Restaurants: A Bit More of a Positive Trend, But Some Brand Fires Remain

Featured guest: Mr. Mac Brand’s Insights, Field Listening. 

Overall sales tempo slowly improving: Viewing restaurant sales and traffic trends in June, and in early July, restaurants continue to tilt up ever so slowly. Black Box and the bank and proprietary trackers all show it. For example, the Black Box sample shows the industry at plus 2% in June, plus 1.4% in May and plus 1.2% in April, all year over year. The other trackers are close.        

The strong and weaker sectors and brands remain the same. Casual dining is the most positive, then with fast casual right behind (excluding Sweetgreen (SG) which is in a hole). QSR in total remains barely flat, while QSR pizza (Pizza Hut and Papa John’s) is negative. In QSR, we think that McDonalds will put up some very positive trends soon with the new Wraps. 

This weekend we learned about the additional cost pressure on coffee commodity as a result of the updated Brazil tariff.  We’ll see if the tariff holds, but the usual coffeehouse story of “we’ll forward buy” is not going to work. No one in the coffee supply chain is standing still. In addition, the recently announced Canadian tariffs will impact steel, which will make equipment and building CAPEX costs rise.        

Starbucks takes center court again:  so now a China deal of some sort is much more likely. Last week, even Starbucks changed its position to “we want a great partner and 30%” Whether that is based on stores retained or a profit sharing arrangement is  not known. 

I hope Starbucks retains actual stores to own and operate. In my view, it is essential for Starbucks not to outsource operations and remain present with skin in the game.

From the field insights: Before we get into the numbers and other issues, please see the insights from Mac Brand, a 2-time author, and Founding Partner of Bellwether Food Group,  who focuses on organizational, cultural, and brand assessment engagements. Mac does a very nice Quarterly Listening Tour, with report below:    

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In June, we did another listening tour across the restaurant and food & beverage industry landscape. Patterns suggest that one primary principle is a key driver of success for these industries.   

That factor? Most successful restaurants ultimately flourish because of one factor, which is the same reason that other firms in and around the restaurant business flourish. That factor is that those restaurants are the preferred employers for the most talented restaurant (industry) employees in that trade area, market, or industry. Working with other talented, collaborative, reliable professionals’ matters. The most talented, skilled professionals prefer being on a winning team.   

The importance of soft skills, and on-going soft skill training is more important than ever. They’re no longer “nice to haves,” in today’s market. Soft skills are “must haves.” If we don’t get that right, nothing else is going to matter.” “We’re in a people business. It’s what can we take from the grocery business.” “Being kind is always in style.”  Both comments came from CFOs, one being a brand with over 500 units. Those are talented, but a little “rough around the edges” are no longer tolerated.   

With gas prices still high, the time needed, and costs incurred getting to work, are salient issues for hourly employees. Reliable, safe, affordable public transportation (something challenged today in places like New York and Chicago, due to safety concerns) helps. While proximity to the location, local gas prices, and cost-free, safe parking matter more than some employers realize.   

In restaurants, traffic is still a challenge for many, but when customers do come in, they reward an enjoyable experience. Encouragingly, servers and bartenders report solid tips in June. “If we can get them in and deliver a great experience…. the customers will reward the bartender and/or the server.”   

Contact Mac at: mac@bellweatherfoodgroup.com, (773) 255 6466  

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So, ultimately we are still a people business, it’s complex and it requires a lot of attention at all levels of the organization. Even at the CEO level.  

CEO Turnover Problems Haunt…the industry has been plagued with high profile CEO departures that hurts brand momentum. Starbuck’s had the biggest flameout in recent history, with Laxman Narasimhan ousted in 2024 with about 1.5 years in the job. Then, last week, the new Wendy’s CEO announced he was quickly exiting for the Hershey’s CEO role. Also, only 1.5 years on the job.  

And we can’t forget about the disastrous 2019 McDonald’s CEO Steve Easterbook misconduct and termination. We know now that blips came up on his background checks, but the board opted to promoted him anyway from the UK.  

Having lived through CEO turnover in my 20 years of restaurant staff corporate roles, I can tell you that a CEO turnover is hugely disruptive--to staff, restaurant management, suppliers and investors, among others.  CEO learning curve, time to implement the new CEOs vision.    

It may be that company boards are making decisions based on gut or politics and ignoring the background and stress tests that executive search professionals provide.  In any event, management processes have to improve.   

More Wendy’s: ROI Problems.  Earlier this week, I noted that total Wendy’s US same store sales were flat over several years since breakfast had been rolled out , and that same store sales were descending through 2025. In fact, 2025 SSS look to be far worse, with current tracking shows Wendy’s traffic down about 9 to 103 on a year over year basis. 

So, what about the ROI in breakfast? Wendy’s doesn’t report on this, and the analysts generally don’t ask. That Wendy’s US system has had flat sales overall is highly telling. Perhaps breakfast cannibalized lunch/dinner or a corresponding amount of lunch/dinner guests left.  

What is very well known is that Wendy’s committed to an additional advertising shot of $55 million in 2020 plus then an additional $11 million increment in 2024. We don’t have the year by year flow, but certainly the $66 million in advertising needs to be counted as an expense. With the $66 million and overall sales flat, I can’t see an ROI.