rest of the industry. We’ve covered this gap ad nauseam, particularly after the bankruptcy at Quaker Steak & Lube.
Consumers are willing to dine out at restaurants with wait staff, as evidenced by the performance of numerous concepts like Texas Roadhouse and Buffalo Wild Wings with dine-in service. But because their spending is more limited, they are picking and choosing where to go. Those with good food, a good experience or a good value, or those that cater to business groups or the wealthy, have performed well.
Those concepts that fail to meet their customer promise — which make sacrifices to food quality or take popular items off of menus, or which simply raised prices too much — have struggled.
Fast casual and quick-serve concepts have done a better job catering to consumer trends than has the casual dining sector. They offer good value. Or they’ve done a better job of marketing the freshness of their menu items while falling all over themselves to commit to cage-free eggs or eliminate antibiotics.
They’ve also done better to leverage social media and attract younger consumers. It’s no secret that two of the better performing chains at the moment, Denny’s and Arby’s, have two of the best social media departments in the business.
While the economy may be improving, consumers are just not feeling good enough to be that forgiving. And casual-dining chains are proving it.