Nation's Restaurant News On the Go #96
Nation's Restaurant News
The #1 source of news and business intelligence for restaurant and foodservice industry professionals
Ron Ruggless here, senior editor of Nation’s Restaurant News.
The big news this week, along with a deluge of public restaurant company earnings reports, was of course the presidential election, which saw former President Donald Trump’s victory over Vice President Kamala Harris in a hard-fought contest.
The result of the election is a mixed bag for restaurants, but will certainly provide interesting impacts on taxes, tips, and tariffs (do you have a wine list?), plus many other regulatory edicts.
I was with Nation’s Restaurant News during the dark days of the COVID pandemic in 2020 and 2021, and I hope the outlook will be brighter both for us and for the second Trump Administration.
For an early look at the election’s impact, check out our colleague Joanna Fantozzi’s great story below.
How the 2024 election results will impact the restaurant industry
Following Democrat underperformance across the country, Donald Trump has secured a historic win over Vice President Kamala Harris to win the presidential election — becoming only the second president to win two nonconsecutive presidential terms, and the first president to take office after being convicted of multiple felonies.
The morning after Trump secured the presidency, the Dow Jones market jumped by 1,300 points, as U.S. stocks surged to record highs, and bitcoin value also jumped 3% to a record $75,000 (the latter likely in response to Trump’s promise to make America “the crypto capital of the planet”). Post-election stock market surges are usually nonpartisan and happen after both Democrat and Republican presidential wins, but what will the business world — particularly the hospitality industry — look like under a second Trump term?
As previously reported, Trump’s economic policy largely relies on lowering taxes for corporations and for many Americans (in 2017, he lowered the corporate tax rate from 35% to 21%). For his second term, Trump has promised to roll back the current corporate tax rate from 21% to 15%, which would also lower income taxes on the wealthiest Americans, and ostensibly make America more business-friendly.
Dutch Bros continues unit growth, tests food sales
Dutch Bros Inc., the quick-service beverage concept, continued its fast-paced growth in the Sept. 30-ended third quarter, adding 38 new shops and continuing the rollout of mobile ordering, executives said.
Executives at the Grants Pass, Ore-based Dutch Bros said they were also testing food, which was increasing transaction amounts and could be rolled out in 2026.
Of the 38 new shops, 33 were company-operated. The company now has 950 locations in 18 states.
Christine Barone, Dutch Bros president and CEO, said growth has attracted employee candidates as well. “Our best people are staying and growing with us,” she said. “Year-to-date, we have received over 400,000 applications to work at Dutch Bros for about 11,000 open field positions.”
At the end of the third quarter, Barone noted that 858 shops had mobile order functionality enabled, representing 90% of the system and 96% company-operated shop coverage.
First Watch leans into targeted marketing and demand generation
First Watch executives said on Thursday that the family-dining restaurant chain is starting to use targeted?marketing and demand generation to bring in new and returning customers.
Reporting for the third quarter ended Sept. 29, the company, which went public three years ago, said Thursday morning that same-store sales were down 1.9%, while same-store traffic was down 4.4% year-over-year.
“We are pleased with our performance in Q3 as it reflects our teams’ superb restaurant-level operations, especially considering an uneven consumer backdrop,” said First Watch president and CEO Chris Tomasso in a statement. “Traffic picked up through the quarter, our employee turnover once again improved and remains favorable relative to the industry as a whole, and adjusted EBITDA grew 18%. We are committed to ensuring our people and real estate pipelines are in place to support our growth to 2,200 locations.”
The company also updated its full fiscal year outlook on Thursday, estimating a same-store sales decline around 1%, traffic growth around -4% to -4.5%, and 47 net new restaurants.
Applebee’s and IHOP value messages got lost in the ‘noise’ in Q3
Dine Brands’ third quarter was negative for both of its largest concepts, with Applebee’s U.S. same-store sales declining by -5.9% and IHOP decreasing by -2.1%. Both brands underperformed both analysts’ expectations and their category peers. During the company’s earnings call Wednesday before market, chief executive officer John Peyton said the brands’ consumer demographic continues to pull back on discretionary spending with the biggest impact coming from lower-income consumers.
“There’s no doubt that macro challenges continue to impact performance,” he said, adding that the company is working on strategy adjustments to “push back against these headwinds.”
“What we’re seeing is a very promotion-driven environment right now and a lot of ‘noise’ for consumers to sort through when there are so many brands and categories offering so many promotions and deals, so we have to make sure we are sharp in the right promotion,” Peyton said, adding that the value messages both brands have been sharing haven’t been as compelling as they’ve needed to be in the past couple of quarters.
“We know we're capable of more and while the underlying strength of our business provides assurance of resilience through market cycles, we are diligently working to identify and address the missing ingredients in our strategy to refine our offerings and move forward,” Peyton said.
Portillo’s struggles to compete against discounters as same-store sales and traffic decline
Portillo’s Inc. reported mixed results for the third quarter ended Sept. 29, as the Chicago-based company saw revenues go up — mainly due to restaurant openings — but same-store sales and traffic declined by 0.9% and 3.5%, respectively.
Like many restaurant companies, Portillo’s is battling an unfavorable consumer environment. This quarter, same-store sales slippage was impacted by commodity inflation and increased labor costs, but CEO Michael Osanloo also mentioned the challenge of competing with heavily discounting brands.
“Like others in the industry, we are up against macroeconomic headwinds and the price wars in quick service, fast casual, and even casual dining are very real,” Osanloo said. “Q3 comp sales growth was challenged by this rampant discounting and Portillo’s does not play the discount game. We compete on great everyday pricing for our craveable food and abundant portions, and we know this approach will benefit us in the medium and long term.”
Osanloo also noted that although Portillo’s traffic dipped during the quarter, it was offset by increases in average check size (driven by multiple menu price increases in 2024) and a robust advertising campaign, as advertising expenses increased by over $1 million during the quarter.
Chipotle’s global plans, Chili’s shocking success, and the founder of a surging BBQ chain
On this week’s Extra Serving, NRN editor in chief Sam Oches and executive editor Alicia Kelso discuss third-quarter earnings reports from some of the biggest restaurant chains in America.
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