3 reasons why chain restaurants are struggling
America is losing its appetite for chain restaurants.
The health of the restaurant industry, as measured by the National Restaurant Association’s Restaurant Performance Index, hit its lowest level since 2013, thanks to declines in same-store sales and customer traffic. Only 30% of restaurant operators reported same-store sales increases in the last year, and just one in three expect sales to grow in the next six months.
Overall, food service industry traffic has been flat the first half of 2016, according to data from industry research firm NPD Group, and is expected to remain weak for the rest of the year.
At the same time, consumer confidence is strong and spending is up. So, what’s keeping people from eating out?
Here are the three things that executives at some of the biggest restaurant chains in the country are blaming for the industry’s stagnation.
- There’s a lot of uncertainty about the election
CEOs across the industry are blaming Donald Trump and Hillary Clinton for sluggish sales.
On Thursday, Yum Brands CEO Greg Creed joined a number of other executives in pinning the blame for industry struggles on the upcoming presidential election.
“I think there’s just great uncertainty as to what’s going to happen in the US, in particular, as a result of the outcome of the election,” Creed said in a call with analysts. “It goes without saying that people are sort of trying to decide who to choose and what the impact will be on the economy. And I think people maybe [are] just hunkering down a little bit.”
Wendy’s CEO Todd Penegor said in August that uncertainty about the election was leading customers to spend less freely.
Starbucks CEO Howard Schwartz, who endorsed Hillary Clinton, has a similar take, though he argues that the uncertainty is bigger than the election.
“I think we have a situation where you have a very uncertain election,” Schultz said in a call with analysts in July. “You have domestic civil unrest with regard to race. And I think the issues around terror have created a level of anxiety… There are a number of things that we are facing as citizens, and I think the direction of the country.”