The U.S. restaurant industry has been fighting a tide of falling consumer traffic and negative comparable-restaurant sales growth (comps) for the first three quarters of 2017. As dining choices have proliferated, there's been plenty of debate over whether America has become "over-restauranted" and whether there are simply too many concepts now, for the decline in demand is being seen nationwide.
However, recent industry data points to a potential upturn in the making.
Image source: Getty Images.
Things are looking up for Q4
According to TDn2K's Black Box Intelligence, restaurant industry comps were flat in November, which followed a 0.9% rise in comps for October. Given the abysmal performance over the first three quarters of 2017, that's a big improvement.
| Metric | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 (through November) |
|---|---|---|---|---|
| Comparable-restaurant sales growth | (1.6%) | (1%) | (2.2%) | 0.4% |
| Comparable-restaurant traffic growth | (3.6%) | (3.1%) | (4.1%) | (2%) |
Data source: TDn2K.
Over the first nine months of 2017, industry comps were down 1.6% on average. With the first two months of Q4 now in the books, a strong December is the only thing standing between the industry and a return to positive comps growth after nearly two years of declines.
But customers are still MIA
Before you get too excited, however, falling customer traffic continues to be an issue, and in spite of the firming comps numbers, it doesn't appear to be improving much. Comps can be broken down into two parts: traffic and the size of the average guest check. With traffic still showing sizable year-over-year declines, that means the comps improvement is being driven entirely by increases in the average check -- an unsustainable formula for growth.
After falling 1.5% in October, industry traffic declined another 2.5% in November. It's obvious at this point that customer traffic doesn't have a realistic chance of positive growth during Q4 -- which will prolong a painful trend. In fact, the industry hasn't seen the quarterly guest counts rise in nearly three years.
Results have been all over the place
It's important to note that some chains don't seem to be struggling at all this year in spite of the tough operating environment. For example, McDonald's (NYSE: MCD) U.S. restaurants saw comps growth of 4.1% in the most recent quarter, as its value-based promotions proved popular with customers. Texas Roadhouse (NASDAQ: TXRH) has also posted impressive year-to-date comps growth of 4% as it continues to bring its successful formula of quality food and Texas-sized portions to mostly suburban locations.