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Americans are downsizing their meal (location) choices.
Lagging sales at major restaurant chains have recently set off worries for the industry and the economy at large. According to Michelle Meyer, a US economist at Bank of America Merrill Lynch, it may be less about personal economic situations or the election and more about consumers' taste preferences.
Using data from millions of Bank of America debit and credit cards, Meyer noted that the weakness in restaurant spending isn't as alarming as other people make it seem.
"A particular focus for us over the past several months has been on the performance of restaurants," Meyer wrote in a note to clients on Tuesday. "As we noted last month, spending has slowed over the past year, but continues to run close to the average pace over the recovery. This contrasts with reports of weakness from the public restaurants and data aggregators such as Knapp-Track."
Instead of overall weakness, Meyer said that the card data show a preference for local restaurants or small chains, like Shake Shack, instead of large chains such as Cheesecake Factory or Olive Garden (as an example of restaurants in this category; neither of these particular firms are experiencing a sales decrease). Meyer has the breakdown (emphasis added):
"Another theory — which we test in this note — is that our data are more representative of the local or small-chain restaurants which have performed better than the large public chains. To test this hypothesis, we isolated the large public restaurant chains from our aggregate of 'eating places' (which exclude fast food establishments).
"We find that sales of the big chain restaurants, which make up 18% of the aggregate, have been decidedly slower than the rest of the composite. This is indicative of a market shift away from large chain restaurants."
chain restaurants COTDBank of America Merrill Lynch
In general, restaurant sales have been lagging because of the increasing cost of eating away from home, while prices for food at home (groceries, etc.) have stayed lower. Thus, more people are opting to eat at home.
It does appear that, in addition to that shift, when people do decide to go out, they're choosing smaller companies.