Economy Watch: Restaurant Chains Suffer From Declining Traffic

Growth for the restaurant industry has not been particularly robust lately, with same-store sales down for the fourth consecutive month.
Cosi (Credit: Coolcaesar at the English language Wikipedia)
A Cosi restaurant in Rosslyn, Va. (Credit: Coolcaesar at the English language Wikipedia)

The health of the restaurant industry, a subset of retail, is a reflection of consumer attitudes, since generally speaking, spending of that kind is entirely discretionary. High spending and growth among restaurant chains points to optimism, while lower spending and contraction among the chains points the opposite direction. Growth hasn’t been particularly robust for the industry lately.

The downturn for most of the restaurant industry continued during September, according to data reported by TDn2K through The Restaurant Industry Snapshot late last week. The figures are based on weekly sales from nearly 25,000 restaurant units and more than 130 brands, representing $64 billion dollars in annual revenue. Among that sampling, same-store sales were down 1.1 percent for the month, which is down for the fourth consecutive month, and chain restaurants suffered another period of dropping guest counts. Even restaurant job growth, which until recently had been posting solid gains, is down.

The key driver behind the fall in sales during September was a decline in traffic, which continues to be the biggest challenge for chain restaurants, according to Victor Fernandez, executive director of insights and knowledge for TDn2K. After improving slightly in August, traffic fell 3.5 percent in September.

The third quarter of 2016 also saw a drop of 1 percent for same-store sales and 3.4 percent in traffic, making it the weakest quarter since second-quarter 2010, when the country was still badly hungover from the recession. Just this year, a number of bankruptcies have occurred among chain restaurants—including Cosi, Old Country Buffet, HomeTown Buffet, Logan’s Roadhouse, Fox & Hound, Champs, Quaker Steak & Lube, Ruby Tuesday’s, Black-eyed Pea and others. There have also been unit closures and executive shakeups at chains.