DDIFO Restaurant Analyst John Gordon had the opportunity to attend the recent conference and provides us with some of his observations, going beyond the headlines and the spin from earnings calls.
Overall, restaurant market share has been stagnant for years, but: Restaurant sales are flat-to-up marginally but traffic is still down from the 2007 pre-recession peak. The overall sales environment, supported by a 3% increase in average check, is not changing, with some exceptions. However, sales market share volatility is high, with new or emergent concepts rocketing up and taking away market share from others.
Interest rates matter a lot to the lenders. While the FED is talking about a small increase in December, this is highly symbolic – the first increase in nine years. Most restaurant lending uses LIBOR or the prime rate as a base, so it’s not at all likely restaurant loan margins will soar. That said, from a practical standpoint, since a debt disaster is not pending, this is likely a good time to buy or sell your restaurant concept.
The role of getting and keeping good people is getting more visibility. While we all know this business is about making money, good people are critical and getting/retaining them is getting more attention. Wage rates reported by brands in October-November were up roughly 3% and the consensus is that price alone cannot cover that amount going forward. More wage increases are coming in 2016 while the increase in the overtime wage threshold may affect unit management.