The Counter: Restaurant Industry Scorecard for Q3 2017

The unfortunate combination of slow summer traffic and natural disasters including Hurricanes Harvey, Irma, and Maria dealt a blow to the service sector, particularly the restaurant industry through the third quarter. As a result, restaurants saw a 0.4 percent same-store sales decline through Q3.

Despite lows, pizza and quick serve are up
Following a rough summer for the industry, pizza showed a 3.2 percent gain. Domino’s brought up the entire segment with its continued investment in tech and customer experience. The company recently announced a partnership with the office chat platform, Slack, allowing customers to “slack” their orders without having to open a web browser. Though the segment was up, without Domino’s, pizza would have experienced a 0.8 percent decline.

Quick serve was also up, posting an increase of 0.8 percent. The QSR segment owes its increase to Carrols Restaurant Group, a Burger King franchisee, and Taco Bell, which posted 3.9 percent and 5 percent gains, respectively. Taco Bell noted this quarter’s increase can be credited to refranchising success.

Labor management means cost management
While some cost of sales can be beyond a restaurant’s control, labor management is an area where restaurateurs are able to dissect costs on an hourly basis. Labor was up across all segments, showing an average workforce price tag increase of 0.7 percent through the third quarter, compared to FY 2016. To help manage costs, businesses might consider implementing labor management software to ensure more efficient labor modeling.

What’s next?
As restaurants take a step back and assess their overall store footprint, many brands are pulling back to improve at current stores rather than focusing on expansion and geographic growth. This approach has myriad benefits including catering to existing customers rather than trying to capture new ones in new locations. In addition, nimble restaurants that are able to pivot to customer needs at current store levels will likely have a better chance at staying on top of the industry, despite the creep of nontraditional players like meal kits and “groceraunts” who look to steal market share.

To benchmark your organization or learn more about restaurant industry performance—including segment leaders and commodity costs—view The Counter in full here. Contact Adam Berebitsky, aberebitsky@bdo.com, or David Rice, drice@bdo.com, with questions.

And be sure to keep up with the Restaurant Practice’s latest thoughts by subscribing to our blog on the Selections homepage here and following us on Twitter at @BDORestaurant.

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