Is The US Restaurant Recession Becoming Structural?

Tyler Durden's picture

Submitted by Wolf Richter of WolfStreet.com

“Flat sales” are now a “welcome change.” The New Normal.

National restaurant data and anecdotal evidence has been piling up. “T Vogel,” a commenter on WOLF STREET, put it this way:

My wife and I make almost 30k more than the median family income in my town (northern CA) with no kids. Our rent just went up by 1k a month – landlord selling – starter houses are selling at 500k.

 

We are not spending a dime more than needed. I plan to skip our weekly night eating out now.

They’re not the only ones to skip restaurants. Costs are going up, not just of restaurant meals, but of life in general. Incomes are lagging behind. And consumers are adjusting…. That’s what a Reuters/Ipsos opinion poll of more than 4,200 U.S. adults confirmed today.

One-third of the respondents said they were eating in restaurants less often than three months ago. The poll was conducted in the second half of January. Of them, 62% cited cost as the primary reason.

Restaurant prices have been rising. The price index for “food away from home,” a subcategory in the Consumer Price Index, increased between 2% and 3% every year since 2012. In January, it rose 2.4% year-over-year. Those price increases are cumulative, and they add up after a while.

It’s not just that eating out is getting more expensive; it’s that stretched households are pushed by price increases elsewhere to divert some of their limited means from eating out to other expenditures.

Yet grocery stores aren’t reporting blockbuster numbers either, Bob Goldin, partner at food industry strategy firm Pentallect, told Reuters. “There’s more splintering of the food dollar, and the pie isn’t growing,” he said. “Where you spend has changed more than the amount you spend.”

The national averages, as seen from the restaurant’s point of view, bear that out.

In its most recent Restaurant Performance Index, the National Restaurant Association lamented “soft same-store sales and customer traffic readings” in December, which kept the Current Situation Index (tracking same-store sales, traffic, labor and capital expenditures) in contraction mode for the third month in a row:

  • 42% of operators said their same-store sales declined year-over-year.
  • 47% of operators said their customer traffic declined year-over-year.

This sort of data has been coming out for a while. It got to the point where TDn2K titled its most recent Restaurant Industry Snapshot: “Flat Sales, Welcome Change for Restaurant Industry in January.”

And more specifically:

While same-store sales growth was flat (zero percent) in January, it represented a welcome break from the ten consecutive months of negative sales growth experienced by the industry through the end of last year.

These flat sales were a function of slightly higher per-person average spending and fewer people going to restaurants: same store traffic was down 2.5% monthly and 4.1% on a rolling three-month basis. As the report put it: “Although still negative, this was the best month for the industry since last May.”

On a two-year basis, same-store sales were down 0.8% from January of 2015.

There were some winners in January, with growing same-store sales: Upscale casual, family dining, and quick service. Casual dining “was able to achieve flat results in January,” hallelujah, thus breaking a streak of 13 months in a row of falling same-store sales.

And there were some losers with same-store sales declines, according to the TDn2K report: fine dining and fast casual.

You get the idea: It’s been so tough out there for restaurants that any sort of flat spot or even a smaller down-tick in the averages is welcome news for the industry. And it looks like it’s becoming a structural feature of the US economy, though not nearly as bad as the downward spiral of brick-and-mortar retail.

This of course contradicts the theory or hopes that millennials – who are said to prefer splurging money on “experiences,” such as eating out, rather than on products, such as clothes – would pull the restaurant business out of its funk.

That said, you wouldn’t necessary know this by walking around San Francisco. Yelp lists nearly 8,000 eating establishments in the City, many of them recent creations, including 500 cafés and 3,000 delis. A lot of the places are packed. Some can be impossible to get into on a Friday or Saturday night without a reservation days or weeks in advance. Others are nearly impossible to get into no matter when or what.

But then other restaurants are nearly empty. There has been a slew of recent restaurant closures, amid talk of a big shakeout, including something called the “Mid-Market Massacre” in an area around Market St., where restaurant after restaurant closes, done in by exorbitant rents, not enough traffic, too much competition, a finicky public that might have lost interest, and insufficient sales. So yes, it’s tough out there, even in San Francisco, in what must be one of the toughest businesses on earth.

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nmewn's picture

And now a word from former Labor Secretary Tom Perez on what this all means...

UnclePhester's picture
UnclePhester (not verified) nmewn Feb 26, 2017 8:27 AM

I ate out today for the 1st time this year.

 

1 99 cent donut at D-N-D

 

 

TeamDepends's picture

Did you get a receipt? (Old Mitch Hedburg gag)

NoDebt's picture

"including something called the “Mid-Market Massacre” in an area around Market St., where restaurant after restaurant closes"

Which would have nothing to do with the middle class massacre, I'm sure.

Mr. Universe's picture

Market Street used to be the heart of the city, radiating out from the Ferry Building it was a sight to behold. Now, urine and feces fill the streets and diners have to cross over passed out bums sleeping in doorways. Add in that the SF hipsters are notoriously fickle, what's hot today is soon passe. Those that survive have great leases or own their property outright. Havinv been a chef in the City I don't eat out much, but we took Dad to Trader Vic's in Emeryville. Talk about a real institution. Average age in this 2/3 full spot was 75? The place reeked old school charm and full service. What also reeked was the $100.00 lunch tab for 3. This included 1 drink and tip.

WakeUpPeeeeeople's picture

Sort of reminds me of the urine district in downtown LA. The urine district is the district that encompasses all the other districts

BuddyEffed's picture

Why should Trump attend correspondents dinner?

It's a Saturday and traveling to Florida that weekend will mean more business for his properties?

Escrava Isaura's picture

Wow.

Able to visualize, correctly, future movements.

However, can’t say for sure that it’s priceless………….Or easily predictable.

 

UnclePhester's picture
UnclePhester (not verified) Escrava Isaura Feb 26, 2017 9:34 AM

Screw the restaurants and screw the corporate grocery stores. GROW YOUR OWN.

 

I just put in 40 more strawberries, 40 more asparagus, 5 grape vines, 10 more Asian Pears, 2 more peaches, a nectarine, a pie cherry and 36 Rosa Rugosas.....and that was just in the past week. I'm doubling the size of my veg garden this year too, as well as growing about 200 tobacco plants.

Escrava Isaura's picture

So, pleeeeeeease, make sure your send us your address. We, the capitalists parasites, want to live near you post collapse.

 

Mr 9x19's picture

 prices of restaurants increase but the quality of meals is shittier and shittier over time and people stop going out ? WEIRD !!!

 

FireBrander's picture

Yeah, that's it in a nutshell. Locally, the old skool 'Mom and Pop" shops are failing because thier kids have taken over the shops and just want to heat stuff in a microwave and charge 5 Star prices.

Even coupons aren't worth a shit anymore..."buy a menu item, get one free"...but, IN THE FINE PRINT, you also HAVE TO buy 2 drinks which are typically $3 each...so no deal.

A new, local, chain opened a ton of strip mall type eateries in 2015 (Someone must have inherited some money and decide to become a restauratuer). I ate there once, it was absolute shit combined with terrible/slow service. Place was half empty and it still took ~30min to deliver luke warm food. I paid cash, waitress was so dumb she ended up charging me just $3 because she got the change math wrong somehow.

2/3'rds of the stores have already closed. I still see their company van at Sams Club loading up on Ragu sauce, off brand pasta...the entire menu is Sams Club frozen food. Terrible Yelp reviews, but there are still some "GREAT FOOD" reviews that look legit; I guese if McDonalds is "good food" to your palate, then this place really is a 5 star joint.

Wile-E-Coyote's picture

I have to agree with you 100% we have stopped eating out purely because of cost and poor quality. You can't take it for granted you will get good service anymore.

FireBrander's picture

I've seen empty spaces completely remodeled for a new eatery...must have cost a fortune...and when they open the doors, the employees are scary as hell. That idiotic FAD of stretching your earlobes with rings...WTF...yeah, you're free to do that, but I don't want to look at that while I'm eating. I also don't want women with Hispanic font graffiti tatoos all over their arms and neck "serving" my food...And, minimal to no hygene standards...employees just LOOK dirty...and then management can't figure out why the sales numbers aren't where they thought, or would like, them to be...LOL.

canisdirus's picture

I think ear stretching went out a decade or two ago.

That said, they never recover, so those people are still out there. In their 30s now, having barely worked since high school or college, now they're trying their hands at working in hot startup restaurants...

Zorba's idea's picture

The wife and I eat out often...outside on the patio...with the shrinking portion sizes and over priced average at best meals ...same phenomena in our grocery stores...same with our stinking fiat..less is more. Bad enuff they got their hands in every one of our pockets...now their taking food out of our mouths.  besides, we had to figure out how to pay for our fucked up healthcare...bronze turd plan more than our mortgage.  Fuck you Obumass and all the other Demasses!!! shout out to all the spineless republiCONS. REPEAL THIS!

 

UnclePhester's picture
UnclePhester (not verified) Escrava Isaura Feb 26, 2017 10:52 AM

I'm sure I'll be busy with the local parasites, but if you want to provide a "target richer" environment for me, I'll be happy to oblige, as ground people make a well balanced fertilizer.....It reminds me of the old Story of, Squanto of the Wampanoag showing the pilgrims how to fertilize maize with menhaden.....just a little ground minority for each hole, children!

nmewn's picture

Visualize having a President who has actually made a profit and paid employees out of those profits. I know its hard for you to do, thinking its easy and that all one has to do is form a government and raise taxes here or there to "pay off public servants" to run the thing and if "profits" go down, you just raise taxes/fees/penalties or counterfeit the money to make payroll...but its really not in the real world.

Just try and visualize that ;-)

Wulfkind's picture

And yet the data shows that everything is still in the shitter.....despite Lord High Maximus Orange Julius's ( May His Name Be Praised Forever ) ability to turn his father's multi-millions into billions in the real estate scam market.

<of course billions as measured in devalued Fed Reserve Monopoly Bux>

Where's the Orange Trickle Down effect ?   I mean.....it worked SOOoooo well under Reagan and he wasn't even a real estate scam artist magnate and NEVER ONCE sold a Winn Dixie steak with his name on it. 

UnclePhester's picture
UnclePhester (not verified) Wulfkind Feb 26, 2017 9:52 AM

Turd Breaths have short memories.

 

Recall how Obama's entire first term was "Bush's fault".

Wulfkind's picture

You fuck-tards bought into the second coming of "It's Morning in America" with Lord High Maximus Orange Julius's ( May His Name Be Praised Forever ) MAGA .

 

So....where's the MAGA bitchezz ??

 

 

UnclePhester's picture
UnclePhester (not verified) Wulfkind Feb 26, 2017 11:11 AM

Calling me names (just for being right) means you are a real coward.

Government needs you to pay taxes's picture

Til we purge the tyrants and criminals, there will be no MAGA.

nmewn's picture

Dearest Soros shill Wulfgang von Putz...

He's been in office for just over a month for the most part fighting with Alinskyite assholes like Schumer to get his cabinet in place. As you obvously don't know how this all works, your boi Obama was in there for eight, long, agonizing years preoccupied with his golf game, flying around the world in OUR jet fighting the phantom of manmade glowbull warming, doubling the debt to 20 trillion dollars and declaring the "young & healthy" to be a criminal class of people.

Instead of, ya know, making conditions conducive to creating jobs. Because GOVERNMENT does not create productive jobs...it provides an enviroment conducive to...having productive jobs.

If theres ever anything else I can enlighten you on economically, socially or legally please don't hesitate to ask again.

hardmedicine's picture

I've seen a lot of press about Soros giving money to Paul Ryan.  If this is true then......... well I'm not sure what then but Paul Ryan is a MAJOR liberal  disguised as a NEOCON.  He isn't even a neocon.

 

I keep telling myself Trump is keeping his enemies even closer...... but Paul Ryan needs to be gagged.  He is not helping at all.  I don't understand why the rule of law hasn't included prosecuting the Clinton foundation.

 

Ikeep telling myself that Jeff SEssions has only been in office for a couple of weeks and it will take a couple of years for them to prepare their case so be patient. 

 

So, while I am impatient after 35 years of globalist shills and big government I still have a little hope that burns in the window..... Praying they don't succeed in killing Trump. 

chunga's picture

I remember being in high school thinking indictments for the Clintons were right around the corner. That biggest single problem I see is the lack of integrity and accountability for politicians/gov. Until that gets fixed the rest of it is a bunch of nothing.

When I see Hillary promising resistance and being there every step of the way, I see her taunting Trump, congress and Sessions. The Swamp has eyes and ears and she is confident nothing is going to happen to her, and it won't without aggressive action sooner rather than later.

83_vf_1100_c's picture

"she is confident nothing is going to happen to her"

She was confident that she was going to be Prez also. Don't give up hope just yet. T has his work cut out just gaining control over all the swamp creatures but he may yet get around to settling old accounts. Her waving a red flag is not smart. She should lay low and hope he forgets her.

Wulfkind's picture

nmewn......I HAVE NEVER claimed or supported ANYTHING you said up there.   Not as Wulfkind.  Nor as the poster formerly known as Jumbotron.

Just calling out you and everyone's slavish genuflecting devotion to a throughly disgusting, narccistic, troll of a human being.  Even though he nominally seems to be a "patriot"....whatever that means anymore.

 

I'm a defender of the Truth.....not of a flag or a nation or some myth called the American Dream.   I will ALWAYS stab at the heart of propaganda and those who fall for it.

nmewn's picture

"I HAVE NEVER claimed or supported ANYTHING you said up there.   Not as Wulfkind.  Nor as the poster formerly known as Jumbotron."

Well now, how can anyone prove otherwise if you keep changing your screen name?

Now to the meat of it...

>>>"And yet the data shows that everything is still in the shitter.....despite Lord High Maximus Orange Julius's..."

"Where's the Orange Trickle Down effect ?"<<<

My response (obviously) was to you belly aching that nothing is being done to improve matters, when in fact there is. He's rescinding Obama's regulatory EO's and TPP is going bye bye too.

You sittin around thinking the "Orange Trickle Down Effect" is a some sort of weird direct deposit into your personal checking account as soon as a regulatory rescission is done? 

Wulfkind's picture

After years of reading your posts nmewn I thought better of you.

The EO's that Lord High Maximus Orange Julius ( May His Name Be Praised Forever ) has EO'd were the easy pickings just for show.  They will NOT.....NOT.....MAGA in any sort, shape or fasion.

TPP is NOT DEAD.....it's just going to get piecemealed and distributed.  The Global Elite will have their supply chains....no matter what.

And what is this bullshit you believe that we are in some sort of "regulatory" recession.    Dude....this is systemic.  This is Empire in collapse. 

 

Pretty soon....like right about now.....Drumpf will run out of EO's and the courts will challenge most of them as they already have with immigration and they have won.

So...let me repeat.

 

Immigration Reform is OFF the table for 2017

Infrastructure is OFF the table for 2017

The WALL is NOT going to be built in 2017

Obamacre will NOT be repealed and replaced in 2017..... if EVER

The Federal Reserve will NOT be abolished in 2017......or EVER

Troops will NOT be coming home from our senseless and useless wars in 2017

Our National Debt will NOT be coming down in 2017....or EVER

The National Deficit will NOT be coming down in 2017....or EVER

And this breaking news right here on ZeroHedge.......Trump's Goldman Sachs man in the Treasury Mnuchin just reiterated Trump's campaign promise to NOT TOUCH ENTITLEMENTS

So.....Entitlements will not be touch in 2017.....or EVER

 

So pray tell, nmewn.......just exactly how is Lord High Maximus Orange Julius ( May His Name Be Praised Forever ) going to MAGA.....when those very things needed to be done and MUCH...MUCH....more.....are NOT going to be done by Drumpf ??

I thought you were out of the MATRIX.   Sadly, I was mistaken.

 

 

francis scott falseflag's picture

I hate to barge in this wet noodle fight but

 He's rescinding Obama's regulatory EO's and TPP

That's like repairing the gash on the Titanic when its bow was already submerged 150 feet down in the ocean.

Zeusky Babarusky's picture

I don't comment much here, just mostly read the comments since you can sometimes pick up some great insight. Your posts do contain an occasional nugget of truth, but the stupidity which dominates your posts negates anything good within them. Mr. Trump has been in office about a month. He will have to overcome years and years of overspending and corruption, and be fought at every turn by the media, liberal groups, and the globalists. There is not anybody on earth who could do anything much in a month. He is even having to fight to get his cabinet in place due to democrat obstruction. I don't know if Mr. Trump can deliver on what he promised, but from all indications he is trying, even in the face of great obstruction. The only way to accurately and fairly judge a presidency is after at least a year if not more. I'm not sure if you are really as stupid as you sound, or a troll. See if you can convince us that you are neither, and I might continue to read your posts.

Wulfkind's picture

You reading or not reading my posts.....like accepting the truth.....matters not what you do or don't do.

Hayabusa's picture

Well you talk about overcoming years and years of overspending and corruption due to democrat obstruction but where has Trump said he will spend more money?  The military!  We do NOT need more money poured into the military indistrial complex who run around the world killing, killing, killing - that money could be MUCH better spent here in the U.S. in areas such as medical care for our citizens, education of our citizens, etc. 

FireBrander's picture

Trump turned Millions into Billions in the "real estate scam market".

True.

...and exactly how did Obama make his ~$12,000,000 of wealth?

...and how did Hillary and Bill "earn" thier (estimated) $110,000,000 of wealth?

Again, Trump is by far the "lesser Evil".

FireBrander's picture

There are a lot of ugly truths about Trump...but I can counter EVERY one of them with a 10x uglier truth about the Clintons...again, that is why Trump won.

The sooner the Democratic Party kicks the Clintons to the curb, the sooner they'll have a shot at regaining the trust of the American people.

The Clintons are pure political poison that "Democrats" just can't seem to stop drinking.

Wulfkind's picture

There are a lot of ugly truths about Trump...but I can counter EVERY one of them with a 10x uglier truth about the Clintons...again, that is why Trump won.

The sooner the Democratic Party kicks the Clintons to the curb, the sooner they'll have a shot at regaining the trust of the American people.

The Clintons are pure political poison that "Democrats" just can't seem to stop drinking.

 

And you guys keep drinking the RINO Koolaid.    Even when it's Orange Julius flavored.....with electolytes.

francis scott falseflag's picture

 

You can say that again!

 

The sooner the Democratic Party kicks the Clintons to the curb, the sooner they'll have a shot at regaining the trust of the American people.

The Clintons are pure political poison that "Democrats" just can't seem to stop drinking.

Wulfkind's picture

Trump turned Millions into Billions in the "real estate scam market".

True.

...and exactly how did Obama make his ~$12,000,000 of wealth?

...and how did Hillary and Bill "earn" thier (estimated) $110,000,000 of wealth?

Again, Trump is by far the "lesser Evil".

 

At least you admitted you voted for "evil"

 

Kinda like "MYGA".......make yourself great again.     Now....here's your choice of making yourself great again.  

 

1:  You could contract AIDS

2:  You could contract CANCER

 

Gotcha.....

 

 

 


Escrava Isaura's picture

Glad you mention visualization. Where the facts become clear.

Article: Houses are selling at 500k.

Here’s your “visual” answer, and it’s not the government’s fault: Private Debt is the Problem.

http://www.debtdeflation.com/blogs/wp-content/uploads/2012/01/010212_2140_TheDebtwatc1.png

Now, worldwide:

https://www.theatlantic.com/business/archive/2014/09/government-debt-isnt-the-problemprivate-debt-is/379865/ 

Conclusion: We need equity-money and not debt-money.

http://www.sovereignmoney.eu/what-is-sovereign-money

 

 

nmewn's picture

I don't know what to say about you basing your national economic conclusions on the home prices in CALIFORNIA or an Atlantic article, other than to say anything derived from your conclusion is going to be baseless and irrational for anyone living in West Virginia or Indiana.

rockstone's picture

Yeah. If he's to come even close to Obama in 'rounds golfed' he's going to really put in the effort. Not to mention the 'money flushed on long family vacations" category and the expense of dragging the mother in law everywhere.

And Trump had no Reggie Love to help out.

UnclePhester's picture
UnclePhester (not verified) rockstone Feb 26, 2017 9:37 AM

ummmm, thas rayciss

pemdas's picture

In my opinion, the big problem is that food away from home is just not that good.

pemdas's picture

Especially when you consider a 10.5% local sales tax and the 20% tip.

TnAndy's picture

And for your 20% tip, you often get lousy service.  Add to that the noise level of a grade school cafeteria, and those are enough to get me to dine at home.

booboo's picture

Today's parents do not have to common courtesy to take their screaming ill behaved children outside When they start screaming. One experience the family thought it was just darling their fartling randomly let out ear piercing screams. Fuck dining out, millennials can have all the eateries to their own, you win. Even the finer restaurants have turned into Chuck E Cheese hell.

rockstone's picture

Good point on the noise. What is with all of the TV's everywhere at the mid and upper mid price point? I mentioned to staff that " I didn't know this was a sports bar" to be answered by "were not. We just like to have the games on for people." To which I've replied, "That is the definition of a sports bar. You're Wild Wings w higher prices"

CJgipper's picture

And the concrete floors with drywall and wood ceilings???? It's not edgy, it's FREAKING LOUD!!!!  I can't hear myself think in those 'trendy' places.

amadeus39's picture

No one is bullying you to tip, you spineless wimp.