This Week In Foodservice: Hurricane Sandy Blows An Ill Wind For Foodservice

Hurricane Sandy tested the resilience of the economy, foodservice operators and more.

There may never be an exact accounting of what Hurricane Sandy did to restaurants and other foodservice operations in the Northeast but anecdotal evidence from the New York Times, the New York Post and a number of other sources indicate that Sandy was no lady. A friend who has relatives in Northern New Jersey forwarded a hundred pictures to the devastation that included shots of an Applebee's, a Dairy Queen, and a McDonald's, all of which were flooded.

In some other instances, operations that escaped significant direct flooding and wind damage had sewage back ups in their locations. Some who had no direct physical damage, experienced power outages resulting in significant food losses. And some who didn't lose power or got it back on quickly couldn't operate because their employees couldn't get to work because of the lack of transportation.

But foodservice operators are resilient. They modified their menus to offer items that were available with some lowering their prices. Some fed neighbors, emergency workers and utility repair crews for free. And, as usually happens after a disaster of this type, operators who could open were besieged by hungry customers.

There will be some hard hit operations, especially independents and small chains that lacked flood insurance and business continuity insurance, that won't reopen. The NRA reports that operators remain resolute and are determined to rebuild. Many are looking toward the future by considering building reinforced walls, moving food storage out of basements, buying generators and carefully examining their insurance coverage.

Economic News This Week

  • The impact of Hurricane Sandy could reduce fourth quarter Gross Domestic Product by 0.2 percent according to Dow Jones' Marketwatch.
  • Initial jobless claims fell 8,000 to post a total of 355,000 for the week ending November 2. However, experts warn that the havoc caused by Sandy may have delayed filings. The four week average of claims remained at a very consistent 370,000.
  • Consumer borrowing rose by $11.4 billion according to the Federal Reserve. Non-revolving loans such as auto, school tuition and personal loans rose $14.3 billion which is an indication that consumers are becoming more confident. Credit card balances declined.
  • Consumer confidence as measured by the preliminary November Thomson Reuters/University of Michigan Index rose to 84.9. The November index is the highest since July 2007. The Gallup Poll of Economic Confidence jumped 4 percentage points in October, the best showing of this report since 2008. But Gallup found the nation remains polarized with the improvement coming from Democrats and independent voters while Republicans remain far more pessimistic. As pointed out last week, many economists are puzzled by the improvement in consumer sentiment given the overall showing of the economy. This past week two different researchers found that the majority of people are either not aware of the "fiscal cliff" (the tax increases and government spending cuts due to take effect in January) or say they don't understand its significance.
  • The housing market continues to improve with CoreLogic reporting that September home prices in the U.S. jumped 5 percent over September last year. CoreLogic determines home prices by monitoring sales of the same houses in a city. September prices did drop 0.3 percent over August prices but this came on the heels of six straight months of increases. Meanwhile, the housing market rebound is aiding the recovery of mortgage buyers Fannie Mae and Freddie Mac. Both, which were placed in receivership in 2008, have been able to pay dividends to the U.S. Treasury. More good news was found in a Census Bureau report stating that there were 1.15 million new households added in the country in the 12 months ending in September.

Foodservice News This Week

  • McDonald's sales sort of hit a wall in October with Big Mac reporting domestic comparable store sales falling 2.2 percent while total system comps were down 1.8 percent. McDonald's had advised investors to expect negative same store sales but the rate of the decline took most stock analysts by surprise. The chain blamed the fall on the weak economy and tougher competition, especially in the U.S. Despite McD's disappointing results, Merrill Lynch and other financial advisors still rate the stock a buy.
  • Food away from home prices are expected to increase 2.5 percent to 3.5 percent next year according to the USDA. Retail food prices are forecast to increase 3.0 percent to 4.0 percent in 2013.
  • Paris-based Sodexo reported solid financial results for their fiscal year ending August 31, with revenues up 13.6 percent and net income up 16.4 percent.
  • Middleby Corporation reported that their foodservice equipment sales increased 5 percent in their last quarter.
  • Growth Chains: Bar Louie is planning on rapid U.S. expansion, adding 20 locations in the next 2 years. Famous Dave's has signed franchise agreements that will add 21 restaurants, including 18 in California, and one each in Lansing, Mich.; Independence, Mo.; and Yakima, Wash. Jamba, Inc. has announced a 4-year program to remodel all company-owned stores. Starbucks is planning on opening 800 stores in China in the next 3 years. TCBY announced plans for 15 to 20 new locations in Houston, many based on their self-serve model. The Thornton C-store chain will be opening 20-plus locations in the Tampa and Clearwater, Fla. areas. Wawa is planning on adding as many as 100 stores in the Tampa-Orlando market. Pie Five Pizza has signed two franchise development agreements for a total of 18 restaurants in Utah and Charlotte, N.C.
  • Comparable Store Sales Reports: AFC Enterprises-Popeye's (up 6.8 percent), Bloomin' Brands (Blended up 3.6 percent, Outback up 4.5 percent, Carrabba's up 1.0 percent, Bonefish up 3.5 percent, Flemmings up 4.1 percent), Caribou Coffee (up 3.5 percent), Carrols (up 6.2 percent), Granite City Brewery (up 2.5 percent), Kona Grill (up 0.2 percent), McDonald's (down 2.2 percent), NPC International (up 1.3 percent), Tim Horton's (up 2.3 percent), and Wendy's (total North America up 2.8 percent, company owned up 2.7 percent, franchised up 2.8 percent).

For details and info on other chains, click here for The Green Sheet.

Click here for Equipment Supplier Financial Data. Updates for Manitowoc and Middleby Corporation.

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