Casual Dining Sales Slow Down, the Sysco/US Foods Merger Continues to Draw Fire and More

Sales among casual restaurant chains slowed in March according to Knapp-Track. Job openings hit a 14-year high in February. Some states go on record opposing the Sysco/US Foods merger. An Oakland, Calif. minimum wage increase leaves some businesses unhappy. These stories and more in This Week in Foodservice.

Same-store sales among the more than 50 restaurant chains that make up the Knapp-Track report increased 0.8 percent in March. This was due, in part, to a 1.9 percent decline in same-store guest counts. Factoring the two together leads to a 2.7 percent in increase in check average.

Malcom Knapp, author of the report, said that the benefits form easier comparisons with March of 2014, an improving job market and lower gasoline prices were offset by an earlier Easter, which had consumers spending more money on retail items as well as cool, wet weather in the Eastern U.S.

Knapp was not too concerned about restaurant sales in oil producing states. He pointed out that Knapp-Track same-store sales in Texas were less than the U.S. average in January but higher than the average in February. He also reported that Boston had strong sales in March as weather improved.

Malcolm Knapp’s data and observations are courtesy of Bank of America Merrill Lynch.

Economic News This Week

  • February job openings inched up to 5.1 million from 5 million in January, representing the highest number of jobs available since 2001 according to the Bureau of Labor Statistics. There was virtually no difference between the January and February quit and separation rates.
  • First-time jobless claims hit 281,000, an increase of 14,000 for the week ending April 4. The less volatile 4-week moving average was 282,250, a decline of 3,000. All told, this labor statistic continues to be a bright spot for the employment market.
  • The Institute for Supply Management’s Non-Manufacturing Index edged down in March to 56.5, a decline of 0.4 percentage points. The labor index increased 0.2 percentage points. The ISM reports 14 of the 18 non-manufacturing industries it studies grew in March while 4 segments contracted.
  • On a seasonally adjusted basis, February’s consumer borrowing increased 5.5 percent over January’s level of 3.9 percent. Non-revolving credit climbed 9.5 percent. Revolving credit fell at an annual rate of 5 percent as consumers reduced their credit card debt.
  • The Orlando, Fla. area welcomed 62 million visitors in 2014, becoming the first U.S. tourist destination to break the 60 million mark. Visit Orlando said the area’s lodging industry booked a record 32 million room nights resulting in bed taxes of $200 million.
  • The Gallup Organization’s U.S. Economic Confidence Index slipped to -2 in March after scoring +1 in February and +3 in January.
  • Consumers spent an average of $86 a day in March according to Gallup’s self-reported daily spending study. This amount was even with daily spending of $87 in March 2014 but below many months in 2014. However, it was up from $82 a day in February this year.

Foodservice News This Week

  • The Sysco/US Foods Merger continues to draw fire. The two mega distributors are heading for U.S. District Court next month after the merger was challenged by the Federal Trade Commission. The FTC has also filed an administrative complaint with an FTC administrative law judge. The complaint alleges that the post-merger firm would severely limit competition in 32 major markets. Eleven states have joined the federal government in the effort to block the merger. The National Restaurant Association stopped short of condemning the merger but instead stated that it “should be carefully reviewed.”
  • What happens when minimum wage has a major increase? A survey of business leaders – including restaurants – in Oakland, Calif., indicate the city’s recent 27 percent minimum wage increase made it very likely or even somewhat likely that they would have to close their doors. As a result of the new $12.25 per hour minimum wage, 47 percent of businesses said they had already raised prices, 30 percent said they had cut employee hours, and 17 percent said they had laid off employees or reduced staffing levels.
  • Wendy’s will open a technology innovation center. Wendy’s will locate the “skunk works” near the Ohio State University campus and it will employ skilled professionals in information technology, operations and digital marketing.
  • McDonald’s opened the chain’s second digital office. Located in a downtown Chicago penthouse, McDonald’s hopes this location will help attract highly sought-after tech talent to develop programs such as free Wi-Fi and mobile payment apps that will help the burger giant to lure tech-savvy diners.
  • Point of sale systems make restaurant chains vulnerable to hackers, according to one cyber security expert. That’s because these systems allow chain headquarters and other authorized parties access to the information. Some restaurants continue to use outdated operating systems for which new security programs are no longer available. Hackers love restaurants because they have a high volume of customers and thus a large number of credit cards.
  • Domino’s will raise hourly wages at more than 300 company-owned units “to stay competitive.” The move will not directly affect the company’s franchised operations.
  • A pork shortage may force Chipotle to delay opening new locations. A couple of months ago the chain dropped a pork supplier for failing to meet the company’s standards – antibiotic free, no added hormones, etc. This caused Chipotle to remove pork items from the menus in 600 locations. The basic problem remains: there simply are not enough farms that can meet the chain’s standards.
  • IKEA reports food sales from both its retail business and in-store restaurants rose 8.6 percent during the Swedish furniture manufacturer’s most recent fiscal year. Food sales now accounts for 5 percent of Ikea’s revenues.
  • Food halls continue to gain traction in California. This relatively new concept features a gourmet restaurant that offers high-end groceries and take out prepared meals including wine.
  • Corporate Stirrings: Bojangles, Inc., which currently has more than 600 locations in the U.S., announced it has filed a registration form for an initial public stock offering with the SEC. General Electric plans to sell its financial businesses. This includes GE Capital, which is very active in providing funding for restaurant chains and franchisees. Jamba, Inc. plans to accelerate its refranchising program with a goal of having 90 percent of the chain’s units franchised by the end of this year.
  • Growth Chains: Johnny Rockets signed a development deal for 100 restaurants in China. Starbucks plans to double the number of stores it operates in Indonesia in the next five years. The Seattle-based coffee giant has 200 locations in Indonesia. CREAM, the San Francisco-based desert company, signed a development deal that would create more than 30 units in Florida in the next 7 years. Gigi’s Cupcakes plans to open 25 new locations this year. Telepizza signed an agreement with a franchisee who will develop 30 restaurants in Nigeria. Andy’s Frozen Custard signed a multi-unit franchise agreement for a total of 20 stores in Tennessee, Texas, Oklahoma, and Central Florida. Legendary Restaurant Brands has signed a master development agreement for as many as 100 Bennigan’s and Steak N Ale restaurants in California. Dairy Queen will expand into Japan with a minimum of 10 stores in the next 5 years. Penn Station Subs has signed a 10 unit agreement for Atlanta in the next 5 years. Newk’s Eatery anticipates 38 percent growth in new restaurants in 2015.
  • Comparable Store Sales Reports: Dave & Buster’s up 10.5 percent, Frisch’s up 4.8 percent, and Ruby Tuesday down 0.3 percent.

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

Related Articles