The Effects Of Delivery Upon Restaurant SSS And Traffic Comps

As restaurants move more into delivery, catering and other new sales platforms, the sales per transaction amount typically rises. That will result in lower customer “traffic” that many restaurants report. This is to be expected. Investors must take a more detailed look at the same store sales components Running positive and ever-growing traffic, particularly in the US, may be too high of an expectation now. This is not to rationalize materially lower traffic; that is and always has been a negative indicator of brand deterioration.

The risk of misreading restaurant same-store sales results has increased as both restaurants and the consumer space has become more complicated.This involves not fully airing out restaurant sales, traffic and average ticket components.The risk of meaningful misreading is more consequential now that program trades are such a large portion of stock trading.[1] Truly powerful restaurant holding companies and brands, like Olive Garden (DRI), Starbucks (SBUX), and Panera (PNRA) have all been affected; those working catering and delivery initiatives will be somewhat over time.

Restaurant same-store sales results can’t be read in isolation. The same-store sales comp is a very narrow reed upon which to make meaningful analytical calls. Something always happens this year or last to skew the effect: weather, holidays, promotional patterns, and foodborne outbreak tragedies, national or international effects all happen. More companies have been reporting the two-year comp, which might optically remove a prior year distortion.   

Must consider all of the restaurant sales components: Restaurant sales are multifaceted as the following chart shows:

Component One

Component Two

Grand Total

Comparable Sales Database stores

Immature, non-comparable sales stores database

Total Company sales

What can make this even more complicated is that some restaurants report only their company operated unit sales. Many report both, but trends in the two subsets can move differently for a host of reasons. Some brands open new stores that are in the non- comps database but unfortunately cannibalize same-store sales at mature stores.

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Disclosure: The author has no positions in any stocks mentioned.

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Farah Kincaid 2 months ago Member's comment

Excellent article, very insightful.