Chain restaurants under pressure
Pressure from increased competition and lower grocery prices will likely keep squeezing sales at chain restaurants.
The industry has been dealing with a slew of economic factors that are persistently dragging down same-store sales and contributing to mainly lackluster financial results. Grocery prices remain low, so consumers on tight budgets are often forgoing the expense of eating out. Increased competition and rising labor costs are also pressuring margins at chain restaurants.
In its latest quarter Darden reported that its Olive Garden restaurants had a boost in sales, helping prompt a more upbeat outlook for the year. But that boost was driven by higher prices, while customer traffic slipped.
“Since the beginning of 2015, same-store traffic growth has trended down at an increasing rate,” said Victor Fernandez, director of Insight and Knowledge for TDn2K, which tracks restaurant industry trends and data.
The company said the industry was having its worst year since the end of the recession, with casual dining – particularly the bar-and-grill portion of that segment – facing considerable struggles.