Restaurants must win markets to fight consumer flux

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Editor's note: This exclusive series to Nation’s Restaurant News provides C-level insights into the sales and traffic data from clients subscribing to Black Box Intelligence, a financial performance benchmarking company. The views expressed here do not necessarily reflect those of Nation’s Restaurant News.

Our predictions of a soft month were unfortunately correct. July started out strong but faltered later on.

The just-released Restaurant Industry Snapshot for July reports that industry same-store sales rose 8 percent and traffic fell 1 percent, compared with a same-store sales increase of 1.4 percent and a traffic decrease of .8 percent in June.

We based our predictions on the Restaurant Willingness to Spend Index from our partners Consumer Edge Research, which declined from an 88 in May to 81 in June. [The baseline is set at 100.] Expectations dropped for both the $100,000-plus consumer and the under $50,000 consumer, by 11 and 9 points respectively. That decline, coupled with the Olympics in the last three days of the month, fueled our concerns.

However, it was particularly encouraging to see such a strong start to the month. Our members reported positive same-store sales in food and in alcoholic beverages. When sales did soften, it occurred predictably in the dine-in area, as to-go sales and catering were both very strong.

Digging into regional results, it was intriguing to me to look at various data points that might explain the differences between sales the best and worst regions. The Midwest is being hammered with record hot weather — along with all parts of the country besides the Northwest — but is still on top with a sales increase of 1.8 percent. At the same time, sales in the West declined .7 percent.

However, none of that matters nearly as much as when you correlate the regional unemployment numbers to performance. When you dig into Bureau of Labor Statics as we do, you find that in the Midwest, very few designated market areas are experiencing unemployment above the 8.4 percent national average.

Conversely, when you look at the West region, very few DMA’s are below that level. In fact, Los Angeles and other southern California markets are still at 10.3 percent and higher — almost 2 percent higher than the rest of the country.

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