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Alicia Kelso

48 posts
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  • 2 min

Inflation ‘becoming less of a problem’ for restaurants

💸 Inflation rose 0.5% in January, annual rate at 3%. Costs driven by shelter, energy, gasoline, food. Overall food index up 0.4%, food at home +0.5%, away +0.2%. Year-over-year, food prices increased: overall +2.5%, at home +1.9%, away +3.4%. Egg prices surged 15.2%, the largest monthly jump since June 2015. The gap between grocery and restaurant price increases was the narrowest since April 2023, yet grocery stores maintained a 150-basis-point advantage over the historical average of 70-basis-points, impacting restaurant sales in 2024. Menu pricing increased 3.4% year-over-year, equalling the 23-year average. Companies like McDonald’s and Brinker observed easing inflation, with Brinker's food and beverage costs improving by 20 basis points year-over-year.
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  • 6 min

The restaurant industry is projected to reach $1.5 trillion in sales this year

🍴 In 2024, the restaurant industry exceeded $1 trillion in sales for the first time, with a forecast of $1.5 trillion in 2025 according to the National Restaurant Association. Menu prices peaked at a 9% increase in March 2023 but are now 3.6% higher year-over-year. Approximately 80% of consumers express more frequent restaurant use if affordable, with 81% for table service and 76% for quick-service. About 29% of operators plan to open new locations in 2025, with limited-service more likely at 35% compared to full-service at 22%. Employment is projected to rise by over 200,000 jobs, reaching nearly 16 million by the year’s end. The trends for 2025 include value, loyalty, experience, and technology, with 95% of operators noting increased customer value-consciousness and 65% investing in digital marketing.
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  • 3 min

The restaurant environment is ‘stable to improved’

🍴 According to the ICR Conference, the restaurant industry saw sequential improvements in traffic and sales towards the end of 2024, with a 0.3% month-over-month decline in December but a 2.4% increase compared to December 2023. Traffic rose by 0.8% in Q4 2024, in contrast to a 1.1% decrease in Q4 2023. Analysts anticipate a "stable to improved environment" with consumer spending expected to advance in 2025, while credit card and auto loan delinquencies slowed down, implying a potential peak in consumer debt. Restaurant spending is predicted to grow by a low-single-digit percentage, but traffic could be flat or slightly negative due to ongoing inflation and a cooler labor market.
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  • 2 min

Restaurant hiring ends 2024 on a high note

📈 The US economy added 256,000 jobs in December, unemployment rate fell to 4.1%. Leisure and hospitality sector grew by 43,000 positions in December, with an average of 24,000 jobs added monthly in 2024, versus 47,000 in 2023. Eating and drinking places added 29,800 jobs in December, up from 23,200 in November. Overall, 172,500 net new jobs were created in 2024 at these establishments, down from 309,000 in 2023. The industry is now 1.4% above its February 2020 peak. Full-service remains 4% lower, while quick-service and fast-casual are 4% higher, and snack/beverage concepts 17% higher than pre-pandemic levels. Twenty-four states and DC have fewer jobs than in November 2019, while 26 states are above pre-pandemic employment. Average hourly earnings' growth slowed, with year-over-year wage growth at 3.8%, the lowest since May 2021.
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  • 3 min

How the surgeon general’s advisory on alcohol could impact restaurant sales

🍺 United States Surgeon General Dr. Vivek Murthy issued an advisory last week concerning alcohol and cancer risk, stating alcohol is the third leading preventable cause of cancer in the U.S. after tobacco and obesity. The advisory seeks to raise awareness, suggesting updates to health warning labels on alcoholic beverages to explicitly mention cancer risks, and reassessing consumption guidelines. Currently, alcoholic beverages account for about 21% of sales at full-service restaurants, and 6% at limited-service venues. With less than 50% of Americans aware of alcohol's cancer risk, and the fact that one-third of consumers ages 18 to 24 abstain from alcohol, the recommendation could impact the industry significantly. The original warning label, added in 1988, may need Congressional approval for changes. Stocks of alcohol companies dropped following the advisory.
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  • 3 min

Midweek dining heats up at full-service restaurants

🍴 In the Stephens Annual Investment Conference in November, One Restaurant Group CEO Emanual "Manny" Hilario observed Thursdays to Saturdays becoming "dead days" for dining, with a shift to earlier in the week. San Francisco restaurants noted similar trends. During BJ’s Restaurants Q3 earnings call in late October, a rise in weekday traffic was reported. Placer.ai data showed an 11.3% increase in foot traffic at Dave & Buster’s on Thursdays in Q3 compared to the previous year. Promotions like BJ’s Pizookie Meal Deal and Dave & Buster’s Wednesday discounts are being used to boost midweek visits. OpenTable data revealed an 11% increase in Wednesday dining year-over-year, with 43% of Americans planning to dine out then. Toast's Restaurant Trends Report indicated an uptick in Monday to Wednesday reservations, with Monday (+11%), Tuesday (+11%), and Wednesday (+8%) in Q3 2024 compared to Q3 2023. However, Saturday remains the busiest day at 27%. Placer.ai also found a shift towards non-traditional dining days since 2019, with Monday visits growing from 10.2% to 10.7% in 2024, Friday visits declining from 17.6% to 17.1%, and Wednesday visits increasing from 11.1% to 11.4%. Furthermore, OpenTable data showed a 10% increase in solo
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  • 2 min

Restaurants closed the inflation gap with grocery stores in November

📈 The Consumer Price Index rose 0.3% in November, now 2.7% higher than November 2023. Menu prices increased by 3.6% compared to last year, with limited-service meals up 3.7% and full-service meals at 3.6%. Grocery/supermarket inflation grew 1.6% year-over-year, marking the 20th consecutive month it lagged behind restaurant price increases. Egg prices surged over 40% month-over-month due to avian flu. Overall food prices jumped 9.9% since 2022, the fastest annual increase since 1979.
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  • 4 min

How Austin’s El Arroyo developed a cult following

📖 Entrepreneur Ellis Winstanley launched Axial Shift in 2017, a software incentivizing managers and employees. He owns restaurants, including Cain & Abel’s (since 1991) and Star Seeds Café (60 years old). In 2012, Winstanley and wife Paige bought El Arroyo, a Tex-Mex restaurant opened in 1975 in Austin, Texas. Post-Great Recession environment hindered rapid expansion. They focused on brand building, notably El Arroyo’s marquee sign, driving online engagement. By 2019, El Arroyo’s merchandise expanded to 350 SKUs, including seven volumes of “El Arroyo’s Big Book of Signs.” A 15,000-square-foot warehouse and sales team now support their retail business. Half of annual revenue comes from the holiday season. With the brand's growth, they plan to open six corporate restaurants by 2026, each expected to generate $7 million in revenue.
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  • 2 min

Wings ‘N More acquired by PE firm Goode Partners

🍔 New York-based Goode Partners LLC invests in Texas-based Wings ‘N More Restaurants LLC, which operates seven locations in College Station/Bryan, Corpus Christi, and Houston. Wings ‘N More, founded in 1986 by former NFL player Mark Dennard, features a full-service and express model offering wings, ribs, and more. Goode Partners, also an early investor in Chuy's in 2006, alongside debt financing from Gladstone Capital Corporation, aims to accelerate Wings 'N More's expansion. Dennard expresses excitement for the brand's growth and new opportunities for team members.
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