Quarter-chicken dinners at Swiss Chalet aren’t selling quite as fast as some would like these days.
Disappointing sales in western provinces were responsible for a soft final few months of 2015 for the company, says BMO Capital Markets.
The iconic Canadian restaurant chain – and purveyor of “Canada’s famous rotisserie chicken” – could face more pressure on sales when its parent company, Cara Operations, reports its financial results later this month.
So what gives? Apparently the oil shock is taking a bite out of restaurant visits as well as how much customers are willing to spend at each meal. Cara said in November it was taking a “cautious outlook” given conditions in the west.
“Since then, energy and commodity [prices] have remained challenging,” BMO analysts said in a research brief this week. “We believe this presents continued headwinds for Cara’s Western Canada operations in particular.”
Like other restaurants, Swiss Chalet is also confronting higher food costs thanks to the plunging loonie, a development that may force a hike in prices, some experts suggest.
BMO’s analysts believe, however, Swiss’s franchisees could run into difficulty passing on the costs if they’re already seeing fewer customers walk through their doors.
“We expect that restaurant operators will find it more challenging to pass through rising food prices,” they said.
Here’s the monthly year-over-year percentage change in food bought from stores over the past few years, which should provide a sense of the cost inflation Swiss Chalet and other chains are grappling with, just like consumers.Click here to view data »
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