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Key Insights from Black Box Intelligence’s Industry Webinar

Every quarter, Black Box Intelligence has the privilege of hosting executives from the top restaurant chains in the country for our State of the Industry (SOTI) webinar where we reveal the latest trends and insights driving today’s restaurant experience.

Key Takeaways and Future Growth Insights from our Q2 State of the Industry (SOTI) Webinar

Every quarter, Black Box Intelligence has the privilege of hosting executives from the top restaurant chains in the country for our State of the Industry (SOTI) webinar where we reveal the latest trends and insights driving today’s restaurant experience. In this article, I’ll be sharing three key takeaways from our Q2 SOTI webinar and highlighting some important factors detrimental to your brand’s future growth. I’ll also touch on the results of our webinar survey, where we asked executives to list their major initiatives for the coming year.

Navigating Economic Uncertainty: How Data Can Guide Your Restaurant Through Potential Downturns

Before I delve into the details, I’d like to address the top concern keeping most restaurant operators awake at night: Is an economic downturn imminent? Unfortunately, the answer is not that clear-cut.

According to the latest Bloomberg survey study, the probability of an upcoming economic downturn in 2023 has increased from 60% in February to 65% in March. Similarly, The Wall Street Journal reported in April that economists put the probability of a recession at 61%. But on a lighter note, if a recession does occur, it is likely to be relatively shallow and short-lived.

Based on these and other predictions, the likelihood of an economic contraction is more probable than not.

Unsurprisingly, many restaurant operators are feeling trepidation about what’s ahead. This uncertainty often leads to hesitation and in turn a delay in critical decision-making. On the flip side, others feel compelled to react post haste, resorting to quick fixes without fully considering the long-term consequences.

While a recession poses significant challenges, it can also serve as a doorway to organizational transformation and innovation. At the center of every successful transformational strategy, there needs to lie a single source of truth, a data solution that allows you to easily collect, translate, and share cross-departmental data so you can make informed decisions that ensure long-term success.

Top 3 Takeaways

1. The Slowdown in Sales, Traffic, and average Guest Check Growth

April marked the industry’s weakest sales growth since July, making it the second-worst month in over two years. This decline is largely due to the significant slowdown of average guest check growth.

While check growth is slowing down, year-over-year (YoY) traffic growth remains negative, further contributing to the decline in sales growth. This challenge is widespread within the industry, with all segments reporting negative YoY same-store traffic. Since 2016, the cumulative loss of traffic has been about 13%, translating to a compound annual growth rate of about -2% per year.

Most restaurant chains have grown their net number of locations compared with their pre-COVID levels, which means considerable market saturation continues to contribute to the relentless trend of declining same-store guest counts. Moreover, in response to economic pressures, guests continue to choose more affordable dining options, trading down toward limited-service restaurants—in particular, quick-service brands.

As a reprieve to inflation-weary customers, average guest check growth in restaurants continues to drop, owing primarily to a moderation in menu price increases as restaurants experience a decrease in cost pressures.

Nevertheless, cost inflation continues to compel restaurants to push the boundaries and adapt quickly by cutting costs, increasing efficiency, and streamlining operations.

2. The Lingering Labor Shortage

Our SOTI survey revealed an overwhelming 55% of respondents consider employee retention as a main initiative in 2023 as the restaurant industry continues to grapple with a daunting labor shortage. (For an in-depth look at the survey results, read our latest Out of the Box Insights article.)

According to our research, limited-service restaurants are operating with 1.7 fewer hourly employees on average per location compared to 2019, and full-service restaurants are operating with 3.7 fewer front-of-house hourly employees. Although there has been some relief coming from turnover rates declining in recent months, employee turnover continues to be much higher than it was back in 2019, posing significant challenges in meeting growing demands and maintaining quality service.

Looking ahead, we believe employees will gravitate more toward organizations that offer a holistic approach to employee satisfaction. In other words, the increase in YoY compensation alone will no longer be the primary driver behind retention; employees will place equal emphasis on factors such as professional growth, career advancement opportunities, schedule flexibility, and work-life balance.

To know whether you are meeting your employees’ evolving expectations, you must have access to your workforce insights, particularly in times of economic uncertainty, so you can remain competitive across local markets, increase employee satisfaction, reduce turnover, and, as a bonus, elevate your guest experience.

3. The Link Between Customer Success & Resiliency

53% of the webinar attendees responded that enhancing service was a major goal for the coming year, while 40% listed improving their brand’s value proposition as one of their most important focuses in 2023. These initiatives align with the current customer experience trends—as inflation woes persist, we’ll see customers continue to focus on value and look for deals or offers to alleviate budgetary constraints.

As a reminder, customers are the life force that sustains your restaurant’s existence, and delivering a best-in-class customer experience is a surefire way to insulate your business against any economic instability.

We found that guest sentiment and review sites remain key drivers of YoY increase in guest traffic. To capitalize on this, restaurant brands need the ability to collect and conceptualize both direct and indirect customer feedback to truly understand what their guests want. By doing so, they can identify blind spots and discover emerging trends that will spark innovation.

Our data shows:

  • Restaurant chains that capture 5 times more customer reviews see a 3.5 percentage-point increase in traffic growth compared to their peers.
  • Those in the top quartile of service net sentiment have a 1.5 times better four-year sales growth and 6 times better traffic growth than their competitors.
  • Brands that saw the most improvement in their value net sentiment scores over the past four years saw 1.5 times better sales growth and 8 times better traffic

Whether or not we are barreling into a recession, without a robust data integration tool that collects and deciphers industry, financial, workforce, and customer data, it will be much harder to make intelligent, strategic decisions to secure your brand’s long-term stability.

And without a fail-proof strategy, you’ll be ill-prepared for any financial hurdles, least of all an economic downturn.

Victor Fernandez

The company’s most senior analyst, having studied the restaurant industry for over seventeen years. He is responsible for creating and delivering insights, content, and products that provide restaurant companies with the business intelligence they need to successfully run their businesses in an increasingly competitive landscape. Victor oversees the company’s surveys and research projects and is also responsible for helping guide product development. He is a frequent contributor to articles covering the restaurant industry as well as an experienced speaker at industry events.

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