Restaurant Industry Booms on Deals, Faces Labor & Traffic Challenges
The restaurant industry is witnessing a mix of growth and challenges. While deal traffic soars to a 50-year high, recent trends show a shift in consumer behaviour and market pressures.
A staggering 29% of all restaurant industry traffic is now on a deal, the highest figure in half a century. This surge in deal-based traffic is the most significant increase since the Great Recession. However, this growth comes amidst a decline in overall traffic and an increase in discounted traffic.
The labour market in the restaurant industry is also showing signs of weakness. None of the major chains have filed for insolvency in the last year, but the industry is grappling with staffing issues.
In the stock market, only one of the five restaurant chains that went public in 2021 is currently trading above its offering price. This suggests that investors are cautious about the industry's future prospects.
Meanwhile, Burger King is working to shed its old 'Creepy King' ads to appeal more to families and young consumers. The chain's average-unit volumes during the 'Creepy King' era may have been limited, potentially hindering its market growth.
Starbucks, on the other hand, has marked the end of an aggressive expansion era with its recent closures. Wendy's has entered the chicken tenders market, a move that could help it tap into the growing demand for chicken-based products.
The restaurant industry is facing a complex landscape, with deal traffic surging but overall traffic and labour market showing signs of strain. Burger King's rebranding efforts and Wendy's expansion into chicken tenders highlight the industry's adaptability. As the industry navigates these challenges, investors and consumers alike will be watching closely.
