E Restaurant Recession? Just The Facts

The overall problem, called a malaise by some, does still seem to be a mystery with both the Fogo de Chao and Popeye’s CEOs noting in the last week they wish they knew what the problem was.

The industry QSR players didn’t do itself any favors by its hamburger wars tactics in Q3 and Q4 2015; in fact, there was little overall sales gain from that.  It came at a time of generally robust job and employment growth, and falling food commodity prices that could have been banked. It seems to have set off unfavorable competitive dynamics that even some casual diners (example, Chili’s) have mentioned. The industry needs to police itself better; the discounting and unit growth issues hurt a mature industry.   

The industry remains investable and vibrant, there are strong building new concepts and highly differentiated concepts that will provide a pathway for the future. And the next McDonald’s (MCD), Panera (PNRA), Starbucks (SBUX) or Cheesecake Factory (CAKE) has to start somewhere.

References:

[1] https://www.millerpulse.com

[2 ]Piper Jaffray 11th Annual Restaurant Benchmark Analysis, Cookbook, July 2016.

[3] Bureau of Labor Statistics display.

[4] St. Louis Federal Reserve, Real Disposable Personal Income Display, August 2 2016.

[5] US Bureau of Labor Statistics, Advance Retail and Foodservice Sales, August 15 2016.

[6] Restaurants Remain Investable in Current Pay for Performance Cycle, Nicole Miller Regan and Josh Long, Piper Jaffray Research Report August 21 2016.

[7]  US Bureau of Labor Statistics, updated 7/25/2016.

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Disclosure: The author has no positions in any stocks mentioned.

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