On the Margin
Warnings of slowdown don't stop restaurants from growing

Warnings of slowdown don't stop restaurants from growing

This post is part of the On the Margin blog.

As we’ve been writing for some time, restaurants and franchises are expanding at a breakneck pace, based at least on their job numbers. And that continued in June, according to the latest report from the human resources firm ADP.

Franchises added 40,700 jobs in the month, according to ADP’s National Franchise Report.

The entire private sector, other than farms, created 172,000 jobs. So nearly one out of every four jobs created in June was at a franchise.

The vast majority of those franchise jobs was at a franchise restaurant: 33,100 franchise restaurant jobs were created in June, far more than any other industry that uses franchising as an expansion vehicle. One out of every five jobs was created at a franchise restaurant.

This is nothing new. Over the past couple of years, the restaurant industry has added a brisk number of jobs at a rate far greater than the economy as a whole. In the last 12 months, franchise restaurants created 248,000 jobs, or more than one out of every 10 private sector jobs created over that timeframe, according to ADP.

It confirms survey numbers from the National Restaurant Association, which has long suggested that restaurants are in expansion mode. And they’ve continued to do so this year, in spite of suggestions that sales are weakening.

Sixty-four percent of operators told the NRA in May, for instance, that they recently made a capital expenditure and 62 percent said they plan to spend more on cap-ex in the coming six months.

Same-store sales in the restaurant industry have been weakening for the past 18 months. Some suggest that weakening is due to falling prices at grocery stores, which is probably true. But some of it has to be due to rapid industry expansion. Franchises are adding locations. So are independents. And that’s spreading the available restaurant traffic, draining some customers from existing locations.

In any event, it speaks to an industry that, in spite of those sales concerns, is likely healthier than those same-store sales make it appear.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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