Tag Archives: same store sales



There is not much to celebrate among restaurant industry operators. “Flat” is better than “Down”, but sales and traffic trends continued to be lackluster in April, and there is no reason to expect a change in May (now history) or the month to come. We have described many times how the dining industry has been an excellent leading indicator relative to the economy.  We suspected earlier this year, as our readers know, that the lack of momentum in the restaurant industry indicated that the economy was unlikely to break out on the upside. That has proven to be the case as the slowdown in the economy is clearer by the day. The latest GDP expectations for the second quarter are in the 1.25-1.5% range, a lot lower than the 3.2% of the first quarter, and bringing the first half very close to the 2.3% of the Obama years.

While some worse numbers than shown below have circulated, we quote below the Miller Pulse survey numbers.

Back in restaurant land: Continued weak traffic was the feature in April, with higher check values (up 4.1%) overcoming a 2.1% traffic decline and bringing same store sales to a 2.1% increase. As we have said repeatedly, that is not enough to overcome higher labor, rents, and other operating expenses, so margins will continue to be challenged. The two year stacked comp is up 3.8% in April, down 10 bp from March.

By segment:

Quick service restaurants were up 2.7% in April, with 4.6% check average overcoming 1.9% traffic decline. Over two years, QSR SSS fell 30bp month to month to 4.3% so not much has changed.

Casual dining did worse, with same store sales down 0.5% in April even with a boost from the Easter calendar shift, and traffic was down 2.8%. Over two years, SSS was up 60 bp to a lackluster 1.3%, with traffic obviously down.

We have heard no credible reports that trends have improved in May so, with two thirds of the second quarter in the rear view mirror, and the economy showing signs of slowdown, there seems little reason to think that operating results will improve in Q2. A pickup could be in the cards, and the restaurant industry could lead the way, but not yet.

Roger Lipton





I used to think that analysts’ obsessive attention to same store sales was overdone. After all, there is nothing wrong with maintaining sales/store, building new stores if the unit level economics generate an attractive return, controlling store level costs, leveraging corporate administrative expenses. The result would be higher sales and profits and earnings per share as the “cookie cutter” strategy spread  geographically.

However: This is not the restaurant industry many of us grew up with. I remember when Chi-Chi’s was doing $2.5M per copy in 1980 and the gross investment in land building and equipment was $1.25M. Ryan’s Family Steakhouse came public in the 1980s, and it was gold, with $1.3M in sales per store and a total gross investment of $650k per location. Those were the days. Today: Competition is brutal. Consumers are cash strapped and shopping for the best deal on the commercial strip, if they are even leaving their homes. Building costs only go up.  Almost all operating costs are moving inexorably higher with labor leading the way. The return on investment from new stores is obviously nowhere near where it used to be and material same store sales improvement has become an absolute necessity if store level margins are to be maintained and corporate earnings have any chance of improving. Furthermore, as I have previously pointed out, 2-3% SSS is not materially enough to overcome rising store level expenses, labor in particular. The majority of publicly held chains are reporting flat to down pretax earnings, sometimes in spite of 1-3% SSS trends.

Which brings us to the current, through March, sales trends.  With few exceptions, such as Chipotle (finally), Domino’s, Wingstop and part of Darden’s portfolio, the tepid trends of the last several years remain in place. While the headlines may trumpet a rebound in March, it was a bounce off the horrible weather in February.  According to Miller Pulse: Same store sales for the restaurant industry as a whole, were up 2.1% YTY, driven by a 4.2% jump in check (price and menu mix), so traffic was still down 2.1%, for the thirty sixth month in a row.  Over two years, the stacked comp was up 3.9% in March (140 bp better than February), so the trend, over two years, in sales and traffic has been remarkably consistent (i.e.”tough”). In March:  QSR chains, with comps up 2.8% (4.6% check increase, 1.8% negative traffic) did a bit better than casual diners with SSS of negative 0.9% and traffic down 3.6%. Let’s not forget: Backing out delivery and takeout, traffic trends are dramatically worse than same store sales. Too many chains are sitting with oversized real estate, using their seating capacity only part of two or three evenings per week.

Rounding out our commentary: Our observation is that delivery is considered a necessity by most but is very much a mixed bag in terms of enthusiastic adoption. Over time we believe that margins will come down for the delivery companies as they compete for customers, and the margin hit for the restaurant company will not be as significant, but it will still be a challenge to control the “last mile” and not run the risk of damaging the brand. From a marketing standpoint, many chains are trying to move away from ultra low priced deals and get back to core products at full price, but it is a challenge to wean customers from chasing the “deal of the day”. Loyalty or Reward Programs, whatever they are called, are a proven productive approach, and Starbucks sets the best example, recently improving their personalized deal. Burger King has their own Loyalty program, consisting of a $5 per month Coffee Club which offers a cup of coffee every day. We’ve heard about senior citizens making a morning of it, bringing along their checker boards, so it will be interesting to see how this traffic building approach works out.

Roger Lipton



The table below shows the most recently reported same store sales (and traffic when it has been disclosed) for most of the publicly held chains. It is pretty sobering when we see the numbers stacked up. The only real exception lately has been Domino’s, which of course dominates the pizza delivery business. Even Starbucks (with caffeine and Howard Schultz), Shake Shack (with the Danny Meyer hospitality culture) and Wingstop (with 75% takeout) who come to mind as bucking the trend, have seen their comparisons slow lately. There is, in essence, hardly any place to hide.


Every industry observer knows by this time that it has been tough out there, and the results we show below have apparently continued into April and early May. You should especially note the traffic trends which in so many cases are negative even if price increases and “menu mix” have helped the nominal same store sales. The question is why. Reasons cited, and all are valid, are: increased competition, lower mall traffic, the stretched consumer, lower grocery prices, political distractions, the weather (sometimes), and of course company specific problems at chains such as Applebee’s and Kona Grill. It has become increasingly clear that if the Millenials are going to get off their couch and take a break from binge viewing on Netflix, they are requiring an “experience” rather than a “fuel stop”. We believe that a growing number of dining customers have had enough of the institutionalized “service by rote” that is provided at so many national chains.


We believe that, after fifty years of chain restaurant growth at the expense of “independents”, the local owner/operator has a chance again. The individual proprietor doesn’t have survey cards on the table, or use anonymous shopper services to gauge the operations because he or she sees every meal that comes out of the kitchen and can watch the customer reactions in the course of the dining experience. At the national chains, how often does it happen that a service person, arriving sometimes before you have had your first bite, asks you “how is everything”. If you mention that something is wrong, they turn into a “deer in the headlights”. For this you are expected to pay a 15-25% tip. Many diners, and potential diners are finally saying “basta”. Our observation is that the chains that are doing the best are those with the superior hospitality “culture”. If I were an operator, I would be channeling Howard Schultz and Danny Meyer, who have written the book in QSR and Full Service Dining, respectively. Part of the experience can be a bit of “theatre”, as demonstrated by the assembly and cooking process at the fast casual pizza leaders such as MOD and Blaze (written up, as “Up & Comers” on our Home Page). TopGolf and Barteca (which we have also written up as “Up & Comers”) provide an unusual “experience” and are doing well. The last example of a special “culture” is a Michigan based chain, where I have recently become a Board member, called HOPCAT. The Millenials, who we all agree will drive consumer spending patterns are flocking to Hopcat, averaging over $4 million in each of twelve locations, not only because the food and drink are good, but the hospitality quotient is obvious. There are no staff uniforms, the service interactions are not “canned” and 90% of the waste is recycled. The staff and the customers really care about this stuff. They cared about it, a lot, at Chipotle, and that may be one reason that customers are returning more slowly than most of us would have forecast.


The newest challenge to the restaurant industry, while operators cope with higher labor, higher rents, potentially higher commodity prices, and the well know external factors as cited above, is how to compete with the increasingly competitive independent operators. It can be done, but not with national advertising and a “one size fits all” approach to operations. Menus must be increasingly tailored to local taste, décor should reflect the neighborhood, marketing must be increasingly directed to the surrounding communities, just to mention a few obvious considerations. As part and parcel, staff has to be chosen to provide the necessary hospitality quotient. While a publicly held chain has to be thinking strategically, they must pay increasing attention to the local detail. If I were to put it bluntly, forget about a national “footprint”. Operate the hell out of your stores market by market. Part of the traffic you are losing annually could well be the result of better performance by local competitors, and the Millenials’ inclination to support them. A historical example of a great chain (in their day) that grew in concentric circles from their Nashville base, was Shoney’s. They put the numbers on the board every quarter for twenty years without jumping across the country. Ray Danner finally retired, younger management wasn’t as disciplined, diversification cost them some focus, and the brand finally faded, but the operational example that succeeded for so long still applies.


We believe that independents are taking market share, for the first time in many decades. It only has to be two or three percent a year (one out of forty or fifty customers) but it adds up over time. You may be running a multi-unit chain, but you must compete store by store, against other chains and independents alike. That independent operator, who is feeling better these days, has his financial life on the line, doesn’t have the corporate “support” and large legal and accounting expenses that you must overcome. He can manage labor more efficiently, perhaps “off the books” with no workmen’s comp and health insurance. He will be in his store on Friday and Saturday nights, meeting and greeting his customers. Keep that in mind as you build your national footprint.