INDIANAPOLIS BUSINESS JOURNAL
Disappointing sales from a growing number of restaurant chains suggest the industry is becoming saturated.
Applebee’s, Chipotle, Chili’s and Buffalo Wild Wings were among a slew of fast-casual heavyweights reporting negative same-store sales in the second quarter. Even more telling of the downturn — Indianapolis-based Steak n Shake snapped its streak of 29 consecutive quarterly increases dating back to 2009.
Experts attribute much of the troubles hampering big chains to increasing competition — not only from other large rivals but also from the growing popularity of independent operators.
“All of these new options are giving consumers more places to go,” said Darren Tristano, president of Chicago-based market research firm Technomic. “Perhaps the one place they’re not going is the big-chain restaurant brands.”
Other factors are at play, too, including a surge in prepared supermarket meals and recipe and ingredient delivery services, in addition to falling grocery prices, making it more convenient to eat at home.
Statistics compiled by Dallas-based Black Box Intelligence for trade publication Nation’s Restaurant News paint a discouraging picture.
Through the first two quarters of the year, same-store sales — a key indicator of a retailer’s health — at the nation’s largest restaurants dropped 0.4 percent from the first six months of 2015.
That marks the first time in more than two years that the sector has experienced consecutive quarters of negative same-store sales growth, according to Black Box.
Black Box’s data gleaned from 130 brands and 25,000 units show the industry’s struggles were even more severe in June, when foot traffic fell 3.5 percent and same-store sales slid 1.1 percent — the biggest drop since January 2014.
“Right now, consumers are distributing their incomes across all categories and so we are not seeing any one retail or restaurant sales category rise sharply,” Joel Naroff, an economic adviser to Black Box, said in a report. “I expect that pattern to continue.”
Observers say restaurants might continue to struggle to increase sales until a shakeout occurs and locations close.
Casualties already are emerging.
Logan’s Roadhouse in early August filed for Chapter 11 bankruptcy in Delaware after competition from casual-dining rivals ate into sales. The operator and franchiser of more than 250 restaurants said it planned to close 18 underperformingoutposts as part of its reorganization plan. Locally, the company shut the doors at 4825 E. 82nd St. in the Clearwater area.
Ruby Tuesday, another casual-dining chain, announced last month that it would close 95 locations nationwide.