Survey: Operators Positive On Sales, Margin Expectations

Restaurant industry same-store sales set records in October, according to the latest NRN-MillerPulse survey, and restaurant operators reported more optimism as margin outlooks for the near term turned positive for the first time in nine months.

MillerPulse, an operator survey exclusive to Nation's Restaurant News, polls about 100 restaurant operators each month on sales, profit trends, performance and sentiment outlooks. Respondents cover all regions of the country and represent concepts in the casual-dining, fine-dining, quick-service and fast-casual segments. Together, the group of respondents typically represent restaurants that book about 19 percent of industry sales.

The November survey, which looks at October results, reported an average industry same-store sales gain of 3 percent, compared with a 2.9-percent increase in the previous month, and a 3.7-percent increase from October a year ago. The latest result is the best 2-year trend on record, up 6.8 percent, according to the report.

"This is really surprising," said Larry Miller, restaurant securities analyst at RBC Capital Markets in Atlanta and creator of the monthly MillerPulse surveys and research.

"This is the best month in the three years I've been doing this, particularly with quick-service, and nothing in the economy or with jobs has changed that dramatically," he said. "My sense is that we are going into the holidays, and consumers are tired of being depressed."

Miller attributed the industry-wide jump in sales mostly to an increase in traffic as opposed to a rise in average check.

The quick-service segment, which includes both fast-food and fast-casual brands, set two records in October. Same-store sales increased 3.9 percent compared with 2.9 percent in September, and a two-year increase of 7.3 percent for October trumped a 5.5-percent two-year increase for September, according to the survey.

And while full-service restaurants, which include both the casual- and fine-dining segments, showed a drop in October same-store sales compared with September, the segment hit a record two-year sales trend with a 6.4-percent increase for October compared with a 5.1-percent increase for September.

Industrywide, year-to-year guest traffic rose 1.4 percent in October, compared with relatively flat results in September. It was fueled by an increase of 2.7 percent at quick-service restaurants.

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In addition to the positive results from sales and guest traffic, responses from those surveyed resulted in the first positive restaurant margin outlook in nine months.

A net of 2.6 percent of respondents expect margins to improve over the next six months. The score is based on the 33.3 percent of operators surveyed who thought things were going to get better versus the 30.7 percent who had a pessimistic outlook on the future, Miller said. Quick-service operators are the most optimistic, with a net 9 percent expecting better margins over next months, compared with net 2 percent of full-service operators.

The survey also found operators across all segments except for fine dining were optimistic about same-store sales over the next six months.

"Nothing makes you more optimistic than seeing positive sales trends," Miller said, referring to the October numbers. He also noted that many operators reported that holiday bookings are looking stronger than they have been in recent years, which contributes to the positive outlook.

A net 24 percent, 8 percent and 4 percent of operators surveyed expect positive sales trends over the next six months for the casual-dining, fast-casual and quick-service segments, respectively. However, a net 38 percent saw sales trends taking a negative turn in the fine-dining segment over the next six months.

While the survey results generally were positive, operators did express concerns for November and the months ahead. Quick-service operators' main concerns for November are pressures from the unstable economy and commodity costs, for which operators expect inflation of 1.8 percent over the next six months, according to the survey. Full-service operators also expect to struggle with the pressure from commodity costs as well as the continued weak traffic it dealt with in October.

However, when asked if the upcoming political elections and ongoing economic uncertainty would affect their hiring plans for 2012, the majority of operators surveyed, or 70 percent, responded that these factors would have little to no affect, while only 30 percent said they would move slower than they normally would otherwise. And Miller saw that as a positive sign.

"I found that surprising. I would have expected it to be more like 50-50," he said. "The fact that people aren't sitting on their hands going into an election year is another sign of optimism for 2012."

Contact Charlie Duerr at