Lunch Traffic Lowest in Four Decades.

A pair of articles on the Wall Street Journal ponders an event I long expected would happen: willingness to eat at fast food places where food is steeply priced and of dubious quality.

by Mish

Americans made 433 million fewer trips to restaurants at lunchtime last year, resulting in roughly $3.2 billion in lost business for restaurants, according to market-research firm NPD Group Inc. It was the lowest level of lunch traffic in at least four decades.
While that loss in traffic is a 2% decline from 2015, it is a significant one-year drop for an industry that has traditionally relied on lunch and has had little or no growth for a decade.
“I put [restaurant] lunch right up there with fax machines and pay phones,” said Jim Parks, a 55-year-old sales director who used to dine out for lunch nearly every day but found in recent years that he no longer had room for it in his schedule.
Even some restaurant-company executives don’t go out for lunch. Employees at Texas Roadhouse Inc.’s Louisville, Ky., headquarters order in so often that they know the delivery drivers by name. “A lot of our folks are trying to be more efficient,” company President Scott Colosi said.
Cost is another factor working against eating out for lunch. While restaurants have raised their tabs over the past few years to cope with rising labor costs, the price of food at supermarkets has continued to drop, widening the cost gap between bringing in lunch and eating out.
Among the hardest hit are casual sit-down restaurants—such as Dine Equity Inc.’s Applebee’s and Ruby Tuesday Inc. —because of the time it takes to order, get served and pay. Such establishments last year saw their steepest ever decline in lunch traffic, according to NPD.
The pain is spreading to suppliers. Meat giant Tyson Foods Inc. recently said a 29% drop in quarterly earnings was due partly to the decline in restaurant traffic.
“Consumers are buying fresh foods, from supermarkets, and eating them at home as a replacement for eating out,” Tyson Chief Executive Tom Hayes said.
Despite the traffic decline, dollar sales at lunch were flat last year because of the menu price increases. But restaurants can’t raise prices indefinitely. In fact, many now are offering lunch discounts to bring people out to eat.

$13 Burgers Hard to Swallow

As the number of outlets serving “better” burgers—featuring nontraditional toppings and artisan buns—has skyrocketed over the past decade, so has the average burger tab, turning some customers off.
Brian Cockerline, a 20-year-old Rutgers University student, used to go to Five Guys for a burger once a week in South Plainfield, N.J. With fries and a drink, his tab was about $13.
Now, he is cooking burgers at home instead.
“I like Five Guys, but I can buy ground beef and one onion and get pretty close to the same burger for half the cost,” said Mr. Cockerline, who rarely goes to Five Guys anymore. “A hamburger, to me, is not a luxury,” he said.
Five Guys declined to comment.
“It’s not sustainable for them to expect people to show up and spend $13 on a burger on a consistent basis,” said Kurt Kane, chief concept and marketing officer at Wendy’s Co, which is among the fast-food burger chains engaged in an intense price war to attract and keep their core, budget-conscious customers. Wendy’s has a deal of four items for $4.
Mr. Cockerline now mostly goes to Wendy’s when he is too busy to cook—because he can’t make a meal for any cheaper than $4, he said.
Wendy’s created its four-for-$4 menu because it found that, on average, people only have $4 to $6 to spend on lunch each day.

Demographics, Minimum Wages, Work Trends

Proponents of $15 minimum wages need a huge dose of reality.

  • Workers are only worth what business owners are freely willing to pay for them.
  • As highly paid boomers retire and are replaced by lower wage earners, meal affordability is a big issue.
  • Corporations attempt to squeeze every bit of work time out of employees, necessitating a bring a sack to work mentality.

Store Saturation

With Amazon smacking general merchandise stores, with auto sales in decline, with customers balking at prices of super-saturated fast food outlets, and with home prices in the stratosphere, where will GDP Growth come from?

Second Quarter Reality

  1. April Durable Goods shipments down 0.3%, new orders down 0.7%: April Durable Goods: Yet Another Weak Second-Quarter Report
  2. Wholesale Inventories: Down 0.3% in April. March revised lower from 0.2% to 0.1%.Retail Inventories: Down 0.3% in April. March revised lower from 0.5% to 0.3%. For details, please see Fed Eyes Second Quarter Recovery, Expects Trump Fiscal Policy Will Expand Economy
  3. Trade deficit in April widens by 3.8% with exports down and imports up: Trade Deficit Widens, Exports Weak: Economists Miss the Mark
  4. Tax Receipts: Federal Tax Receipts Running Below Expectations
  5. April New Home Sales: New Home Sales Contract 11.4%: Sales Barely Up Year-Over-Year
  6. April Existing Home Sales: New Home Sales Contract 11.4%: Sales Barely Up Year-Over-Year
  7. April Existing Home Sales: Spring Housing Flop: Existing Home Sales Decline 2.3 Percent, Inventory Issues Persist
  8. April Housing Starts: About that Strong April Recovery: Housing Starts and Permits Flop, March Revised Lower
  9. April Empire State Manufacturing Survey: Empire State Manufacturing Survey Turns Negative: Welcome News?
  10. April Retail Sales: Sales were at least positive (+0.4%), but they were well under economists projections: Retail Sales Disappoint Again: Department Stores Clobbered in 2017

Mike “Mish” Shedlock

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