Restaurant Quarterly Update – Summer 2018

June restaurant survey data indicated a 1.1% improvement in same-store sales (SSS), the fourth consecutive month of positive or flat sales. The recent improvement in sales provides evidence for the industry’s relative recovery, as the industry has reported sales increases in six of the past nine months, and the second quarter had an overall improvement of 0.8%. So far in 2018, same-store sales growth has been positive, which is encouraging for an industry that saw its sales decline by 1.0% during each of the previous two years.

However, restaurants experienced a 1.7% decline in same-store traffic during June. While this is an improvement of roughly one percentage point from earlier in the year, it still indicates issues in the industry with regards to driving traffic, stemming from an oversupply of restaurants and fierce competition from outside of the chain restaurant sector. With positive sales coming from only an increase in average checks, the biggest problem for the industry continues to be the declining same-store guest traffic year-over-year.

Fast casual, upscale casual and fine dining were top performers in the quarter. Upscale casual and fine dining led the industry in 2017 and continue to experience positive results in 2018. Fast casual has continued to see a resurgence in 2018 after two years of declining sales. All three segments have year-to-date positive same-store sales growth, with fast casual leading the way at 2.0% growth in 2018.

Staffing challenges continued to escalate for restaurants during June. The strong labor market has produced the most challenging staffing environment in years. This year has seen the highest restaurant turnover in decades, as owners struggle to find enough qualified employees to adequately run their restaurants. Compounding the problem, turnover for both restaurant hourly employees and restaurant management inched up again in June. Due to a historically-low unemployment rate, high turnover, and an oversupply of restaurants, 75% of restaurants are currently understaffed.

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