Published on Tuesday, 20 August 2013
Written by The Editors
Lots happening in the foodservice arena these days, including the re-opening of the Boston restaurant most affected by the marathon bombings, potential changes to hotel foodservice and much more.
It is difficult to follow the story of foodservice employees "striking" against fast-food chains and asking for wages of $15 an hour. News reports say that "thousands" of people participate in the action but no specific numbers are included and the reports lack detail.
Most people will probably agree that trying to maintain a decent lifestyle on $7.25 per hour is not realistic. Labor experts calculate that $11 to $12 an hour for a 40-hour week is probably the lower end for people to escape poverty.
Let's face it: This is a difficult situation but it not limited to fast food restaurants, foodservice in general or even to the retailers.
The flip side is that restaurants give a lot of people their first jobs that enable them to move on to more remunerative positions. I once worked for a company where the controller would tell us about his first job at age 16 working at a quick-serve burger chain. He hated the job and he hated the manager but, looking back, that position is where he learned punctuality, quality and portion control, sanitation, production and customer service. Reflecting on those lessons learned, he said it was a great job.
One final thought: Back in the 1950s I worked part time at a national retail firm that was involved in a unionization drive. The union's organizers threw around a lot of major salary increases they obtained for their members in the past and they talked in terms of 20 percent to 30 percent increases or even more if the movement was successful. After the successful union drive, the first contract gave me a 3.5 cent per hour raise, which was not enough to cover my union dues.
Economic News This Week:
- First-time jobless claims for the week ending August 10 fell to 320,000, a decline of 15,000 that represents the lowest number of unemployment claims since October 2007. The less volatile 4-week moving average fell 332,000, a decline of 4,000, which is the lowest since November 2007. The number of new claims as well as the 4-week average had been hanging in the 350,000 range for the first half of the year. Whether this decline in job losses will hold is anyone's guess but unlike major shifts in the data earlier this year, all 50 states reported and there don't appear to be any seasonal glitches or weather problems to mess up the numbers.
- The Builder's Confidence Index for August hit an 8-year high of 59, up 3 points from July. Any number in excess of 50 is considered "good" and this is the fourth consecutive monthly increase.
- July housing starts and building permits issued both advanced, up 5.9 percent and 2.7 percent respectively. Housing starts are at 896,000 on an annualized basis and building permits are at 943,000 annualized. The results are due to increases in multifamily housing with starts for single-family homes down 2.2 percent and building permits for single family down 1.7 percent.
- The Producer Price Index was flat in July. Core prices, which exclude food and energy, were up 0.2 percent. Core prices are up just 1.2 percent over the 12 months ending in July. Food prices were flat last month with a big increase in pork offset by a decline in fresh vegetables.
- The Consumer Price Index rose 0.2 percent in July with "core" prices also up 0.2 percent. Consumer food prices were up 0.1 percent.
- Industrial production was unexpectedly flat in July and the Commerce Department revised June industrial production down to +0.2 percent from the previously reported +0.3 percent. Overall, manufacturing was down 0.1 percent while automotive vehicles and parts manufacturing was down 1.7 percent due to the usual July factory shut down. Capacity utilization was also down dropping to 77.6 percent from 77.8 percent in June.
- The New York Federal Reserve's Manufacturing Survey declined slightly in August to 8.24 from the 9.46 reported in July. (Zero means no activity). New orders and shipments both declined but expectations remained high for the future.
- The Philadelphia Federal Reserve's Business Activity Survey declined rather sharply, falling from 19.8 in July to 9.3 this month. Activity is still significantly more than the zero level and is still "chugging along" according to a Fed spokesman.
- Productivity rose 0.9 percent in the second quarter of the year, according to the U.S. Department of Labor. Unfortunately, even with this greater than expected increase, productivity has been flat in the last 4 quarters. One economist, noting that the U.S. is not used to this since productivity has increased an average of 2.3 percent annually since the end of World War II. Increasing productivity eventually results in more investments in equipment and people, which drives the entire economy, which is why many economists consider productivity the most important statistic to judge economic activity.
- The Reuters/University of Michigan Consumer Sentiment Index took a significant drop with the preliminary August Index falling to 80.0 from a 5-year high reading of 85 in July. The current situation index fell from July's reading to 98.6 to 91 while the expectations index fell from76.5 to 72.9. In other words, consumers are less happy about today and they are highly nervous about the future. However, it is not unusual for the final Consumer Sentiment Index to improve over the preliminary mid-month report when a broader sample is analyzed.
Foodservice News This Week:
- Forum, the Boston restaurant that figured prominently in the Boston Marathon bombings, has reopened four months after the tragic event, according to the Boston Globe. The operation has a slight name change. It is now the Forum Bar & Restaurant. More significantly the first floor has been completely remodeled, the restaurant has a new chef and a new menu. Because of the remodeling, Forum was the last of more than 400 businesses affected by the tragedy to reopen. Owner Euz Azevedo kept his management personnel on salary while the restaurant was closed and has offered to rehire any of the former staff who wished to return. Forum's employees were praised for taking care of customers and aiding bombing victims.
- Food away from home prices increased 0.2 percent in July over June. In the past 12 months food away from home prices increased 2.1 percent. Using the U.S. Bureau of Census sales numbers for July, which were up 0.6 percent over June and 3.9 percent over July of 2012, it would indicate that the foodservice industry has "real growth" of in the area of 1.5 percent. This assumes that different statistical sources can be "married" to reach this conclusion.
- Retailers' foodservice efforts to compete with restaurants appear not to be working according to recent data from Technomic. Americans seem to be patronizing supermarkets and other retailers less often for "prepared ready to eat and ready to heat meals" with 32 percent of those surveyed reporting they purchased such meals less than once every 3 months vs. 28 percent in the survey a year earlier. The most recent survey had 22 percent of consumers purchasing these meals once a week or more often, compared to 28 percent in the earlier study.
- Hotels are downscaling their foodservice offerings, according to a recent LA Times article. Last year the trend seemed to be for hotels to adopt more casual fare at the expense of upscale dining. Now some hotels offer cafeteria-style foodservice with grab-and-go foods like pizza and sandwiches. Further, room service may be on the way out. The problem, according to the article, is that while occupancy rates and room charges are at least approaching where they were before the recession, food and beverage sales continue to lag.
- A wave of new restaurant openings in Pittsburgh has resulted in a shortage of line cooks. The Post Gazette says the problem is exacerbated by the fact that restaurateurs want experienced cooks and don't want to hire recent culinary school grads, much less training the line cooks themselves.
- Growth chains: GRILLiT plans to add at least 58 franchised locations across 8 states in the next 5 years. The Sheetz c-store chain plans to open six new stores a year in West Virginia for the next several years. Smashburger announced franchise deals in Tallahassee Fla., Charleston S.C., and Ventura County, Calif., which will add a total of 19 new locations. Yogurtland, which has opened 20 new units in the last two months, has signed agreements for an additional 20 stores which means the chain now has 100 units in the development pipeline.
- Comparable Store Sales Reports: Bob Evans (down 0.6 percent) and Red Robin (up 4.3 percent)
For details and same store sales reports of chains, please click here for the Green Sheet.