The restaurant industry has been a major part of the economy as it accounts for roughly $800B in annual sales. However, with more people opting to make dinner versus spending on trendy dining experiences, recent trends seem to be setting the industry back. December 2016 saw the industry collectively generate negative same-store sales growth, which can be a sign of things to come.

The Fast Food sector experienced a decline in sales due to the “fast casual” trend with places such as Mendocino Farms and Tender Greens. McDonalds saw a .5% decrease, while others struggled to maintain positive/low negative growth.

If the entire restaurant industry is struggling to maintain market share, what are the causes? Increased labor costs are resulting in more restaurants repricing their items to make up for lost revenue; however, lower commodity pricing should have seen food prices decrease. It still seems that those commodity decreases are not being passed on to consumers, causing many more to stay at home rather than spend additional money dining out. Rising costs in other places such as housing are causing many young people to conserve their money in order to afford the new post-recession economy.

Food at home costs have seen decreases across the board. Food commodities have seen decreases as low as 10% over the past year. This combined with internet recipes, Pinterest boards, and a general attitude that if you cook it yourself, it’s healthier; seem to be putting the restaurant industry on its heels.

For February 2017, food away from home CPI was up 2.4% higher than February 2016, while food at home CPI was 1.7% lower than February 2016. These deviations are causing people to switch to the grocery store from the restaurant. Additionally, with newer services such as Blue Apron popping up in every major city, you can make yourself all the benefits of a home cooked meal without the grocery store trip. Blue apron itself has seen monthly deliveries from 1 million in 2014 to over 5 million in 2015 and it continues to rise.

Mounting competition is giving the restaurant industry a new fight for its life. With many meals costing $10 to $20 dollars per person, even at fast food restaurants it will be a difficult fight when your competition can make meals at home for a quarter of the price. Overall, restaurants will need to find new ways to steer people out of the kitchen and into the booth.

Alexander Brown
POST WRITTEN BY

Alexander Brown

CATEGORIES CPA Food Bites,

Alexander Brown, CPA, is a supervising senior associate auditor with over five years of experience. Alexander is an expert in two niches with Green Hasson Janks, specializing in both childcare and family services and food and beverage clients. Alexander’s other experience includes California…Learn More