Service Employees Union Wants Franchisors Investigated, Restaurants Outselling Grocers and More

Are restaurants really outselling supermarkets? Restaurants are among the top draw in consumer visits. Arby's reduces energy use. Service Employees Union International wants franchise power imbalance investigated. All this and more in This Week in Foodservice.

U.S. consumers now spend more on food prepared outside of the home than on food at home according to some recent news reports. Is this accurate? The short answer is no.

The basis for the news report was monthly retail sales data from the Department of Commerce that clearly showed dollar sales at eating and drinking places exceeded sales at supermarkets. Some news organizations interpreted this to mean that people were spending more on eating out more than buying groceries for home. One story even implied that people were eating out more often than they were eating at home.

But, as later articles pointed out, food for the home is sold in a variety of places. To the folks at the Census Bureau, supermarkets are a distinct class of retailer that does not include super centers (i.e., WalMart, Target, etc.), warehouse/club stores (i.e., Sam’s, Costco, etc.) as well as convenience stores, drug stores and specialty stores. Included in the last category are butcher shops, bakeries, seafood stores, etc. Consumers order millions of dollars of grocery products online and by mail order, too. Thus, billions of dollars of food sold for consumption in the home do get not sold through supermarkets. In fact, supermarkets have been losing market share for years to other types of food outlets.

Indeed, this scenario can be pretty complicated. First, supermarkets and other retailers sell non-food items such as magazines, toothpaste, OTC medications, and cigarettes. Non-food products should not be counted when making comparison with foodservice. Second, supermarkets, C-stores and other retailers offer prepared foods for consumption on the premises or for take-out. Those sales should be counted as foodservices, not as grocery volume.

Still another comparison problem arises with grocery store sales counted just against restaurants. Both the National Restaurant Association and Technomic calculate restaurants and bars are less than 70 percent of total industry sales meaning hotel dining, clubs, employee feeding, education, healthcare and other foodservice segments account for more than 30 percent of foodservice. These operations certainly should be counted as food away from home when comparisons are made with meals consumed at home.

Economic News This Week

  • April 2015 housing starts reached a seasonally adjusted annual rate of 1,135,000, which was up 10.1 percent from March and 6.4 percent over April 2014. Single family housing starts were 733,000, 16.7 percent more than March. Building permits issued in April were at a seasonally adjusted annual rate of 1,143,000, up 10.1 percent from March and up 6.4 percent over April 2014. Single family permits were estimated at 666,000 up 3.7 percent from March.
  • Existing home sales softened in April, falling 3.3 percent from March to a seasonally adjusted annual rate of 5.04 million. April sales were up 6.1 percent compared to April 2014. Properties sold fast in April with an average time on the market of 39 days.
  • The Consumer Price Index crept up 0.1 percent in April led by slight increases in shelter, medical care, household furnishings and other items. These core prices increased 0.3 percent while food prices were flat and energy prices dropped 1.3 percent. In the past 12 months prices for all items are down 0.2 percent.
  • Initial jobless claims hit 274,000, an increase of 10,000 for the week ending May 16. The 4-week moving average for claims was 266,250, a decline of 5,000. This is a 15-year low for the 4-week average.
  • The Philadelphia Federal Reserve Bank’s Manufacturing Survey retreated in May to 6.7 after hitting 7.5 in April. Any number that exceeds zero indicates expansion. The new orders index rose three points with the shipments index also rising three points. However, the current employment index fell five points.
  • The Leading Economic Indicators Index rose 0.7 percent in April, which the Conference Board categorized as a “sharp increase.” But the increase was driven in large part by a jump in building permits issued as opposed to an increase in a number of indicators.
  • Nielsen’s Global Consumer Confidence Index hit 97, in the first quarter – an increase of 1 point. U.S. consumers were the eighth most confident at 107 while consumers in India were the most confident (130) and those in the Ukraine were the least (41). Regionally most areas were up or stable except for Latin America where consumer scores were the lowest since 2011.

Foodservice News This Week

  • The Service Employees Union International has petitioned the FTC to investigate the franchise industry claiming an imbalance in power forces franchisees to offer substandard wages.   
  • Technomic, Inc. says the “build your own” sub-segment of the fast-casual restaurant community continues to grow twice as fast as made-to-order operations. The build-your-own subsegment sales grew at a rate of 22 percent in 2014 vs. 11 percent for other fast-casual restaurants (compared to 3.8 percent for the total foodservice industry). Of course, growth percentages can be misleading given the small base some segments have.
  • Restaurant chains account for half of the top 10 most visited retail chains in the U.S., according to a data service called Placed. Number one was Walmart with more than 50 percent of the 500,000 people monitored paying at least one visit to the retail giant in March. Number two on the list was McDonalds with more than 48 percent of those surveyed reporting they had visited a Mickey D’s. Other restaurants in the top 10 include Subway (3), Starbuck’s (4), Burger King (8) and Taco Bell (9).
  • Food away from home prices increased 0.2 percent in April. In the past 12 months Food Away From Home prices are up 2.9 percent. In the same time period Food At Home Prices rose 1.3 percent.
  • The Arby’s Restaurant Group has reduced energy consumption by 11 percent, according to a company release. The reduction applies to company-owned restaurants and has occurred since 2011. Arby’s goal is a 15 percent energy reduction by the end of this year.
  • KFC is redesigning its restaurants. Changes include a more modern, simple look, adding booths and high-top tables, and displaying the colonel’s face on the building’s design. The new look is part of a new branding effort to celebrate the chain’s 75th anniversary. Also on tap are new menu items, new packaging, updated websites, and new commercials featuring a Colonel Sanders impersonator.
  • Is Shake Shack entering the chicken market? A subsidiary of Shake Shack filed a trademark application for the name “Chicken Shack” but the chain only said they are not introducing a new concept at this time.
  • US Foods opened a 500,000-square-foot distribution center in Seabrook, N.H. to serve New England. The new facility is LEED certified and includes a number of green enhancements.
  • Reinhart Foodservice plans a distribution center in Prince William County, Va., to serve the East Coast. The company says the facility will employ over 100 and is over 110, 000 square feet.
  • Corporate Stirrings: Frisch’s Restaurants has been sold to NRD Partners 1, a private equity firm. The selling price was $175 million, which is roughly a 20 percent premium over the recent price of the Frisch’s stock. At least one party is challenging the sale in court. 7-Eleven announced that it has agreed to purchase Tedeschi Food Shops, Inc. a 180-plus c-store chain in the Boston area. Tim Horton’s will close its U.S. office and relocate to Canada. The company reiterated that the U.S. is a top expansion target for the chain.
  • Growth Chains: Jersey Mikes is opening 13 restaurants in Southeastern Wisconsin in the next 4 years. Krispy Kreme has signed a development agreement for 11 stores in Arkansas, Illinois, Montana and Kentucky. Krispy Kreme also has a development agreement for 31 stores in South Africa over the next 5 years. Boston Restaurant & Sports Bar will open 26 locations in Mexico over the next two and half years. Bennigan’s and Steak N Ale will open 20 restaurants in Central and South America. Chaswood Restaurant Group, which recently acquired 6 TGI Fridays in China, plans on opening 14 more in that country. Texas Chicken, which operates under the name Church’s in the U.S., has agreements for 20 restaurants in Belarus and 9 in Bulgaria. Moe’s Southwestern Grill, which just opened their 600th location, plans on opening 70 restaurants this year.
  • Comparable Store Sales Reports: COSI up 1.2 percent, Peter Piper Pizza up 6.8 percent, Red Robin up 3.1 percent and Steak N Shake up 6 percent

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

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