Daily Management Review

US restaurants are experiencing the worst crisis since 2009


08/15/2017


The restaurant industry in the US keeps showing extremely weak results, while a constant decline in indicators can signal serious problems in the consumer sector of the world's largest economy.



Joe Mabel
Joe Mabel
According to a recent study by Black Box Intelligence, comparable sales in July fell by 2.8%, and traffic by 4.7%. In June, the decline was 1% and 3%, respectively. The US restaurant sector has been falling for 17 consecutive months, the longest period since the financial crisis. Sales are down almost throughout the country, and just 12 markets recorded growth. Analysts note that hopes for a rebound were not met, and all the positive forecasts turned out to be false.

Black Box states that sales in July 2017 decreased by 4.2% compared to July 2015. In other words, there has been no growth at all in two years. For comparable sales, the decline was 8.7%, which is the worst indicator in three years. That is, the industry has not left the downward trend, started as far back as 2015.

Now, not only experts are cautious to forecast recovery in the restaurant sector, but are also extrapolating the weakness on the entire economy.

"Despite the fact that the economy continues to grow at a moderate pace and employment growth remains strong, the consumers appear to be on vacation - literally and figuratively," said Joel Naroff, president of TDn2K economic consultants and experts whose data underpins Black Box’s study.

At the same time, the prices for food sales are declining on an annual basis, and restaurants also have to lower them in the long term, reducing the average check. This raises the question of profitability in the face of growing labor costs.

American households adhere to the economic regime, reducing the level of savings and curbing the costs of discretionary goods. Now analysts propose to wait for autumn or early winter, when the growth of wages should accelerate.

Even if this does not appear to have a favorable effect on restaurants' performance, this will mean an extremely deep crisis in the segment.

At the same time, increases in salaries for low-paid workers can indeed have a significant impact on the entire economy. A large part of Americans does not have personal savings at all, so that they can finance discretionary purchases.

According to the US government, sales in public places amounted to 56 billion, the indicator has not changed for 8 months already. They decreased by 0.6% from January, but still by 1.7% more than the same period of the big year.

Ironically, in addition to the problems associated with the drop in the number of guests, the impossibility of raising prices, increasing competition and reducing total costs, serious problems continue to be associated with personnel. It is difficult to retain a sufficient number of qualified employees in such problems.

Salaries of waiters and barmen has been increasing for 89 months since March 2010. At the same time, this sector for the last 7 years has brought 2.4 million new jobs, or 14% of the total. Yet, an average salary there is $ 13.35 per hour and $ 331.08 per week, which is the worst indicator in the US.

According to the People's TDn2K report, 63% of companies said that it is now more difficult to recruit qualified employees. At the same time, many predict the need to increase the number of employees.

The situation in the restaurant sector of the US economy only confirms wider problems. Debt on credit cards has reached $ 1.02 trillion, car loans amount to $ 1.13 trillion, and housing costs have reached a record as part of the total costs.

Spending on health and education is growing, and many are forced to pay too much on their educational loans, even if they have a good job. At the same time, this type of loans grew by 164% over the past 10 years to $ 1.45 trillion.

source: bloomberg.com






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