At the time, we lauded stability. Our graphs of early 2022 quick-service restaurant traffic trends looked like a mountain range — a significant dip in performance followed by a steep climb, thanks to the appearance and ultimate retreat of the omicron variant. But in 2023, month-over-month trend lines have evened out.
A week ago, we lauded a flat line (on a graph, that is). Now that Silicon Valley Bank has “flatlined,” will QSRs suffer?
According to our Senior Vice President of Consulting Services, Richard Delvallée, the short answer is no.
“Fallout from the Silicon Bank failure is unlikely to affect QSR performance trends,” he said in a conversation. “Consumers are reacting to a softening economy by buying fewer items per visit, but traffic has remained stable.”
Delvallée said that QSRs might even see moderate improvement in traffic trends, thanks to some consumers “trading down” from other restaurant segments based on concerns about the risk of a recession and the impacts on future spending power.
In the end, though, he “expects trends to remain similar.”
“Similar” is good news for operators. After years of volatility, consumer behavior is stabilizing. So are supply chains. Brands might be able to plan again. The bad news? New, more stable habits may include fewer trips to QSRs and fewer items per trip. According to our February QSR trends:
- Customers are reducing the number of items they purchase to spend less. Quantity per transaction is down 4.9 percent YOY.
- Dine-in (+29.8 percent YOY) was the top-performing QSR channel in February 2023.
- Drive-thru remains in negative territory but is moving up month over month. In February, drive-thru traffic was -8.7 percent YOY, a smaller decrease than in December (-12.2 percent) or January (-9.8 percent).
- Customers continue to value the convenience of delivery, despite service and fee costs. The channel is up 20.8 percent YOY.
- Dinner was the best-performing daypart (+2.2 percent). Breakfast was down 1.4 percent, and lunch was down 1.8.
Inflation remains an X factor for the year ahead. Yet QSRs are slowing down price increases to meet tightening budgets. The average price flattened, up 14.0 percent YOY compared to last month’s +13.7 percent. Here, too, Revenue Management Solutions analysts anticipate further stability as we compare against the bullish price increases of 2022.
As we near the exit of post-pandemic uncertainty, Revenue Management Solutions analysts don’t think the tumult in the banking sector will rock the boat in any extreme way. As we move further into 2023, we believe operators can build the bottom line, but it may require a return to the steadier practices of our past.