Published on Tuesday, 05 May 2015
Written by Jerry Stiegler
The NRA says their performance index drifted lower in March. Sysco reported sales and gross profit rose in the last quarter. NPD sees casual restaurant situation improving. YUM! Brands will spend $185 million on KFC including new equipment. These stories and a whole lot more in This Week In Foodservice.
The NRA’s Restaurant Performance Index slid 0.4 percent to 102.2 in March. The Current Situation Index declined 0.2 percent to 101.8. Same-store sales stayed about even from February. In March 62 percent of the operators said they had higher same-store sales vs. 60 percent whose same-store sales were up in February. In both months respondents reported same-store sales were down. However, traffic softened, with 45 percent of the operators saying their March traffic rose, which was down from 57 percent of operators who reported increased February traffic. Thirty-four percent of operators said traffic declined in March, up from 32 percent in February. (The statistics are based on comparisons with February and March of 2014.)
The Expectations Index also fell, losing 0.7 percent to 102.6. Almost 60 percent of operators expect to have higher sales in 6 months but just 3 percent of operators expect sales to be lower. This is the 29th straight month operators are at least moderately optimistic about the future.
As far as spending goes, the March RPI had mixed messages. Operators reported that 56 percent had made a capital expenditure for equipment, expansion or remodeling in the last 3 months. But, when it came to making capital expenditures in the next 6 months, 53 percent planned on an investment, down from 64 percent in February.
In summary, industry performance in March was modest but stayed in a modest expansion mode.
Economic News This Week
- Gross domestic product in the first quarter of this year was up 0.2 percent according to the advance estimate from the Commerce Department. Positive factors were personal consumption expenditures and private inventory investment. Negative factors were from exports, non-residential fixed investment, and state and local government spending. As weak at GDP growth was, it still beat some estimates.
- Initial jobless claims fell by an impressive 34,000 to 262,000 in the week ending April 25. This is the lowest number of claims in 15 years, when claims were 259,000 for the week ending April 15, 2000. The 4-week moving average fell 1,250 to 283,750.
- Personal spending increased a modest 0.4 percent in March after an even more modest 0.2 percent increase in February. Personal income was unexpectedly flat for the month. Both numbers indicate an economy that is barely moving.
- The Chicago Production Manufacturing Index jumped 6 points in April to 52.4 helped by a double-digit growth in new orders. While feedback from panelists was very mixed, 4 of the 5 components of the index gained. They include employment, which was the highest since January. Any reading over 50 indicates expansion.
- The Institute For Supply Management’s Production Manufacturing Index for April was dead even with March at 51.5. Any reading over 50 indicates increased manufacturing activity. The new orders index rose 1.7 percentage points to 53.5. The production index rose 2.2 percentage points to 56. The employment index fell 1.7 percentage points into negative territory at 48.3 percent. Overall, the Index shows the manufacturing segment is struggling through a slow growth period.
- Factory orders rose 2.1 percent according to the Census Bureau’s full report for March with durable goods orders up 4.4 percent. Transportation equipment increased 13.5 percent. Shipments of manufactured durable goods increased 1.2 percent while unfilled orders for manufactured durable goods rose 0.1 percent.
- The homeownership rate has fallen to 63.8 percent, the lowest rate since 1989. An economist at CoreLogic says the decline is actually approaching normal levels and there may be more drops in homeownership ahead.
- March Construction Spending was estimated to be 0.6 percent below February at a seasonally adjusted annual rate. Spending was 2 percent over March 2014. Residential construction spending in March was down 1.6 percent from February and down 2.3 percent March 2014.
- US auto and light truck sales were strong in April with most manufacturers enjoying sales increases over April of last year. Sales of high priced and high profit pickup trucks and SUVs were particularly good, meaning that car makers were pleased with April performance.
- The Conference Board’s April Consumer Confidence Index gave up the major gain it picked up in March. The April index fell to 95.2 from 101.4 in March. The Present Situation Index dropped to 106.8 from 109.5 in March while the Expectations Index declined 87.5 in April after hitting 96 in March.
- The Reuters/University Of Michigan Consumer Sentiment Index Final April reading was 95.9, which was up from 93 in March. The Current Conditions Index rose to 107 from 105 in March while the Expectations Index increased to 88.8 from 85.3 in March.
Foodservice News This Week
- Sysco reported increased sales and gross profit for the company’s third quarter ending March 28. Sales grew 4.2 percent and gross profit 3.1 percent. Sales from acquisitions accounted for 0.6 percent of the increase while foreign exchange rates decreased sales by 1.3 percent. Sysco’s internally estimated inflation rate was 3.7 percent and case volume was up 2.5 percent or 2.2 percent without acquisitions.
- Casual restaurant traffic was flat for the year ending February 2015 after 4 straight years of the number of consumer visits declining. The NPD Group reported that casual restaurant sales rose 2 percent either as result of ordering more or menu price increases or a mix of both.
- YUM! Brands has announced they will invest $185 million in KFC over the next 3 years to pay for new back-of-the-house equipment, incentivize remodeling, and advertising. Participation will require franchisees to allow YUM! to take control of the chicken chain’s marketing.
- Visits to quick service restaurants grew in the U.S., Australia, Great Britain, Canada and China in the fourth quarter of last year according to the NPD Group. Traffic was flat in Japan, Russia and Spain. Full-service restaurant visits increased in China, Germany, Great Britain and the U.S. while full-service visits dipped in Canada, France, Italy, Russia and Spain. The NPD Group believes that the results reflect consumer sentiment more than the country’s economic condition.
- A city accepts food trucks. What makes the story noteworthy is the city is Paris. The City of Light refused to license food trucks for many years for fear that their lower operating costs would undercut Paris’s famous gourmet restaurants and cafes but has now relented, permitting food trucks to operate at 40 locations.
- The fast food market in India is projected to grow to $78 billion by 2018, up from $48 billion this year. Wendy’s is among a number of chains planning to enter the market with the catch being the hamburger chain will not offer beef.
- Standex International reported the company’s foodservice equipment sales increased 8.1 percent in the last quarter.
- Corporate Stirrings: Bojangles announced that the firm’s proposed initial public stock offering will be 6.25 million shares at $15 to $17 a share, which would raise roughly $100 million for the company. YUM! Brands closed its fast-casual concept KFC Eleven. A company spokesman said that the store, which opened in 2013, provided information that will be applied to other KFC operations. The Melting Pot Restaurant announced a financing program for qualified restaurant operators who take over select Melting Pot locations in certain markets. Good Times Burgers will purchase 100 percent of Bad Daddy’s after two years of partial ownership. Bob Evans will close 20 underperforming restaurants, 16 of which are owned by the company.
- Growth Chains: HoneyBaked Ham & Café will open 15 to 20 new locations this year. Toppers Pizza has signed a multi-unit partnership agreement to open 6 restaurants in South Dakota and Iowa in the next 4 years. Bojangles will open 22 to 25 company-owned restaurants and 28 to 32 franchised restaurants this year. Blaze Fast Fire’d Pizza will open 62 restaurants this year, which will raise the chain’s total locations to 107. Penn Station will open 10 units in the Northeast Atlanta area over the next 5 years. Halal Guys has signed 2 franchise agreements for a total of 15 restaurants in Texas. OXXO, a Mexico based c-store chain, plans on entering the Texas market by making an $850 million investment to build 900 stores.
- Comparable Store Sales Reports: Applebee’s up 2.9 percent, Buffalo Wild Wings (company owned up 7.0 percent and franchised up 6.0 percent), Del Frisco (Del Frisco Grille down 3.5 percent, Del Frisco Double Eagle up 2.3 percent and Sullivan’s Steakhouse up 4.8 percent), Fiesta Restaurant Group (Pollo Tropical up 6.4 percent and Taco Cabana up 3.8), Habit Burger up 12.6 percent, IHOP up 4.6 percent, Panera Bread (system up 0.7 percent, company owned up 1.5 percent, and franchised up 0.1 percent), Pollo Compero up 11.8 percent, Ruth’s Hospitality Group up 2.8 percent, and Tropical Smoothie Café up 12.3 percent.
For details and the same-store sales of other chains, please click here for the Green Sheet.