A tough first quarter got a slight bump in March, but it wasn’t enough turn things around. Same-store sales rose slightly at 0.4 percent while industry traffic fell by 2.2 percent for the first quarter of 2018, according to the MillerPulse quarterly report.
“Negative traffic is the new norm,” said Larry Miller, co-founder of MillerPulse, a restaurant data and information service. “The last time traffic was positive for our group was February 2015. So, we've not had a month of positive traffic in over two years now. That's pretty depressing.”
With March in mind, are things looking up?
“It's honestly tough to make a categorization off of one month,” said Miller. “We typically won't do that. But if I'm thinking about March, in general, there's a lot of shifts going on there.” Those shifts include weather and Easter holiday, which fell in the first quarter this year, but the second quarter last year.
“Very few people are going, ‘Hey, let's go to Popeyes for Easter Sunday,’” Miller said. But on a normal Sunday, they might. So, the timing of Easter this year helped casual dining but hurt QSR.
But, said Miller, “That's reversing right now.”
Casual-dining woes are well known, but QSR’s same-store sales have been slowing down, too, said Miller. “This year has been a little bit more volatile than last year for casual dining and for the industry,” he said.
“If you take a longer picture not just the quarter, for the better part of 2010 to 2018, QSR was doing quite well, and casual dining was struggling,” Miller said. “And there's this very large gap between the two. And the last 18-24 months QSR has really underperformed with casual dining, so the whole industry has now been pretty soft.”
So where are people eating?
“That's the question, right?” said Miller.
Groceries are partially to blame, he said. But unit growth is a larger factor in the traffic story.
“There's been a lot of unit growth from 2010-2016. We grew at a very high rate of unit development, and that's sort of the typical cycle of restaurants when traffic’s positive, people open restaurants. It happens broadly across the space, and then at some point, we overgrow the amount of traffic that's really there, and then we start contracting. And we're at that point right now. I think we've bottomed in that whole cycle. The unit growth rates are slowing, which is what we've been waiting for, and so eventually our traffic and unit development will come back in better balance, and we'll start seeing a return toward flat traffic and then slightly positive traffic sometime in the next five years.”
And then the cycle begins again.
MillerPulse for NRN is a quarterly look at the restaurant industry same-store sales and traffic with Larry Miller, founder of restaurant data and information service MillerPulse.
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