On the Margin
Restaurants had a strong second quarter

Restaurants had a strong second quarter

This post is part of the On the Margin blog.

Customers dined out more in the second quarter, or at least they spent more when they dined out.

The vast majority of publicly traded companies have reported their springtime earnings reports by now, and on average their same-store sales rose 3.2 percent during that period.

Restaurants in every sector reported improvement, though some sectors performed better than others. Pizza chains, family dining and fast-casual concepts all performed well, continuing their respective runs of improvement. QSR and casual dining performed the worst.

To be sure, same-store sales are imperfect. The numbers don’t indicate whether more people actually ate out at the concepts in the period. Many chains have raised prices in recent quarters to offset higher commodity costs, and in some cases the numbers might actually hide traffic declines.

In addition, the numbers represent only a single-quarter snapshot of performance that can be broadly affected by things like weather or sudden tax decreases or auto sales or Hollywood box office receipts.

QSR 3.7%
Casual Dining 1.5%
Pizza 6.1%
Fast Casual 5.4%
Coffee/Snack 4.0%
Family Dining 5.7%

Still, that snapshot has its winners and its losers. And here they are.


Shake Shack. Yes, its numbers include a whopping 6-percent cumulative price increase. But consumers lined up to pay those high prices. And it’s important to note that its same-store sales base includes only 16 restaurants, so it’s a terribly small sample size. But there’s no getting around the fact that Shake Shack for now is a phenomenon from a consumer perspective.

Pizza. I feel like a broken record. Pizza sales are strong right now. Pizza chains are effectively using technology to get customers to more easily order from their menu. They’re taking business away from independents. Etc. Etc. Etc. On average, pizza chains’ same-store sales rose 6.1 percent.

Family dining. I once thought that the Great Family Dining Comeback of 2015 was due to dramatically lower gas prices. But as gas prices have crept up this spring, chains like Denny’s and IHOP just keep performing. Go ahead, tout the performance of fast casual. But old-line family dining chains did better, with average same-store sales of 5.7 percent.

Burger King. Few concepts had a good a quarter as Burger King, which recorded a 7.9-percent increase in domestic same-store sales, thanks to Chicken Fries and cheap nuggets. A few customers are clearly shifting their allegiance to the King from Ronald McDonald.


Pizza Hut. The exception to the pizza rule at the moment is Pizza Hut. Its sales were flat in the second quarter, but that was 610 basis points behind the overall sector. But it was 1,280 basis points behind sector leader Domino’s. At a time when pizza chains have sold a lot of traditional pizza by using technology to make ordering easier, Pizza Hut introduced a new menu with artisan pizzas.

Casual dining. On average, casual dining concepts had a positive quarter, with 1.5-percent same-store sales growth. And some concepts had great quarters, such as the 8.2-percent growth at Texas Roadhouse. But several concepts struggled, led by the 9.2-percent decline at Famous Dave’s corporate locations.

McDonald’s. The struggles at McDonald’s Corp. are not insignificant. It’s the largest restaurant chain in the world, and it dominates the QSR sector. Its struggles have been a boon to competitors that have taken a lot of business away from the Golden Arches.

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