Storms have severely affected sales in recent months.

Mother Nature fractured the restaurant industry’s overall performance in recent months. That’s the obvious fact, but what does the data tell us about the health of the business as a whole? On Friday, TDn2K released its latest Restaurant Industry Snapshot, which gathers weekly sales data from nearly 30,000 restaurant units to provide a vitals check.

The first glance is a troubling one. As a whole, the third quarter posted the second worst sales and traffic growth in more than five years. Same-store sales fell 2.2 percent across the spectrum—a 1.2 percentage point drop from the second quarter. Traffic, even worse, was down 4.1 percent.

Victor Fernandez, the executive director of Insights and Knowledge at TDn2K, said in a statement that the results aren’t quite as disturbing as they seem. “On one hand, the last three months were plagued by significant events that are external to the industry, but nevertheless had considerable negative impact on restaurant sales,” he said. “Hurricanes Harvey and Irma affected millions of people in two of the country’s largest economies during the quarter. On the other hand, there were some signs of improvement throughout the quarter, especially when removing the effect of Texas and Florida on the national sales results.”

Given the weather variable, it’s best to take this conversation to a broader point, skipping the month-to-month comparisons. For instance, same-store sales dropped 1.9 percent in September compared to 2.1 percent in August—a month where Hurricane Harvey and the Floyd Mayweather-Conor McGregor fight adversely affected sales nationwide.

Compare those numbers to July, however, and September showed a significant jump from July’s same-store sales decline of 2.7 percent.

More, the areas directly affected by the storms absorbed a massive blow. Texas’ same-store sales fell 5.1 percent in August. Florida’s plummeted 6.2 percent in September. If you subtract the two states from the picture, national same-store sales growth would improve about 0.2 percentage points for the third quarter. Additionally, same-store sales growth improves from negative 2.8 percent in July to negative 1.8 percent in August, and betters to a 1.4 percent decrease by September.

“Clearly, sales are still declining year-over-year,” Fernandez said in a statement. “But the rate at which they are falling has been decelerating. The trend is for improving results throughout the quarter once some of the external factors are isolated.”

Every industry segment reported negative same-store sales in September, marking the second consecutive month that has been the case. Fine dining, which was showing positive for most of the year, has declined since August. TDn2K said the segment was hit particularly hard in Texas and Florida, and was the weakest performing group based on sales growth. Family dining and upscale casual were the best.

As has been the case in recent quarters, increased consumer spending is not coming to the rescue of restaurants, said Joel Naroff, president of Naroff Economic Advisors and TDn2K Economist, in a statement.

“The economy was hit by massive hurricanes in August and September. The chaos created also translated into volatile economic data,” he said. “For example, vehicle sales surged in September, largely due to the replacement of damaged vehicles. Consumer spending likely picked up, but not for the reasons we would hope for.”

“Going forward, rebuilding efforts will also temporarily add to economic activity. Thus, third and fourth quarter growth will likely be good, but we could pay for it in the first part of 2018,” he added. “Separating out the weather effects from trend economic growth, it appears that conditions have firmed a bit. That should be enough to trigger somewhat faster wage gains and spending, but don’t expect significant improvement in discretionary consumer purchases such as restaurants.”

TDn2K’s Q3 People Report Workforce Index showed much of the same when it comes to the labor force. According to the report, operators are still worried about finding qualified employees to staff their restaurants.

“Their expectation is that recruiting difficulties will continue in upcoming months. After plateauing for the last few months, turnover rates for both restaurant management and hourly employees increased again during August, surely a factor behind the growing concerns regarding restaurant staffing. This is not surprising given that the competition for available employees keeps rising as the labor market continues to tighten,” the report said.

The national unemployment rate fell to 4.2 percent in September and is the lowest its been in almost 17 years, the report said. Service, value, and lower turnover rates have created a competitive arena at the local level.

“The correlation between unemployment and restaurant turnover, especially for hourly employees, has been well documented by People Report,” Fernandez said. “But regional factors also come into play. For example, Kentucky and Mississippi, which are among the states with the highest restaurant hourly turnover rates in the country, both have unemployment rates around 5.3 percent, well above the national number.”

Feature, Finance