Stagnation just slid back into recession.
After six years of 1% annual growth in customer counts and a flat first half of 2016, foodservice traffic declined by 1% in Q3, according The NPD Group. Even quick service, which has kept the overall industry from sinking farther in the past, saw a drop in traffic for the first time in five years.
Lower disposable income—a result of higher health care costs for most and heavy student debt loads for some—coupled with restaurant prices that have risen in excess of inflation is part of the problem. NPD restaurant analyst Bonnie Riggs says its recent research finds that, “75% of the respondents who have decreased their visits to restaurants say they watch how they spend their money on most or all purchases, and a high percentage of these respondents think that restaurant prices are too high. The fact is the cost of the average restaurant meal has risen 21% over the last decade and with lower grocery prices the price gap between eating at home and dining out is widening.”
This expands on data from NPD in September that showed a 4% decline in Q2 lunch traffic while diner traffic decreased 1% and breakfast customer counts rose 1%. That research found that rising prices—especially at fast-casual concepts—were turning off consumers and sending them in search of c-stores, retail or other options.
The Habit Burger Grill’s recent Q3 earnings report was emblematic of the problem affecting most restaurant companies: comp sales were up 0.2% thanks to a 2.6% rise in average check that offset a 2.4% decline in customer traffic.
“The term growing your business in a ‘one percent world’ has become a popular mantra for the restaurant industry after six consecutive years of annual traffic gains of just 1%,” said NPD restaurant analyst Bonnie Riggs. “However, over the past six months restaurant industry traffic growth has come to a standstill and quick-service restaurants, which have been the traffic growth drivers, are now experiencing a slowdown in visits.”