Consumer

Shelly Banjo is a Bloomberg Gadfly columnist covering retail and consumer goods. She previously was a reporter at Quartz and the Wall Street Journal.

Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

U.S. restaurant sales grew in the second quarter at their slowest pace since December 2009. As restaurants start reporting third-quarter results this week, investors should expect to see the pain continue.

Check, Please
Sales growth at North American restaurants in the second quarter was the slowest since 2009
Source: Bloomberg Intelligence
Note: Reflects comparable sales for 37 public restaurants in the Bloomberg Intelligence North American Restaurants Index

For one thing, customers are finding it's getting more expensive to eat out. Restaurants are hiking menu prices to keep up with rising minimum wages and other costs .

Aside from the 2008 recession, the last time the gap between the cost of eating at home and eating out was this wide was in 1981.

Checkout Line
Grocery prices have declined for 10 straight months while restaurant prices increased
Source: Bureau of Labor Statistics

Lunch-time crowds, which make up a third of all restaurant traffic, are thinning out as more people work from home, while others take advantage of low grocery prices to pack their own lunches.

Many millennials, who had been among the most-frequent restaurant customers, are cutting back, according to industry research firm NPD Group.

Staying In
Millennials made 20 percent fewer restaurant trips in 2015 than they did in 2006
Source: NPD Group/CREST
Note: Millennials defined as those born from 1976 to 1989.

A new crop of meal-delivery services such as Blue Apron and Hello Fresh are expected to rack up more than $10 billion in annual sales by 2020, helping make home-cooking cool again.

Food Fight
Global meal-kit sales are expected to increase tenfold by 2020
Source: Technomic

Despite declining sales, restaurant chains are building faster than the U.S. population grows, leading to oversupply. 

restaurant-v.-population

That's eating into profit margins. 

restaurant-margins

It's also leading to a lot of restaurants going bust -- fueling the highest number of bankruptcies of public and major private restaurants since 2011, according to New Generation Research. 

Bankruptcy Banquet
In the past year, several private restaurant chains have filed for bankruptcy
Source: Bloomberg

Bigger chains such as McDonald's and Domino's are poised to do better in what some are calling a restaurant recession, thanks partly to their scale and highly franchised models.

But as industry sales slow further and competition heats up, even they will have to fight for growth.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Generally, labor costs make up around 30% of restaurant sales compared with 12% to 14% of grocery stores, estimates Nomura analyst Mark Kalinowski.

  2. Restaurant traffic break down: Lunch is 33%, dinner is 30%, breakfast is 22%, and snacking/late night is 15%, according to NPD.

    NPD reports lunch visits are down 7% from last year, the biggest drop since the recession. 

To contact the authors of this story:
Shelly Banjo in New York at sbanjo@bloomberg.net
Rani Molla in New York at rmolla2@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net