Why the Slowdown in the Restaurant Industry Isn't All Bad News
A while back, we became aware of the slowdown in the restaurant industry. Now this:
...the "restaurant industry hasn't reported a positive month since February 2016", we can add one more month to the running total: according to the latest update from Black Box Intelligence's TDn2K research, in July both same-store sales and foot traffic declined once again, and this time the slide was more pronounced, tumbling by -2.8% and -4.7% compared to declines of "only" -1% and -3% in June, respectively, in the process extending the stretch of year-over-year declines for the US restaurant industry to 17 consecutive months - the longest stretch since the financial crisis.
That's almost a year and half of falling sales. What's up?
Some believe it's a sign of consumer's tightening up on spending. But before considering that, one of the respected analysts we regularly read opined there's a little more going on. The theory is that restaurants have accelerating contamination, disease, and cleanliness issues that have now come back to bite them. The Chipotle debacle illustrates the contamination problem. Food they served made people sick; they had to close their restaurants for a spell to find and resolve the problem. Their stock got whacked and hasn't recovered. This chart going back to 2016 when the trouble surfaced tells the story.
Notice how lately, after the initial nosedive in 2016 with the usual slight recovery, the stock has really tanked. Maybe that's the industry slowdown piling on top of Chipotle's contamination crisis.
The "disease" we referenced involves workers who pass on various bacteria to unsuspecting diners. The internet is filled with stories and studies related to this subject. Explanations range from legal and illegal immigrants carrying exotic diseases from their native lands to the fact that many workers aren't paid much, resulting in their a) not having access to good health care; b) working when they're sick because they need the money. Whatever the reasons - and I suspect those are varied - it's not something easily dismissed. A colleague recently became violently ill after eating in a restaurant on a business trip. She's apparently feeling better after having to spend time in the hospital, but whatever got into her GI tract may never be eliminated. Nasty stuff.
The cleanliness refers primarily to workers who handle food not washing properly, as well as the non-hygienic practices of some restaurants. Equipment and surfaces aren't properly washed and disinfected, becoming breeding grounds for germs and bacteria. Ugh!
With all that in mind, it's understandable that some of us are cutting back on exposing ourselves to the dining experience. Then there's the trend of the consumer tightening up on spending overall.
...One of the clearest indicators that households are spending cautiously is the softening of big-ticket purchases. In July, for the eleventh month out of the last twelve, vehicle sales were below the rate posted the year before. Home sales, while still trending up, are now expanding at a decelerating pace.
If the consumer's simply not buying in general, we'll see this in the overall economy at some point despite the never-ending reports that economic activity has been and continues increasing, albeit at a relatively anemic pace. For instance, it will be interesting to see what happens when the leases on all those luxury cars offered to any and all comers - credit scores be damned - in recent years come due. Now that credit for those who are essentially un-credit-worthy is not being freely extended anymore, what will these people drive? It may not be the BMW's, Audi's, and Mercedes Benz's you can find in any neighborhood - rich, poor, and all in-between - in the New York metro area.
But getting back to restaurants, the news really isn't all that bad. Maybe people will get back to preparing meals at home for themselves. First off, it's much healthier if you eat food prepared at home from fresh ingredients. It's also easier on that expanding waist line that characterizes our beloved homeland, recently declared the fattest country on God's good earth. And maybe, at least once in a while, people will sit down and eat together - the common practice when I was growing up.
Not that I wish any ill will on those who make a living in the restaurant industry, but, let's face it, you've had a good run; maybe it's time to retrench. As for me, I find going out to eat occasionally to be a treat, with the emphasis on "occasionally." The rest of the time, I try to see to it that I fill my belly with reasonably healthy fair that keeps me a few steps removed from obesity, even better, helps keep mind and body in relatively useful shape.
Besides, those home-made french fries I used to help my Mom cook growing up, as a special treat for the family, were far better than 99% of the competition.
...the "restaurant industry hasn't reported a positive month since February 2016", we can add one more month to the running total: according to the latest update from Black Box Intelligence's TDn2K research, in July both same-store sales and foot traffic declined once again, and this time the slide was more pronounced, tumbling by -2.8% and -4.7% compared to declines of "only" -1% and -3% in June, respectively, in the process extending the stretch of year-over-year declines for the US restaurant industry to 17 consecutive months - the longest stretch since the financial crisis.
That's almost a year and half of falling sales. What's up?
Some believe it's a sign of consumer's tightening up on spending. But before considering that, one of the respected analysts we regularly read opined there's a little more going on. The theory is that restaurants have accelerating contamination, disease, and cleanliness issues that have now come back to bite them. The Chipotle debacle illustrates the contamination problem. Food they served made people sick; they had to close their restaurants for a spell to find and resolve the problem. Their stock got whacked and hasn't recovered. This chart going back to 2016 when the trouble surfaced tells the story.
Notice how lately, after the initial nosedive in 2016 with the usual slight recovery, the stock has really tanked. Maybe that's the industry slowdown piling on top of Chipotle's contamination crisis.
The "disease" we referenced involves workers who pass on various bacteria to unsuspecting diners. The internet is filled with stories and studies related to this subject. Explanations range from legal and illegal immigrants carrying exotic diseases from their native lands to the fact that many workers aren't paid much, resulting in their a) not having access to good health care; b) working when they're sick because they need the money. Whatever the reasons - and I suspect those are varied - it's not something easily dismissed. A colleague recently became violently ill after eating in a restaurant on a business trip. She's apparently feeling better after having to spend time in the hospital, but whatever got into her GI tract may never be eliminated. Nasty stuff.
The cleanliness refers primarily to workers who handle food not washing properly, as well as the non-hygienic practices of some restaurants. Equipment and surfaces aren't properly washed and disinfected, becoming breeding grounds for germs and bacteria. Ugh!
With all that in mind, it's understandable that some of us are cutting back on exposing ourselves to the dining experience. Then there's the trend of the consumer tightening up on spending overall.
...One of the clearest indicators that households are spending cautiously is the softening of big-ticket purchases. In July, for the eleventh month out of the last twelve, vehicle sales were below the rate posted the year before. Home sales, while still trending up, are now expanding at a decelerating pace.
If the consumer's simply not buying in general, we'll see this in the overall economy at some point despite the never-ending reports that economic activity has been and continues increasing, albeit at a relatively anemic pace. For instance, it will be interesting to see what happens when the leases on all those luxury cars offered to any and all comers - credit scores be damned - in recent years come due. Now that credit for those who are essentially un-credit-worthy is not being freely extended anymore, what will these people drive? It may not be the BMW's, Audi's, and Mercedes Benz's you can find in any neighborhood - rich, poor, and all in-between - in the New York metro area.
But getting back to restaurants, the news really isn't all that bad. Maybe people will get back to preparing meals at home for themselves. First off, it's much healthier if you eat food prepared at home from fresh ingredients. It's also easier on that expanding waist line that characterizes our beloved homeland, recently declared the fattest country on God's good earth. And maybe, at least once in a while, people will sit down and eat together - the common practice when I was growing up.
Not that I wish any ill will on those who make a living in the restaurant industry, but, let's face it, you've had a good run; maybe it's time to retrench. As for me, I find going out to eat occasionally to be a treat, with the emphasis on "occasionally." The rest of the time, I try to see to it that I fill my belly with reasonably healthy fair that keeps me a few steps removed from obesity, even better, helps keep mind and body in relatively useful shape.
Besides, those home-made french fries I used to help my Mom cook growing up, as a special treat for the family, were far better than 99% of the competition.
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