Moving past the 1 percent

Editor's note: This exclusive series to Nation’s Restaurant News provides C-level insights into the sales and traffic data from clients subscribing to Black Box Intelligence, a financial performance benchmarking company. The views expressed here do not necessarily reflect those of Nation’s Restaurant News.

It's all about the 1 percent. No, not the 1 percent being discussed daily in the media and by the politicians. I'm talking about the 1 percent same-store sales environment that we seem to be stuck in — for now.

The Restaurant Industry Snapshot from Black Box Intelligence, now reporting in 171 DMAs, reports a 1-percent increase in same-store sales for the month of August; the rolling three months is also stuck at 1 percent. Traffic rose 1.1 percent for August and fell 1.2 percent for the rolling three months.

Of note, the Olympics did take place this year in the first two weeks of the month. Additionally, Florida, the worst region for August, was impacted by the recent hurricane. The best region was New York/New Jersey, which had a hurricane in this period in 2011.

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Clik here to view.At Black Box Intelligence we have been reporting that we are in a 1-percent kind of world and we don't see that changing in the short term. We know that the restaurant industry and many of the brands out there are mature, with little growth in units and guest counts. We also see some brands in turnaround mode with their management focused — as they should be — on fixing the brand rather than growth.

But that is all about the average — not the top quartile, where investors want to invest and management teams get rewarded.

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Clik here to view.Are there any new causes for the sluggish growth to report? We don't think so.

Our partners at Consumer Edge reported a drop in the August Willingness to Spend Index Index, from July's 87 to 86. This drop comes after a jump in July that led to the 26th month (out of 30 months) that this index has correctly predicted a rise or fall in sales for the following month.

Consumer Edge continues to observe that the $100,000-plus consumer is feeling okay, while continued concern about gasoline prices, housing and unemployment create more frugality in the lower- and middle-income groups. Supporting this observation, we did see the upscale/fine-dining segment outperform the casual-dining segment.

However, we now are reporting on fast-casual brands separately, including more than 3,000 restaurants, and found this group to be the strongest segment overall. So the question this poses to me comes down to more than just income and age demographics to determine a brand's customer base.

The fast-casual segment typically fits with the middle-income group, which is watching their spending. But income alone does not speak to lifestyle; I happen to believe that fast casual is stealing share from casual dining and quick service.

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The big challenges are the ones that ultimately every brand faces: truly understanding customers and figuring out when they visit and how to get them to visit more often. Most brand gurus have done this for some time. Increasingly, they see a greater need to segment their core customer in order to understand how to compete for that customer. As I have noted for many years, if someone goes to McDonalds for breakfast, Starbucks for a break, Chili's for lunch, Jamba Juice for a snack and Ruth's Chris for dinner, then who owns them? (Trick question!)

My advice would be to forget about the 1 percent or the 99 percent. Focus instead on the 20 percent: The general rule in our business that says 20 to 30 percent of our guests usually represent 70 to 80 percent of our revenue. It's a complex concept to break down because it requires understanding it by daypart. Who makes up your 20 percent by daypart?

This is complicated stuff, but if you do know who makes up that 20 percent by daypart and you exceed their expectations, that is where the top quartile plays — not the 1-percent average. I see the best teams utilizing their resources in marketing, human resources, technology and operations to focus on that 20 percent coming back more often.

Gaining share that is sustainable is not easy, but there are people and brands doing exactly that. Congratulations to our industry's 25 percent, our top performers for another great month.

The Restaurant Industry Snapshot is a compilation of real sales and traffic results from 171 DMAs from 72 distinct restaurant brands and approximately 14,000 restaurants that are clients of Black Box Intelligence. Currently, data is reported in four distinct segments: casual dining, upscale/fine-dining, fast casual, and family dining. Black Box Intelligence is a sister company to People Report, which tracks one million restaurant employees on workforce analytics. The Restaurant Industry Snapshot also includes the “Restaurant Industry Willingness to Spend Index” from Consumer Edge Research, which is a monthly household survey of more than 2,500 consumers. Consumer Edge Insights is a marketing partner with Black Box Intelligence and People Report.

Wallace B. Doolin
Doolin is chairman of Thomas Doolin and Associates LLC, the holding company of People Report, the leader in human capital business intelligence for the restaurant industry and Black Box Intelligence. He is the founder of Black Box Intelligence, a state of the art business intelligence product for the restaurant industry. Additionally, serves as a trustee of the National Restaurant Association and is a past chairman of the National Restaurant Association's Education Foundation. Other current responsibilities include public company board of director service for Caribou Coffee and Famous Dave’s. Previously, Doolin served as CEO of Carlson Restaurants Worldwide and TGI Friday’s, Buca, Inc and La Madeleine.