Restaurant recession? Here’s why the industry is in big trouble

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Restaurant recession? Here’s why the industry is in big trouble
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If you like to eat out, you can expect a lot more deals and promotions this year as struggling restaurants compete for your business.

Industry analysts began talking about a “restaurant recession” last year, and it’s only getting worse.

Read more: 3 restaurant menu items you should never order

Trouble ahead for your favorite restaurants

According to TDn2K’s Restaurant Industry Snapshot, December 2016 was the weakest month in over three years for same-store sales growth with a 4.3% decline.

The report is based on weekly sales from nearly 26,000 restaurants and more than 130 brands.

Looking at the entire year, same-store sales growth for 2016 was -1.1%, which represents the industry’s worst performance since the recession.

‘Restaurants have now posted four consecutive quarters of declining year-over-year sales,’ said Victor Fernandez, executive director of Insights and Knowledge for TDn2K. ‘The last time the industry experienced a year with all negative quarters was 2009, when the economy was suffering the effects of the great recession.’

The report found that family dining and casual dining restaurants have been hit the hardest, including these 5 restaurants that face a difficult 2017.

Quick service, fine dining and upscale casual restaurants fared better.

What’s interesting is that as traffic has declined, restaurants have continued to increase their prices, which may be what’s keeping some of them in business. 

But with more people saving money by eating at home, could raising prices backfire? 

Bottom line: Expect more discounts in 2017 

Clark says that all of this instability in the restaurant industry means that you need to keep an eye out for aggressive discounts, particularly at casual chains.

‘Even as the job market improves, consumers are looking for relatively low price points and the convenience to order online when they eat away from home,’ said Carla Norfleet Taylor with Fitch Ratings. ‘With persistent food price deflation, deal promotions will likely be a tactic restaurants use to get people in the door.’

At the end of 2016, Clark recommended that you think twice before buying a bunch of gift cards for restaurants that may suddenly shut down before the cards are able to be used.

With no major turnaround on the horizon for the restaurant industry, his advice stands for the year ahead.

Read more: 4 ways restaurant menus are designed to make you spend more

Why you shouldn’t buy restaurant gift cards

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Michael Timmermann paid off his mortgage in two years. Now, he shares his money-saving tips on his blog, MichaelSaves.com.
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