The good news about 2014 restaurant sales comes with a question mark. The Sysco/US Foods merger looks to be headed to court. Wait staff are far from getting rich but are also doing better than minimum wage. “I’m a drone and I’ll be your server this evening.” These stories and a whole lot more.
The highly respected Food Institute calculates 2014 restaurant and bar sales grew 3.4 percent in real terms. The Institute takes the U.S. Census Bureau’s sales numbers and adjusts them by price change data for food away from home as determined by the Bureau of Labor Statistic’s Consumer Price Index.
This is good news given that restaurants are usually considered a slow growth business and may also indicate that the industry is recovering from the great recession. And, for 2013 the Food Institute calculated restaurant and drinking place sales had “real” growth of just 2.0 percent. For the sake of comparison, the Institute projected “real” sales at grocery stores rose 1.3 percent in 2013 and just 0.4 percent in 2014.
The Food Institute notes the government’s numbers are subject to “ongoing revisions.” It is also important to note the sales data does not include many foodservice segments such as hotels, motels, resorts, retailers, or any of the so-called institutional operations like education, healthcare, military, etc.
Perhaps the biggest problem with a 3.4 percent real growth statistic is that both the National Restaurant Association and Technomic, Inc. place real growth considerably lower for 2014. Technomic says restaurant and bar sales had real growth of just 0.4 percent last year while the NRA put real growth at 0.6 percent. There is simply no way to reconcile the projections. Somebody has to be wrong. (Of course, they could all be wrong.) Now optimists can use the Food Institute number and pessimists the lower statistic. Or, one could pick a number in between and hope for the best.
Economic News This Week
- Initial jobless claims fell to 283,000, a decline of 21,000 for the week ending February 14. The 4-week moving average was 283,250, a dip of 6,500.
- January existing home sales dropped 4.9 percent compared to December resulting in a seasonally adjusted annual rate of 4.82 million homes. This marks the lowest rate in 9 months but the National Association of Realtors points out that sales increased 3.2 percent compared to January 2014.
- The Federal Reserve Bank of New York’s Empire State Manufacturing Survey fell 2 points to 7.8 in February. Any reading in excess of zero indicates expansion.
- The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey declined in February by 1.1 points to 5.2. The Fed describes this as a period of modest continuing manufacturing activity growth in the Philadelphia area.
- Industrial production rose 0.2 percent in January after declining by 0.3 percent in December. The Federal Reserve also reported that industrial production from September thru December was slightly lower than initially indicated but in the fourth quarter production was estimated to have risen at 4.3 percent. Capacity Utilization was unchanged from December at 79.4 percent in January.
- The Gallup Organization’s U.S. Economic Confidence Index stood at +3 for the week ending February 15, marking the third straight week the index has been at this level. After seven years in negative territory the index has stayed in a narrow five-point range for almost two months.
- The Conference Board’s Leading Economic Indicators Index increased 0.2 percent. A Conference Board spokesman notes the index continues to increase but lately the rate of increase has moderated. The economy should be OK in the short run but some long run problems may exist.
Foodservice News This Week
- Sysco’s proposed acquisition of US Foods has been challenged in a suit by the Federal Trade Commission contending the combined companies would raise prices and reduced service. Sysco has stated that the FTC does not understand market dynamics. The suit has been the subject of speculation for weeks and in the past few days Sysco hired a top level Washington D.C. law firm in the event the FTC tried to block the merger.
- Waiters and waitresses in the U.S. earn $13.20 per hour including base pay and tips according to PayScale.com. Bartenders do better as they earn $16.30 per hour. Tips vary significantly from city to city with wait staff tips highest in Boston and lowest in Minneapolis.
- Can airborne drones replace wait staff? A shortage of service workers inspired a restaurant in Singapore to install drones. The drones work off a computer program, navigate through the use of infrared sensors in the restaurant and can carry up to 4.4 pounds of food and beverages. The restaurant owner says the drones free up time for staff to interact with customers.
- Restaurant employees make up 10 percent of the U.S. workforce according to the National Restaurant Association. But big tourism states have higher percentages of restaurant employment including Nevada (16 percent), Hawaii (14 percent) and Florida (12 percent).
- Corporate Stirrings: Restaurant Brands International, the new parent company of Burger King and Tim Horton’s, reported a loss for the company’s last quarter due to costs associated with their recent merger. The loss came despite some favorable comparable store sales figures. Granite City Food & Brewery’s board of directors hired an investment firm to explore a strategic transaction, which usually translates into putting the company up for sale. Saladworks LLC has filed for bankruptcy with the stated intent of disentangling the company form legal action by a minority stockholder. Einstein Bros Bagels will close 39 locations in the U.S. due to sales underperformance.
- Growth Chains: Blaze Pizza, which opened 50 new units last year, plans on opening 60 to 70 more operations this year. Kneader’s Bakery & Café plans to open at least five new units in San Antonio in the next three years. La Madeleine plans to open three or four locations in San Antonio before 2020. Shake Shack and its Japanese licensee will open their first restaurant in Japan in 2016 and a total of 10 through 2020. Domino’s Pizza has opened in two new international markets, Azerbaijan and Cambodia. Krispy Kreme opened a new location in Kansas City this month, which is the chain’s 1,000th shop. Smokey Bones will open three restaurants in 2015. Gus’s World Famous Fried Chicken, with 10 locations in 4 states, has announced plans for 8 more restaurants. Legendary Restaurant Brands, owner of Bennigan’s and Steak & Ale, is looking for equity partners or landlords to open up to 19 new restaurants this year. &pizza with 9 units currently and 6 more set to open in the first half of this year, announced they have received an investment of $10 million for further expansion. Uncle Maddio’s Pizza Joint plans on adding at least 20 more locations in the greater Atlanta area in the next few years.
- Comparable Store Sales Reports: Bloomin Brands (Blended up 4.2 percent, Outback Steakhouse up 6.4 percent, Carrabba’s up 0.3 percent, Bonefish Grill up 0.7 percent, and Flemming’s up 3.4 percent), Burger King up 4.2 percent, Denny’s (system up 4.7 percent, company-owned up 5.8 percent, and franchised up 4.6 percent, Famous Dave’s (company owned down 4.0 percent and franchised down 2.4 percent), Fiesta Restaurant Group (Pollo Tropical up 7.7 percent and Taco Cabana up 6.1 percent), Granite City up 0.7 percent, Jack in the Box (system up 4.4 percent, company-owned up 3.9 percent, and franchised up 4.6 percent), Noodles & Co. (system up 1.3 percent, company-owned up 1.3 percent, and franchised up 1.5 percent), Potbelly up 3.7 percent, Qdoba (system up 14.0 percent, company-owned up 12.9 percent, and franchised up 15.1 percent), Texas Roadhouse (company-owned up 7.0 percent and fanchised up 5.7 percent), and Tim Horton’s up 4.1 percent.
For details and same store sales of other chains, please click here for the Green Sheet.