Restaurant sales slowed to their lowest rate of 2015 in November, especially at quick-service chains, according to the latest MillerPulse survey, generating concerns that more concepts could use aggressive discounts to generate traffic.
Same-store sales rose 1.3 percent, the slowest rate in 21 months, and slower than the 1.5-percent increase in October.
Sales were especially slow at quick-service restaurants, where same-store sales increased just 0.9 percent — the slowest rate for the segment in nearly three years.
By contrast, casual-dining concepts saw same-store sales increase 1.8 percent, the third straight month in which the segment’s sales improved.
“It certainly didn’t look like harder comparisons,” said Larry Miller, who co-founded the survey. He noted that the two-year trend also slowed to its lowest rate since September 2014. Two-year same-store sales trends factor out one-time events like weather or other issues.
Both quick-service chains and casual-dining concepts struggled to generate traffic in the month, with traffic falling 0.2 percent overall and for quick-service concepts, and declining 0.3 percent for casual dining.
Dine-in chains have struggled for years now to lure more customers, although the November traffic decline was the best result for the segment since June.
And casual-dining chains might be doing a better job than quick-service concepts in convincing customers to order more expensive food, Miller said.
Indeed, that’s a direct contrast to quick-service chains that now appear to be at the beginning of a major discount era. Burger King has generated sales with its $1.49 chicken nuggets and its 2-for-$5 menus. KFC has lifted its sales with a $5 Fill-Up Box. Wendy’s recently introduced a 4-for-$4 meal.
And McDonald’s Corp. is about to kick off a McPick menu that, come January, will enable customers to pick two items for $2.
“Maybe you’re seeing a divergent trend where there’s a lot of promotional activity at QSRs that are more likely to be discounting, but you also have casual-dining chains that are getting people to order more appetizers and add on alcohol sales,” Miller said. “Casual dining might be doing a better job of promoting those items.”
This might be a good time for quick-service chains to get into a discounting mode. Commodity costs that have hurt the restaurant industry in recent years have started to come down. While labor costs have caused some concern, there remains little evidence that they’re having a broad impact on the industry.
On top of that, there are a lot of restaurant chains eager to get more customers in the door.
“The environment is so ripe,” Miller said. “You have soft traffic, easing commodities, benign labor inflation and McDonald’s is not doing well. You have this 800-pound gorilla saying that we want traffic back.”
Still, the results from November are discouraging for an industry that should seemingly have the wind at its back.
Employment is growing enough to cause the Federal Reserve to raise interest rates. Wages are starting to improve. Gas prices are low. And this winter has been remarkably mild. All of those factors should drive traffic, but they haven’t yet.
“It does concern,” Miller said. “If this trend were to hold, sales would be lower next month than they are this month.”
Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze
