2019 business outlook: Restaurant industry
Moderate growth expected for restaurants
INSIGHT ARTICLE |
Restaurant performance in 2018 was characterized by moderate growth from increased ticket sales offset by slowing same-store traffic. We expect more of the same next year as consumers continue to demand convenience and value. Competition is growing from C-stores and grocery, which have been increasing their focus on prepared meals; and from Amazon, which is adding more cashier-less AmazonGo stores. Next year, we expect additional moderate growth fueled by strong consumer spending. Restaurants will also pay more for workers, with wage growth expected to reach 4 percent by the end of 2019.
While wage growth is promising, the consumer emphasis on value provides quick-service restaurants (QSR) and some casual-dining chains the opportunity to boost same-store sales by expanding their discount menus and adapting to third-party delivery options to help drive traffic. According to the National Restaurant Association, 41 percent of operators expect to see an increase in same-store sales in the beginning of 2019. The increase in the spread of optimism for customer traffic compared to increased sales signals that operators expect higher same-store sales from increased ticket levels.
With some operators already hanging on by a thread amid an oversupply of restaurants in the market, these challenges, led by the tight labor market and reduced margins, will likely lead to some closures. The restaurant concepts that rise to the top will likely have adapted to smaller footprints and technology innovations to accommodate tighter margins; they will capture new customers as the field of competition narrows.
See more of RSM's 2019 business outlooks
Economic narratives for 2019 include continued trade tensions, more interest rate hikes and declining unemployment and wage growth.