This week we take a closer look at the National Restaurant Association’s July Restaurant Performance Index, the Burger King/Tim Hortons deal and the flurry of speculation it triggered about other possible acquisitions and the latest economic numbers.
The National Restaurant Association’s Restaurant Performance Index edged down in July, the second consecutive month the overall index declined. The Index dropped 0.3 percent to an even 101 but for the 17th consecutive month it stayed above 100, which indicates the restaurant industry remains in expansion mode.
While same store sales and traffic remained strong, it was the Expectations Index that took a hit in July, declining 0.5 percent to 101.2. Still, the Expectations Index remains above the critical 100 level. The pattern of people seeing the present as being ok but worrying about the future repeats in the Reuters/University of Michigan Study and the Conference Board Consumer Confidence study reported on below.
Economic News This Week
- Gross Domestic Product for the second quarter of this year was revised up to 4.2 percent. The Bureau of Economic Analysis’ advance estimate was 4.0 percent.
- Personal income increased 0.2 percent in July which is the smallest gain in 6 months. Personal Spending fell 0.1 percent according to the Department of Commerce. http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
- Initial jobless claims totaled 298,000 for the week ending August 23, according to the U.S. Department of Labor. The 4-week moving average was also below 300,000 at 299,750. Claims for unemployment are running slightly below the level they were before the recession. http://www.dol.gov/opa/media/press/eta/ETA20141624.pdf
- Banks loosened their lending purse strings in the second quarter with the FDIC reporting that bank loan balances rose 2.3 percent compared to the first quarter. This represents the largest quarter-over-quarter jump since 2007. http://online.wsj.com/articles/u-s-banks-boosted-lending-in-second-quarter-fdic-says-1409234875#printMode
- Durable goods orders shot up 22.6 percent in July, the biggest increase since the Commerce Department began collecting the data in 1992. With a 74.2 percent increase in orders, the transportation segment drove the increase. Without the transportation segment, durable goods orders fell 0.8 percent. http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf#EconStats
- The Chicago Business Barometer hit 64.3 in August, an 11.7 point increase. Any reading that exceeds 50 indicates expansion. Production, new orders and order back logs all rose significantly. https://www.ism-chicago.org/insidepages/reportsonbusiness/
- Home prices continue to increase but at a slower rate according to the S&P/Case-Schiller National Home Price Index. In the 12 months ending in June, prices gained 6.2 percent. This is a major shift from the double digit growth seen in 2013 and earlier in 2014. http://www.forbes.com/sites/erincarlyle/2014/08/26/housing-price-gains-hit-the-brakes-in-june-spcase-shiller-says/
- Consumer confidence hit 92.4 in August, an increase of 2.1 points, according to the Conference Board. The Consumer Confidence Index has risen four consecutive months and its highest level since October 2007. https://www.conference-board.org/press/pressdetail.cfm?pressid=5264
- The Reuters/University of Michigan Index of Consumer Sentiment rose to 82.5 for August, up from the preliminary reading of 79.2. The Current Conditions sub-index rose to 98.8 from 97.4 which is the highest it has been since July 2007. But, the Expectations Index fell from 71.8 to 71.3 which is the lowest it has been since March of this year. http://finance.yahoo.com/news/consumer-sentiment-august-outlook-dims-143600112.html;_ylt=AwrBJR6b2gFUoFUAF0KTmYlQ
- Gallup’s Economic Confidence Index continues the same “static pattern” coming in at minus 16 for the week ending August 24, the same as the week before. So far in August the Index has only varied by 2 points. http://www.gallup.com/poll/175469/economic-confidence-index-unmoved.aspx?utm_source=alert&utm_medium=email&utm
Foodservice News This Week
- Speculation on other takeover targets has been rampant since the Burger King/Tim Horton’s deal was made public. One observer’s list of potential acquisition targets included Chipotle, Buffalo Wild Wings, Chuy’s, Panera Bread, Papa John’s, Popeye’s, Texas Roadhouse, and Cheesecake Factory. Perhaps his most fascinating scenario was McDonald’s buying Chipotle. http://www.marketwatch.com/story/10-restaurant-chains-targeted-for-takeout-2014-08-25?siteID=mktw
- Think fast-casual pizza continues to grow quickly? The segment’s rise to success may continue for some time, according to a Fortune article. Riding the efficiency of rapid cook ovens that can turn out a pizza in as little as 5 minutes, some project the segment could add as many as 2,000 locations in the next five years. http://fortune.com/2014/08/25/fast-casual-pizza/
- The Bureau of Labor Statistics Worker Displacement Study shows foodservice employees at the top of the list when it comes to finding new employment after losing their jobs. The Bureau studied people more than 20 years of age and who had 3 or more years on the job when they were terminated between January 2009 and December 2011 and what their employment status was in January 2014. Overall, 61.3 percent were employed, 20.8 percent were unemployed, and 17.9 percent were not in the workforce. Foodservice workers ranked right at the top with 72.1 percent employed virtually tied with educational services where 72.5 percent of the workers were employed. The only other industry above 70 percent employed was insurance at 70.9 percent. Perhaps the data reflects the growth in the foodservice industry or that foodservice has younger workers who can adapt to other types of work. http://www.bls.gov/news.release/pdf/disp.pdf
- The California Supreme Court rules franchisors are not responsible for the actions of their franchisees’ employees. In a four to three decision the court said that Dominos could not be held liable for a franchisee’s supervisor accused of sexual harassment. The ruling is directly contrary to a recent decision of the National Labor Relations Board. http://www.forbes.com/sites/danielfisher/2014/08/28/california-supreme-court-rejects-obama-administration-theory-on-franchise-employees/
- Food trucks keep rolling. The National Restaurant Association places food trucks at 1.0 percent of industry sales and counts them as one of the fastest growing operator segments. There is now a national organization – National Food Truck Association – to coordinate with the local groups. Further, some major chains, including Chick-fil-A, Starbucks, Taco Bell and TGI Friday’s have joined the movement with their own trucks. Emergent Research predicts that food truck sales will hit $2.7 billion by 2017. http://nextcity.org/daily/entry/food-trucks-laws-zoning-regulations-dc-philadelphia-new-york-los-angeles
- A “healthful” fast food chain is about to launch in California. Operating under the name “Loco’l” the concept’s founders are Los Angeles-based chef Roy Choi and San Francisco-based chef Daniel Patterson. No menu items were mentioned but the first unit will open in San Francisco in the spring of next year followed by a second unit in Los Angeles a few months later. http://www.latimes.com/food/dailydish/la-dd-roy-choi-launch-locol-20140825-story.html
- Denny’s opened an upscale concept in New York City featuring copper-stamped ceilings, wood paneling and leather booths. One unique menu item is a $300 brunch that includes a bottle of Dom Perignon champagne. http://www.businessweek.com/news/2014-08-28/denny-s-goes-upscale-with-300-champagne-brunch-in-nyc
- Standex International reported the company’s foodservice group experienced an 11.1 percent increase in sales in the last fiscal period. http://ir.standex.com/press-release/earnings/standex-reports-fourth-quarter-and-fiscal-2014-financial-results
- Growth Chains: Kono Pizza signed a multi-unit franchise agreement for three units in Charlotte. Boston Restaurant & Sports Bar signed an agreement for five restaurants in Baltimore. Bob Evans will open up to 10 new restaurants in the company’s current fiscal year. Muscle Maker Grill has plans to open 22 units across the country. BURGERFi, which currently has 54 restaurants, plans to double in size by the end of 2015. KFC has re-entered Zimbabwe with one store now open and plans to add 25 more.
- Comparable Store Sales Reports: Bob Evans (down 2.5 percent) and Zoe’s Kitchen (up 7.5 percent.)
For details and the same-store sales of other chains, please click here for the latest Green Sheet.
- Foodservice Industry Equipment Suppliers Financial Data: Report on Standex International
For the report on Standex and other suppliers, please click here .