News Feature | June 19, 2017

Restaurant And Hospitality News – June 19, 2017

Christine Kern

By Christine Kern, contributing writer


In news this week, restaurant same-store growth is stagnating with restaurant oversupply; and McDonald’s has turned to Snapchat to entice younger workers to apply.

Restaurant Oversupply Intensifies With 18 New Units Being Added Daily

According to an On the Margin blog post, the current restaurant growth of 18 new units daily is outpacing supply and hurting overall unit economics, resulting in falling same-store sales. Over the past six years, approximately 40,000 new restaurants have been added across the industry, a recent Credit Suisse study on the impact of industry supply revealed. And unit count growth has outpaced population growth in four of the past five years, resulting in an overall increase in the number of restaurants per capita.

Just like the over-storing of retail, this over-storing of the restaurant industry is having a negative impact on the bottom line, particularly among chain restaurants, where penetration is at an all-time high according to the Credit Suisse study. That means trading unit economics for sales growth.

And while restaurant sales rose 54 percent overall in 2016, with $580 billion in sales last year, supply growth is outpacing the increased demand, causing a same-store sales environment that is at its lowest point since 2009. In fact, Black Box found that same-store sales haven’t increased since February of last year.

"Restaurants same-store sales slowed at a greater pace than total sales in 2016," Credit Suisse analyst Jason West told Business Insider. "This suggests unit growth (supply) is outpacing sales growth (demand)."

The case that supply is outpacing demand was further bolstered by a comparison between overall restaurant traffic and same-store traffic. Even as more people are visiting restaurants in the US than ever before, on average, individual restaurants tracking their traffic year-over-year have seen declining figures.

"We believe there is an oversupply of restaurants out there," Victor Fernandez, the executive director of insights for the restaurant-industry tracker TDn2K, told Business Insider.

Concerns that there are simply too many places to eat out have swept the industry. Executives at restaurant chains including Starbucks and Darden, Olive Garden's parent company, have said the US is "over-retailed."

According to Credit Suisse analysts, the only way that the same-store-sales slump will end is when there is a major economic change or a reduction in the opening rates of new restaurants.

McDonald’s Now Accepting “Snaplications”

In an effort to recruit new employees, particularly among Millennials, McDonald’s had turned to Snapchat to make the application process more accessible. Now, prospective workers can use a new “Snaplications” campaign to submit an application via Snapchat, according to Fortune.  This serves as a preliminary application form. The McDonald’s franchise expects to hire some 250,000 workers this summer, and it is hoping that the new option will entice younger workers to apply.  Snapchat has more than 4 million daily users, 82 percent of whom are young people, according to Snapchat Daily.

Fortune reported that McDonald’s has adopted the aggressive use of social media and other applications including music-streaming site Spotify and television-streaming site Hulu to appeal to potential workers between 16 and 24 years of age.

McDonald’s has begun airing 10-second video ads that feature employees discussing the benefits of working at the chain. Viewers then have the option to swipe up to connect to McDonald’s career page in Snapchat, where they can find opportunities and apply for specific jobs.

“We’re always looking for new and innovative ways to find jobseekers,” Jez Langhorn, senior director in human resources at McDonald’s USA explained. “We thought Snaplication was a great way to allow us to meet job seekers where they are – their phones.” While the Snapchat application does not replace the traditional hiring process, it does allow McDonald’s to engage in one of the “new and innovative ways to complement the existing hiring process.”

McDonald’s is not the first company to use Snapchat to hire millennials: MetroStar Systems, and IT solutions company, adopted the practice in 2016, asking applicants to make a “Snapplication” answering five questions and submitting it on the company website.