Restaurant and bar sales posted stronger results in June than they did in the same period last year. At the same time, individual restaurant operators continue to look for new ways to deal with the Affordable Care Act. 

Total retail sales grew by 0.4 percent in June, according to the U.S. Department of Commerce. This is based on a subsample of retail businesses and is adjusted for seasonal differences and holiday shifts but not for inflation. The results are somewhat misleading since auto sales and gasoline sales pushed up the rate of increase. Without auto sales, total sales were flat compared to May.

Restaurant and bar sales declined 1.7 percent last month on an adjusted basis when compared to May. However, restaurants and bars marked a 3.6 percent increase over June 2012. For the first 6 months of this year, restaurants and bars are up 3.9 percent on an unadjusted basis.

As we do every time we present this data, we caution that this is advance data subject to revision, it is not adjusted for menu price increases, and covers only bar and restaurant sales.

Economic News This Week:

  • Initial jobless claims remain stuck in the same range they've been this year. Claims rose 16,000 to 360,000 for the week ending July 5. The 4-week moving average for first time claims hit 351,750, an increase of 6,000.
  • Temporary workers are offered full-time employment roughly one third of the time by their employers. But this year the average is about 10 percent, indicating that managers remain nervous about adding staff.
  • Competition for jobs looks better with the U.S. Department of Labor reporting that there were about three job seekers for every opening, compared to six people competing for each open position in May 2012.
  • The U.S. payroll population stands at 44.8 percent, according to an estimate by the Gallup Organization. This indicates the percentage of people 18 years and older who are employed at least 30 hours a week. The report for June is the highest so far this year but, overall the P2P rate has been pretty consistent since mid-2011.
  • Unhappy workers cost companies billions of dollars a year according Gallup's research. Workers who hate their jobs or are "disengaged" lack productivity and provide poor customer service. U.S. companies with an average of 9.3 "engaged" employees to 1 disengaged had 147 percent higher earnings per share when compared to their competitors. Only about 22 percent of U.S. workers are "engaged and thriving."
  • The Producer Price Index for June rose 0.8 percent, which was the biggest jump since September 2012. The increase was driven primarily by a 7.2 percent leap in gasoline prices. Food prices were up 0.2 percent led by a 4.2 percent rise in meat prices. Without either energy or food prices being factored in, "core" producer prices were up 0.2 percent.
  • Economists' outlook for the second quarter of this year appears to be sliding. The Wall Street Journal found at least some economists now expect Gross Domestic Product to fall bellow the most recent estimate of the +1.8 percent for the first quarter with some forecasts in the +1.4 percent range.
  • Consumer sentiment as measured by the Reuters/University of Michigan Consumer Index was 83.9 for the preliminary July report. This is the lowest reading for the index in three months but far above the recession years which ended in 2009 when the index averaged 64.2. In the 5 years before the recession the Index averaged 89. Gallup's U.S. Economic Confidence Index, which hit a 5-year high of minus 3 in late May, has leveled off in the last few weeks in the minus 9 range.

Foodservice News This Week:

  • Hiring part-time workers to escape offering health insurance has been discussed several times recently in this space. A recent Wall Street Journal article covered the subject and stated that some Subway owners, CKE, and Del Taco have been hiring part-time employees rather than full-time. Panera, Wendy's and Chipotle say they are hiring both full and part time workers as a result of growth. The story also noted that in general employers have been adding far more part timers than full time workers this year.
  • Part-time workers – version 2. Fatburger's CEO told CNNMoney that some of the company's franchisees have begun sharing workers, thus keeping them at less than 30 hours a week at one location to avoid paying for health insurance. Evidently the same procedure has been used in the past to avoid paying overtime wages. It appears to be legal as long as the restaurants involved have different owners.
  • Consumer's craving for menu items are the key to both visit satisfaction and customer loyalty according to a recent white paper from Technomic, Inc. Thus, "craveability" is now the key word.
  • Overseas restaurant expansion continues with CNNMoney reporting that almost one-fifth of the attendees at this year's franchise expo were foreign. The article quotes Franchise Times to the effect that unit growth in the U.S. was virtually flat from 2010 thru 2012 for the top 10 restaurant chains while "growth exploded abroad." McDonald's locations grew by 1 percent in the U.S. but 5 percent abroad. 7-Eleven increased units by 10 percent domestically but 19 percent internationally while YUM! closed more units than they opened in the U.S. but grew by 14 percent overseas.
  • "De Chaining" is California Pizza Kitchen's goal for its new prototype, which the chain is calling "rustic," "rough," "organic" and "relaxed" in order to get away from "that very expected, shiny chain feel." The company is also considering freestanding units in a move away from malls.
  • Fazoli's is moving in the opposite direction of CPK by unveiling a new prototype aimed at food courts, airports, colleges and military bases. All food prep is in front of the customer and serving time is three and a half minutes, according to the company. The new design is described as being available as a "turnkey package."
  • Peter Piper Pizza is opening the second of its "next generation" restaurant design featuring new exterior color and signage with revamped modern interiors, new store configurations, and an enhanced kitchen.
  • Growth chains: Diversified Restaurant Holdings will open six Bagger Dave's and one Buffalo Wild Wings restaurants in the second half of this year. Captain D's has an agreement that will open four units in the next five years in Alabama and Tennessee. Blaze Fast Fired Pizza signed agreements with franchisees for 7 units in Central Ohio and 14 restaurants in Indianapolis, Detroit, and Grand Rapids. KFC will open five restaurants in the Ukraine. Darden has signed agreements with 2 franchisees for restaurants through out Latin America but the number of restaurants nor time frame were provided. Pizza Inn has franchise agreements for 10 new locations in Alabama, Arkansas, Mississippi, and Tennessee.
  • Comparable store sales reports: YUM! (Blended sales up 1.0 percent, KFC up 3.0 percent, Pizza Hut down 2.0 percent and Taco Bell up 2.0 percent.)

For full details and same store sales of other chains, please click here for the latest Green Sheet.