Mirus Reporter

Mirus Index Shows Decline

2017 has been tough if you are in the restaurant biz. With occasional signs of optimism slipping in every once in a while, the year has been a bust for most chains. Many of the companies who produce the benchmark numbers for the industry continue to mistakenly look at same-store-sales, and failing to draw justified alarm to the reduction in customer traffic.

I have been beating this drum for over a year now, and I am happy to say I do see signs that the traffic problem is getting mentioned more often of late. Here is the latest story from the New York Times on a possible cause of the traffic malase - overdevelopment  (https://www.nytimes.com/2017/10/31/business/too-many-restaurants-wall-street.html?smid=tw-share).

On a two-year basis through September, the Mirus Index shows a decline of -8.0% across all segments. The bad news is that October will be worse when all the numbers are collected.

The Future, Now?

All restaurant businesses strive to improve and streamline operations and increase profits by cutting expenses and recovering resources. A common reaction to increased wages by some restaurant executives has been to replace human labor with machines. In the ever-changing climate of the restaurant industry, it makes sense that some restaurant companies would implement the use of machines to grow productivity and cut down on labor costs. But are robots equipped to give customers the same level of service as a friendly employee? Are automated machines destined to take over restaurants?

The official numbers for July are now out and it was a bad month for restaurants sales, down by -4.7% according to TD2NK. I thought it would be good to take a mid-month check on the Mirus Index to see if August could be the month to turn things around. Based on the first 14 days of the month, the sales slump continues in August.

Same Store Sales in Mirus Index were positive in both Q1 and Q2 of 2017, and you can see the trail end of that in the chart above. The positive gains were declining in June, and July 4th was a great weekend, but by the middle of July the month to date numbers were negative and they haven't budged much.

All of this is focused on sales, but what about traffic? Q3 will be the seventh quarter in a row of negative customer traffic into restaurants. TD2NK measures that traffic fell -8.7% from July 2015 to July 2017. The Mirus Index has traffic down -2.7% at the mid-way point of Q3 2017. You can manipulate same store sales, but you can't manipulate customer traffic.

We will keep an eye on things, and keep you informed. If you would like to learn more about how you can get the Mirus Index every day, click on the button below.

Restaurant sales and customer traffic have been in decline for months, and July didn't help. While the results were not the worst in recent history, July extends several streaks that started at the start of 2016. Same store sales for July fell (1.2%) on (2.6%) less traffic. July was the first month this year that recorded negative growth in both numbers.

For the past year, reports have been consistently detailing the decline in restaurant same store sales. Mirus reporting clients, as a group, have not suffered this fate.

Mirus Index is a same store sales performance benchmark of all the restaurant companies who use Mirus reporting solutions. For the past eight years we have routinely compared the Mirus Index against the more popular indices published by companies like Black Box Intelligence, MillerPulse, Restaurant Research, and others.

Change Happens...

Menu changes occur all the time in restaurants. Sometimes it is a price change; sometimes it is a limited time offer. There are lots of reasons for changing your menu. Think of a menu change as an avenue to stimulating your customers. By making the change, you are hoping to achieve a particular outcome; for example, selling more of a menu item or making more money selling the menu items you already sell.

Measuring success or failure of a system that improves decision making is challenging in many respects. But, the Same Store Sales (SSS) metric can be useful, especially when applied to a long period of time, and across thousands of restaurants. SSS is caluclated as a percentage change from last year to this year, and only uses locations that are open for both years.

As a restaurant CMO the areas of social media, guest feedback and planning the next profitable promotion probably take up most of your time. But what about labor? Wait, Operations is supposed to take care of labor scheduling and staffing not marketing. Before you pass this very important function off to the next guy you may want to see how labor affects the marketing department's efforts.

The Foundation

For the purpose of this article, let's make the assumption that the multiple restaurants you oversee have, in some form or another, a POS system, an established holiday calendar, weather data, customer satisfaction surveys, kitchen timers, and a labor management system.

If you only have a few of these systems in place, that's okay. I just wanted to name the data source systems that could be leveraged for this reporting overview.

Successful restaurateurs need to have extensive KPIs and they must be able to quantify everything.  Data scrutiny and analysis is an ongoing process. Restaurant CEO's need to have their restaurant information distributed and analyzed by different personnel that will empower their businesses to increase revenue and improve customer service.  However, operators can be misled by information received solely from their POS systems (sales, reservations) or BOH systems (inventory, food costing, labor scheduling).  They need to be able to get a look at the bigger picture.