The Counter: Restaurant Industry Scorecard for Q1 2018

Throughout the first quarter of 2018, same-store sales across the restaurant landscape rose at a slim but vital 0.9 percent. The first quarter’s growth brought a healthy bout of optimism to an industry grappling with heightened competition for restaurant-goers’ business, as overall FY17 sales remained flat. Mild weather largely drove this uptick, with restaurant traffic climbing as winter storms tampered down. Restaurants in major Northeastern cities, however, were forced to close stores during the winter’s several Nor’easters. Despite this, quick serve, fast casual, casual, and pizza restaurants’ same-store sales all increased through Q1, with only upscale casual reporting a loss. 
 
Same-Store Sales
Quick service restaurants posted a 1.4 percent increase through the first quarter, with Colorado’s all-natural burger and shake chain Good Times Burger leading the charge with a 7.1 percent rise, which the company attributes to its better burger initiatives. Chicken-wing chain Wingstop, Inc. reported the fast casual segment’s highest sales increase, 12.5 percent, which the company credits to its delivery, technology, and expansion strategies. Overall, the casual restaurants’ segment reported 1.5 percent growth, with Bloomin’ Brands, Famous Dave’s, Applebee’s, BJ’s Restaurants, and Denny’s posting solid gains. In the pizza market, Domino’s continued to outperform its competitors, reporting a 6.4 percent increase through Q1. Upscale casual was the sole segment to experience an overall decline in sales during the first quarter, reporting a -0.5 percent dip.
 
Labor & Commodities Costs
Eggs dominated the industry’s attention this quarter, as prices spiked 54.2 percent through the first few months of 2018. However, this increase comes well after the 51 percent price drop in 2016, suggesting that prices are leveling, not skyrocketing. Cheese prices also increased as the dairy market grapples with competition from plant-based dairy alternatives, while fresh vegetable prices were down 5.2 percent. Across restaurant segments, labor costs rose 0.3 percent over Q1 2017. Labor costs continue to rise as workers push for higher minimum wages in their states, and national employment levels climb.
 
Emerging Opportunities & Challenges
In the months to come, restaurants will navigate persisting industry disruption caused by overall market saturation, competitive delivery services, new menu standards, and both front of house and back of house technological innovations. Investors’ interest in the restaurant space will likely continue well into the second quarter, as tax reform spurred a steady pace of restaurant M&A in Q1. Going forward, businesses that can balance dine-in and delivery, the changing workforce, and listen to consumers’ desires will thrive.
 
To benchmark your organization or learn more about restaurant industry performance—including segment leaders and labor costs—view The Counter in full here.

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