Restaurant Recession? Just The Facts

On July 26 2016, the Stifel Restaurant Team wondered via published research if we were in a restaurant recession, as a possible harbinger for a US recession coming up. They noted negative same store sales trends and the lack of restaurant pricing power, among other problems.

The Washington Post picked up this same question on August 22 2016:

A ‘restaurant recession’ sounds scary. Are we really on the brink of one?

Is a restaurant recession really happening? We looked at some background data points to get a better view.

Chain Restaurant Store Sales Softness Unquestionable: Reported chain restaurant same store sales are unquestionably soft, with all of the major restaurant trackers, Knapp Track, MillerPulse and Black Box showing one year SSS declines  in all sub segments, QSR, fast casual, casual dining and fine dining. The latest industry peak seems to have been early 2014. The view on a two year and five year stackedbasis is more positive, however. The best data source to see this is MillerPulse, a comprehensive restaurant business conditions tracker. [1]

 July 2016 was especially weak, with the lowest July restaurant estimated seasonality value reported since 1992. This has impacted both high and low average ticket operators.

Vast majority of US Restaurants are not in the Comps Sales Base: There are many chain restaurants, and even more US restaurants that are not a part of the publicly reported chain comparable sales data base. Big worldwide operators like Subway, Dairy Queen and Red Lobster are privately held and do not report. Of the Piper Jaffray comprehensive Cookbook of Restaurant data [2], 64 companies included represents 13% of the Technomic 500 chain restaurant concept count. There are 110,000 units in Piper’s 2016 Cookbook, which represents about 11% of the National Restaurant Association’s count of over 1,000,000 restaurant and food service venues in the US.

Food Away from Home Trends: We have historical data on food away from home expenditures, tracked by US BLS via surveys. It has grown from about 17% in 1929 to 47% in 2014. Since World War 2, food away from home as a percentage of total food expenditures has grown on a real basis (excluding inflation) every year except for the following:

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

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