Robert Wagner of NetFinancials reported this week the results of his quarterly Atlanta restaurant sales survey.  His data shows an increase in Atlanta restaurants sales in 2012 of just 3.7% over comparable sales for the prior year.  While on the surface, a sales increase seems like good news to the restaurant brokers and those in the industry, he points out that this figure represents a decline over the trend seen in the first two quarters of the year.   

Beginning in Q1 2012 comp sales were plus 6.8%; then in Q2 comp sales were plus 5.0% and now in Q3 comp sales are plus 3.7%. Year-to-date through September 30 2012 Atlanta restaurant sales increased 4.9% over sales for 2011. 

Restaurant brokers and others look at comparable sales growth as one of the most vital data points in analyzing the industry and while overall growth is a good thing, it is concerning to see gradual slowing over time. In the restaurant brokers view however, it is also important to view the Atlanta restaurant sales trend against the nation's results as measured by the gross domestic product.  The Gross Domestic Product (GDP) growth rate provides an aggregated measure of changes in value of the goods and services produced by the United States economy, the largest in the world.  As seen in the chart below, overall GDP growth was 4.1% in the fourth quarter of 2011, then an anemic 2.0%, 1.3% and 2.0% in the third quarter.  Economists point out that without the impact of government spending (via quantitiative easing or increase in the money supply) in Q3, the GDP would have been at 1.3% again. 

When viewed against the overall economy, the Atlanta restaurant sales trend is better than the national results and the trend line is similar (adjusted for government spending)

As restaurant brokers, we are hearing from both buyers and sellers that the economy as a whole felt as though it was slipping into a "wait and see" period in the third quarter.  Many are postponing investments, watching the spending and delaying decisions pending the results of the upcoming presidential election.  When you layer on the unknown impact from the looming "fiscal cliff" or uncertainty surrounding multiple taxes that expire on 12/31/2012 coupled with the sequestionation or forced $1 trillion cut because the President and Congress could not reach a budget compromise, is it any wonder, America is holding its breath (and tightening its wallet)?

Like the election polls, the data must be closely analyzed to understand the numbers.  Part of the good news from the NetFinancials survey are results showing that of 78 restaurants surveyed, 71% reporting positive sales gains in Q3 2012. That contrasts to 29% of restaurants reporting Q3 negative sales trends. Twenty percent of restaurants surveyed reported double-digit sales gains in Q3 2012.

Robert Wagner of NetFinancials finds the "sales trend is worrisome." The restaurant brokers agree but are more optimistic that once the election is complete and some uncertainty is removed, that spending in total may rebound from its current anemic levels.  This should put restaurants sales back to more robust gains in the fourth quarter of 2012 and the first quarter of 2013.

Robert Wagner, CPA is president of NetFinancials, Inc. which provides a full range of tax and accounting services for restaurant companies. The NetFinancials restaurant sales survey is provided free of charge as a service to the restaurant industry.  The Restaurant Brokers, Eric and Robin Gagnon are industry experts and authors of Appetite for Acquisition and founders of We Sell Restaurants. 

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