Same Store Sales Trends
Solid 4Q Outlook
- 4Q:19 same store sales forecast of +3.2% suggests solid growth even as quarterly sales trend down.
- Government data supports both restaurant & grocery 4Q sales momentum.
QSR & FSR Value Efforts Continue Zig Zagging
- QSR value mix fell as fewer $4 and under promotions & more $7+ offers propelled the average promotion price to a 2-year high.
- FSR value mix increased to the highest level in almost 3 years, driven by an increase in $6 & under promotions.
- New product news fell sharply for both QSR & FSR as chains continue to promote the large number of new products introduced in November.
- In any case, the total number of promotions (including value, gift cards & core products) continue to trend higher for both FSR & QSR.
4Q GDP Growth Outlook Rebounds
- Lower rates seem to be helping economic growth.
Key Cost Trends & Forecasts
Food & Labor Costs Escalate Further
- Costs for the vast majority of RR’s tracked commodities continue to escalate with coffee, wheat and chicken eggs at new highs.
- Restaurant job openings held steady, but quits increased which may drive higher wages necessary to retain employees.
Franchisee EBITDA Valuations
Valuation Index Pressured by Cost Concerns
- Valuation index reflects rising labor & commodity costs and increasing requirements for remodel & tech investments driving a greater supply of stores for sale by smaller operators.
Flat RR Index Under-performs S&P 500 in December
- RR’s $1B+ Chain Index was flat in December as a +1% increase in QSR was fully off-set by a -1% decrease in FSR.
- Restaurant stocks continue to under-perform the S&P 500 as investors focus on unit-level cost inflation in an asset-light business.