Published on Tuesday, 15 April 2014
Written by Jerry Stiegler
This week we report on positive restaurant industry sales for March, discuss a negative demographic trend, explore news of a flat burger market, celebrate fine dining’s comeback and a whole lot more.
Perhaps all of the economic doom and gloom associated with the rotten winter was not justified after all. That’s one takeaway from looking at the U.S. Census Bureau’s Advance Retail Sales data for March. Consumers didn’t stop spending — they postponed their purchases.
The Census Bureau reports total retail sales jumped 1.1 percent over February, the largest monthly increase since September 2012. Compared to March 2013 sales increased 3.7 percent. Auto sales led the way, increasing 3.1 percent, and consumer spending climbed 0.7 percent in March. The best news of all was that restaurant and bar sales were also up last month with an increase of 1.1 percent over February and 4.1 percent over March 2013.
The Bureau also increased February sales statistics. Restaurant and bar sales increased to 0.8 percent from 0.3 over January and to 3.2 percent from 2.6 percent over February 2013. It is important to remember the Census Bureau’s survey covers restaurants and bars only. Not included are hotels, resorts, clubs or any of the so-called “institutional” segments of the foodservice business.
The data above does have some limitations. Based on a small sample, the findings are subject to change. The data is adjusted for weekends, holiday shifts and seasonal variances but not menu price inflation.
Economic News This Week:
- Initial jobless claims fell sharply for the week ending April 4. In reaching their lowest levels since May 2007, first-time claims dropped to 300,000, a decline of 32,000. The less volatile 4-week moving average fell to 316,240, a decline of 4,750.
- The March Producer Price Index took a significant leap up to 0.5 percent, the largest increase since July 2013. Food prices rose 1.1 percent. Without food and energy, March’s core producer prices increased 0.1 percent. In the past 12 months the Producer Price Index is up just 1.4 percent, far less than the Federal Reserve’s inflation target of 2 percent.
- Consumer debt increased in February to a seasonally adjusted annual rate of 6.4 percent, according to the Federal Reserve. Similar to recent months, the increase came in the form of non-revolving debt such as car and student loans. Revolving loans, mostly credit card debt, fell by an annualized seasonally adjusted rate of 3.4 percent. Cutting back on credit card use is considered to be a sign of caution by consumers.
- Consumers’ daily spending in March stayed even with February’s rate of $87, according to data from the Gallup Organization. This rate is similar to March 2013, which saw average daily spending of $89. While spending appears stalled, this year’s rate for March remains well ahead of the same time frame from 2008 through 2012.
- The Reuters/University of Michigan Consumer Sentiment Index increased to 82.6 for the April preliminary reading. This is higher than the consensus prediction and the highest the index has been since July of 2013. The Gallup Organization’s U.S. Economic Confidence Index rose slightly to negative 15 in the week ending April 6.
Foodservice News This Week
- A Pew Research Center demographic study does not bode well for the foodservice industry. The study says the percent of mothers who do not work outside the home increased to 29 percent in 2012, up from 23 percent in 1999. Many experts have long held that working moms are an important factor in the growth of the foodservice industry. One well-respected foodservice expert often said it was virtually impossible to overestimate the impact working wives and mothers had on foodservice given the limitations on their time and willingness to cook. Plus, working mothers can also lead to increased household income, also beneficial to the industry. One important note to the study: 6 percent of the mothers said they were not working because they couldn’t find a job. It is possible with an improved economy the increase in mothers who don’t work outside the home will slowly reach a plateau or even decline.
- Burgers: a flat market? Based on an analysis of data from its Top 500 Chains study, Technomic concluded the hamburger business has reached maturity. That’s due, in large part, to the fact that after adjusting for menu price inflation, burger segment sales declined. Technomic did point out that a number of regional chains enjoyed double-digit growth and some fast-casual hamburger operations also did well. Maybe the issue is a little more complicated. Scott Hume, editor/publisher of Burger Business notes The NPD Group, which monitors independent operators and chains too small for the Technomic Top 500 study, found that the number of non-chain burger units were up a strong 7.2 percent last year.
- Fine dining is on the rebound, according to The NPD Group. U.S. fine dining restaurants, which experienced a double-digit decline in traffic in 2008, had a 5 percent increase in visits in 2013. NPD’s CREST study said that overall restaurant visits were flat last year. Fine dining accounts for 14 percent of foodservice sales and has seen increased visits the past 3 years.
- Calculating the impact of minimum wage increases can be a complex exercise for the restaurant industry. When the discussion of a minimum wage increase takes place people often predict a variety of outcomes, including: loss of jobs, increased menu prices, reduced employee hours, improved employee morale, reduced turnover, forcing foodservice management to cut costs in other areas and improved customer service. According to a recent Wall Street Journal article the correct answer appears to be all of the above. The minimum wage is indeed a complicated topic for our industry.
- Secret supper clubs have appeared in the Palm Springs, Calif., area. Patrons who pay as much as $100 for a dinner receive an email directing them to a location shortly before meal time. The evening frequently involves an entertainment factor such as a Titanic theme. One wonders what the board of health thinks about these “pop up” operations.
- Sonic is number one when it comes to the customer experience among burger chains, according to the fourth annual Temkin Experience Ratings report. Consumers rank brands on how well they meet the customers’ needs, how easy is it for customers to get what they want, and how customers feel about their experience.
- CiCi’s Pizza closed four locations in the Columbus, Ohio area.
- Corporate Stirrings:Saladworks is looking for “highly qualified strategic investors to facilitate the next phase of growth.” A group of shareholders is suing Darden for changing the date for the company’s annual meeting. Critics charge that the change will make it difficult for stockholders to affect the chain’s activities. More than 20 Papa Murphy’s franchisees have sued the company claiming a lack of disclosure regarding sales volume and a claim of excessive marketing fees. Papa Murphy’s has announced the chain plans an initial public stock offering. Quiznos settled a lawsuit with a dozen defunct franchisees who charged the company with fraud and not acting in good faith.
- Yum! Brands introduced a new concept: Super Chix. Observers quickly came to a conclusion that the restaurant in Arlington, Texas, is a direct competitor to Chick-fil-A. As reported here last week, Chick-fil-A’s domestic sales now exceed those of Yum! Brands’ KFC.
- Growth Chains: Corner Bakery Café signed a multi-unit development agreement for 17 cafes in Orlando over the next 6 years. Orange Leaf Frozen Yogurt has signed agreements with current franchisees to open a new compact kiosk in four locations around the U.S. Blaze Fast Fired Pizza will enter the Northern California market with six units in the next nine months. Cold Stone Creamery has signed a new master franchise organization to grow the number of units in Japan to 100 from 34 by the end of 2017. Peet’s Coffee & Tea will open 20 stores in Chicago this year. Pizza Hut opened a location in Northern Iraq and the franchisee plans to open four more this year. Flippin’ Pizza has signed an expansion agreement for five locations in California.
- Comparable Store Sales Reports: Fazoli’s (company-owned up 6.7 percent and franchised up 6.8 percent) and Ruby Tuesday (company-owned down 1.9 percent and franchised down 2.2 percent).
For details and same-store sales for other chains, please click here for the Green Sheet.