The restaurant industry continues to struggle with labor costs. Included below is NRCP’s 3Q17 preliminary report on the direction of Labor costs among the publicly-traded restaurant companies. In the Casual Dining Segment, the large operators continue to struggle with large negative impacts on EBITDA and EPS. Blooming Brands, Cheesecake Factory were the hardest hit with ($13.0M) and ($8.4M) reductions in EBITDA. Both of these results represented a $0.14 reduction in EPS. Blooming Brands has struggled all year with significantly higher labor costs. Cheesecake also had a large negative impact during the second quarter, but more than offset the positive impact in the 1Q17.
Darden, Brinker and Texas Roadhouse also had large negative impacts in the 3Q. Darden had a small impact in the 2Q17, only partially offsetting the strong positive comparison in the 1Q17. Brinker had a flat 1Q, struggling in the 2Q, but 3Q17 negative impact was double the 2Q17. Texas Roadhouse struggled in the 1Q and 2Q. BJ’s Restaurants has struggled in all three quarters, with mid-single digit impacts, totally approximately $10M over the last three quarters. Of all of these companies, Texas Roadhouse is the company with the best same-store sales, [+4.6%] which implies that labor costs could have been significantly worse had they faced the industry average results of (-1.8%). The steakhouse segment only had nominal same-store sales of 0.6%.
In the QSR and Fast Casual Segment, McDonald’s negative impact in their Company Restaurant skewed the average tremendously. On more than $10B in sales, McDonald’s negative 150 bps impact represents $150M in higher labor costs. Most other companies in these segments continue to struggle with low-single digit impacts. BoJangle’s and Pollo Loco were the hardest hit with $2.0M and $1.6M, respectively.
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National Retail Concept Partners, LLC is a full-service consultancy based in Denver, CO. working with a variety of industries, including the automotive, retail, restaurant and hospitality industries. Partners Larry DeVries and Dean Haskell wrote the preceding post. These recurring posts can be accessed at their LinkedIn profiles. NRCP recently shared its labor optimization success at the Restaurant Finance Conference. The partners can be reached by email at email@example.com and firstname.lastname@example.org. Mr. DeVries is based in Denver, Colorado and Mr. Haskell is based in Nashville, Tennessee.