Mergers and Acquisitions Tripled in 2014, Wendy’s Sues Major Franchisee and More

The NRA’s Restaurant Performance Index slipped in November. If it seems mergers and acquisitions were up last year in foodservice, you’re right. Wendy’s is taking one of their largest franchisees to court. These and a lot more stories in This Week In Foodservice.

The November Restaurant Performance Index experienced what the National Restaurant Association termed a “modest decline” falling to 102.1 in November from 102.8 in October. The Current Situation Index dropped 1.6 percent to 101.4 in November. Same-store sales softened in November with 57 percent of operators saying comp sales were up while 21 percent reported a decline. In October 71 percent reported same-store sales were up and 11 percent said they were down. Traffic counts were reported to be up in November by 45 percent of those surveyed vs. 55 percent of those who experienced increased traffic in October. Traffic declines were reported by 30 percent of operators in November, which is up from just 16 percent in October                  

The Expectations Index rose 0.3 percent to 102.8 in November.

As for operator purchasing and intent to purchase in the future, the RPI shows slight declines but probably within the range of statistical variation. Operators who said they had made a major investment (expansion, remodeling and/or equipment purchase) in the last 3 months dropped from 57 percent in October to 54 percent. Those planning to make capital expenditures in the next 6 months also declined slightly to 57 percent in November from 59 percent in the October study.

Thus, the report continues to show expansion in the foodservice industry. The NRA points this is the 21st straight month the Index has been above the 100 benchmark while the Current Situation component has been above 100 for 9 months.

Economic News This Week

  • Initial jobless claims rose by 17,000 to 298,000 for the week ending December 27. The less volatile 4-week moving average was 290,750. A recent article in the Wall Street Journal pointed out jobless claims are at an all-time low when adjusted for population growth.
  • Car manufacturers enjoyed strong sales in December with many brands experiencing double-digit volume growth. Low gas prices and low interest rates received a lot of the credit for the increase. The month closed out a very good year for auto and light truck sales with estimates running as high as 16.9 million vehicles sold.
  • Construction spending declined 0.3 percent in November from October but was up 2.4 percent over November 2013. Residential construction was up 0.9 percent over October.
  • Home price increases continue to decelerate. The S&P/Case Shiller U.S. National Home Price Index for 20 cities gained 4.5 percent on a year over year basis in October, down from 4.8 percent in September.
  • The Institute For Supply Management’s December Manufacturing Index retreated in December, falling 3.2 percent to 55.5 percent. This is the 19th straight month the index has indicated U.S. manufacturing has expanded. Any reading over 50 means manufacturing activity is growing. While the new orders index and the production index both fell but stayed within the positive range. The employment index increased over November.
  • The Chicago Production Manufacturing Index fell 2.5 points in December to 58.3. Production dropped 5.1 points but stayed well into expansion mode at 61.6. Any number over 50 indicates growth. For all of 2014, the index had its best performance in the last 3 years.
  • The Consumer Confidence Index rose to 92.6 in December, up from 91.0 in November. The Conference Board also reported that the Present Situation Index rose sharply to 98.6 from November’s 93.7, but the Expectations Index fell slightly to 88.5 from 89.3 in November.
  • The Employee Confidence Index from Randstad USA rose to 58, which is an 8-year high. The report shows employees are more confident about their job security as well as the overall economy.

Foodservice News This Week

  • Foodservice mergers and acquisitions activity almost tripled in 2014 according to the Food Institute. There were 55 deals last year vs. 22 in 2013.  
  • Wendy’s is suing a major franchisee. The suit targets their fourth-largest franchisee, Maryland-based DavCo Restaurants LLC, contending the 152-unit operator refuses to take part in the Wendy’s remodeling program and purchase a company-wide POS system.
  • Foodservice hiring is up but that’s a problem.  According to a recent article in the Sacramento Bee, foodservice operators are finding it difficult to locate qualified people. At the same time, pressure is on to raise wages. This leads to operators wanting to find experienced employees and makes management reluctant to hire the unskilled and train them.
  • November food away from home prices took a steep increase of 0.4 percent. This was the largest increase since January 2012. Food away from home prices are up 2.9 percent in the 12 months ending in November 2014. The total Consumer Price Index fell 0.3 percent in November and is up 1.3 percent in the last 12 months.
  • A $13 an hour minimum wage, as proposed in Chicago, will require a 20 percent increase in menu prices according to one Chicago restaurant operator. He said he backs a moderate increase in the minimum wage but it should be instituted in phases and statewide.
  • McDonald’s tests an entirely new concept in Sydney, Australia, named “The Corner.” The restaurant does not serve burgers or fries and is described as a “lab” for new menu items that might be offered at McDonald’s operations. One writer described the restaurant as looking “like a McDonald’s which is trying not to be a McDonald’s.”
  • Romano’s Macaroni Grill has closed their four restaurants in the St. Louis area. The Ignite Restaurant Group, owners of Romano’s, had previously announced that 14 Romano’s had been closed in the first 9 months of 2014.
  • Chick-fil-A may have suffered a computer breach. A bank reported 9,000 of their customers appear to have been hacked and the only common factor was use of their credit cards at Chick-fil-A restaurants.
  • Corporate Stirrings: Cameron Mitchell LLC. is considering an IPO offering this year. Shake Shack Inc. has filed for an IPO offering. The 63-unit chain is hoping to raise $100 million. Wendy’s of Montana, operator of 18 Wendy’s, has been sold to Wenspok, headquartered in Spokane WA.
  • Growth Chains: Pot Belly Sandwiches, Inc. announced they will be opening 10 restaurants in London in the next 5 years. The Halal Guys signed a franchise agreement for 5 stores in the Houston area. Schlotzsky’s Deli has opened their first unit in Russia, one of 50 units planned for the former Soviet Union. Carl’s Jr. has an agreement with a Japanese franchisee to open 150 operations in the next 10 years. Dairy Queen has signed a multi-unit development agreement for 20 stores in Kuwait over the next 5 years. Bowl of Heaven has signed a 4-unit franchise deal for parts of Los Angeles County and now has more than 50 units in development in California and Nevada. Sonic has announced a franchise agreement for 8 drive-ins in Albany, N.Y. Corner Bakery has signed a franchise agreement for 5 restaurants in Virginia. Papa Murphy’s has plans for as many as 25 stores in Louisville. Dunkin’ Donuts will be opening 35 new locations in the greater Cincinnati area.
  • Comparable Store Sales Reports: ARK Restaurants (up 2.3 percent), Dave & Buster’s (up 8.7 percent), Logan’s Roadhouse (down 1.3 percent), and Ruby Tuesday (down 1.0 percent).

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

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