Restaurant industry during recessionBlog

Restaurant industry during recession

"From our restaurant-industry only perspective, when industry category comps decelerate simultaneously by -2% to -3% (like in the second half of 2000, first half of 2007 and now in the second quarter of 2016), then the lower 'new-normal' same-store-sales trend has lasted for at least two years -- typically the year-before and year-of a U.S. recession," he writes. That can mean something as simple as adding a trivia night or providing a local, must-try specialty dish that’s just as popular on social media as it is in the store. "Our sense is that the amount of supply that has come into the market over the past few years is beginning to impact traffic trends, most notably in Texas and Colorado, where conditions have deteriorated with slower energy-related activity and supply growth," Barish says. “I think that is where Wing Zone and franchising really plays well: ‘I’ve done well in my career and I’m ready to try something else.’ In a way, you’d be kind of crazy to leave your well-paid, stable career now. Likewise, a recession could also help drive down skyrocketing real estate costs, particularly as the retail apocalypse continues to hollow out more big-box storefronts.“The strategic operator will take advantage of that for the long term,” he says. The weak may hurt or go away. Starbucks CEO Kevin Johnson told CNBC in late August that the coffee giant hadn’t seen any signs of economic weakness. "Accordingly, today, we adopt a below-consensus two-year second half of 2016 through first half of 2018 industry-wide comp outlook of +0.50% while also incorporating a below-consensus outlook of relative pricing power as price-wars typically ensue during dining-out slowdowns. We’re in very tight margins ... so if you wait until the recession happens, you don’t have a lot of levers to pull.”Victor Fernandez, vice president of insights and knowledge at restaurant knowledge firm TDn2K, doesn’t view a recession as an immediate threat. But that same order on a third-party platform, with its higher menu prices and added service fees, Friedman says, can cost more than $30.“And I think people are going to start to say, ‘I could go get it and save $10. “They’re going to take their aggressive spend and reduce it, but it’s not going to be as dramatic as we’ve seen in years past.”She suggests restaurants invest in technology like data analytics to help refine their operations. For many pundits, it's not if, but when. "We believe the industry has at least 18 months of challenges ahead in terms of softer same store sales and higher labor costs because of capacity growth and labor tightness, a year after the stock peak in summer ’15," he writes, noting that this conclusion comes after an "extensive" study on restaurant supply and its impact on same store sales growth and labor.One of the biggest pieces of evidence Barish points to is a supply glut. Wing Zone thinks so. That will make consumers less optimistic and more careful with their spending.“I think that recession is not a near-term threat as of now, but that could change very quickly,” Fernandez says. It’s Darwinian.”Mabel says the next recession may help alleviate two of the most chronic challenges in the industry: rising rents and an ultra-tight labor pool. The stability of the restaurant industry during a recession depends on the restaurant itself. Many people consider dining out to be an unnecessary expense, and creating a budget during economic struggles might mean cutting out late-night runs to local dives. Ultimately, he adds, "we think excess capacity in the industry is keeping same store sales growth from accelerating despite other macro tailwinds" like job growth and wage inflation.Wage inflation, however, works both ways: higher labor costs as the result of minimum wage hikes could eat into restaurant margins.

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