On October 23, 2024, a McDonald’s restaurant in El Sobrante, California.
David Paul Morris | David Paul Morris Bloomberg | Getty Images
The restaurant industry has had a rough year, and executives can’t wait for 2025 to arrive.
“I don’t know about you, but I’m ready for ’24’ to be behind us, and I think ’25’ is going to be great,” said Kate Jaspon, chief financial officer of Dunkin’ parent company Inspire Brands. ” Restaurant Finance & Development Conference in Las Vegas this week.
Dining room Bankruptcy filings surge So far in 2024, it will be up more than 50% compared to the same period last year. According to industry tracker Black Box Intelligence, traffic at restaurants open for at least a year has declined year over year from 2024 through September. and many of the nation’s largest restaurant chains, McDonald’s arrive Starbucksinvestors were disappointed by at least one quarter of lower same-store sales.
But signs of recovery are already emerging, fueling tepid optimism about the future of the restaurant industry.
Sales improved from this summer’s lows. According to data from Revenue Management Solutions, traffic at fast-food restaurants increased 2.8% in October compared with the same period last year. The company’s data corroborates anecdotal evidence from Burger King owners and others International restaurant brandsaid earlier this month same-store sales growth October.
Plus, interest rates are finally coming down. In early November, the Federal Reserve approved its second consecutive interest rate cut. For restaurants, lower interest rates mean new stores are cheaper to finance, fueling growth. Previously, higher rates hadn’t had much of an impact on development, as restaurants were still catching up on delays caused by the pandemic and enjoying the highs of a post-COVID-19 sales boom.
A Shake Shack storefront with a glowing sign is seen on a busy street on October 22, 2024 in New York City, New York.
The Smith Collection | Gadot | Archive Photos | Getty Images
in burger chain shake cabinChief Financial Officer Katie Fogertey said higher interest rates over the past few years have not slowed development. But she expects a “significant boost” in consumer confidence as interest rates fall.
“If credit becomes cheaper, people will feel like they can borrow more, although that won’t necessarily drive consumption of $5 burgers. It’s just the psychology behind it,” Fogarty told CNBC.
Shake Shack reports that same-store sales have increased in every quarter so far this year, even as consumers have become more cautious.
Restaurant valuations are also improving, raising hopes that the IPO market will eventually thaw.
“We’re working with a lot of different people right now to get ready,” said Damon Chandik, managing director of Piper Sandler at RFDC. “The window is not fully open at the moment… I think given the traffic pressures that we’re seeing across the industry , the threshold is extremely high.”
He added that he expects to see some restaurant IPOs next year, hopefully in the first half of the year.
Signage at a Cava restaurant location on May 28, 2024 in Chicago, Illinois.
Scott Olson | Getty Images
Not since Mediterranean chain Restaurants has a major restaurant company gone public Cava IPO in June last year. Since then, Cava shares have risen more than 500% its debutits success has not encouraged any other large private restaurant companies to take the plunge. Instead, broader market conditions scared away other competitors.
About a year ago Panera Bread Confidential submission Listed again, but IPO has not yet materialized. Inspire Brands, owned by private equity firm Roark Capital, is another potential candidate for a massive IPO in the future. Inspire’s product portfolio includes Dunkin’, Buffalo Wild Wings, Jimmy John’s, Sonic, Arby’s and Baskin-Robbins.
Still, it’s not all optimism in the industry.
“I think we’ll still see headwinds next year both macro and within the industry,” Portillo’s Chief Financial Officer Michelle Hook told CNBC.
The fast-casual chain, best known for its Italian beef sandwiches, reported same-store sales declines for the third consecutive quarter. Portillo’s doesn’t take advantage of some of the discounts offered by other companies in the restaurant industry, such as McDonald’s and Chili’s.
The value war is likely to continue into 2025, putting pressure on restaurant profits and intensifying competition among chains. McDonald’s, for example, plans to roll out a broader value menu in the first quarter after extending its $5 value meals from summer to winter. For some restaurants, the looming threat of bankruptcy has not gone away, especially for chains that rely on discounts to win back customers.
While a recession next year is unlikely, it may take consumers longer than expected to recover from years of high costs.
