Restaurants looked to be heading into the back half of the year with big plans following an amazing recovery. The delta variant may have other ideas.
According to the latest update from Black Box Intelligence, sales growth appears to be softening. Same-store sales during the week ended Aug. 15 were their lowest in nine weeks. Traffic growth has likewise slowed, the restaurant information firm said.
What’s more, 42 states averaged lower sales growth during the first two weeks of August compared with all four weeks of July. Dine-in sales growth was negative for all industry segments outside of fine dining, Black Box said, while two-year growth for takeout sales have picked up in recent weeks.
The information is the first to suggest a potential impact from the delta variant—backing up suggestions from executives such as Brinker International CEO Wyman Roberts, who said the rise in infections has been slowing sales at some of the company’s Chili’s restaurants. “As the delta variant has kind of picked up some steam here in the last few weeks, we have seen some softening,” he said last week, according to a transcript on the financial services site Sentieo.
For the most part, restaurants have been enjoying a strong 2021, with most restaurants reporting sales well above 2019 levels—but particularly limited-service restaurants and steak concepts. Generally, industry executives have been cautious about making predictions because of the surge in infections. But there have been few if any outright warnings.
Other data from Black Box could suggest factors outside of the delta variant that may give executives pause. The firm noted that sales are improving in some of the COVID-19 hotspot states, including Mississippi, Alabama and Arkansas.
Meanwhile, there is evidence consumers are starting to question the value of restaurants after 18 months of steep price increases.
According to Black Box, there are fewer mentions of “good” and “reasonable” prices among consumers compared to the second quarter of 2019.
And at limited-service restaurants, there are more mentions of “not worth it,” “extra charges” and “smaller portions” along with fewer mentions that would suggest prices are good. There are also fewer mentions at full-service restaurants of specials or drinks.
While it’s not certain whether that’s impacting sales, there is some fear that rising prices could ultimately turn away customers. Restaurants have been raising prices in part because of increasing demand, especially for limited-service locations, and because of soaring costs for labor.