Restaurants and drinking places are doing well according to the recent retail trade numbers. An expected ruling from the National Labor Relations Board could have serious consequences for the foodservice industry. Sysco outlines its strategy moving forward as the broadline distributor gets targeted by an activist investor. Is Subway too big? One school of thought thinks so. These stories and a whole lot more This Week in Foodservice.
July U.S. retail sales increased 0.6 percent over June’s levels and 2.4 percent more than July 2014, according to data from the U.S. Department of Commerce. Excluding motor vehicles and parts, retail sales rose 0.4 percent compared to June and 1.3 percent more than July of last year. Restaurants and drinking places out preformed the retail market as a whole, rising 0.7 percent from June and up 9.0 percent over sales in July of 2014.
In the first 7 months of this year restaurant and bar sales are up 9.1 percent which is more than any other retail segment included in the Census Bureau study. Total retail sales for the 7 months are up 2.2 percent.
There are some limitations on this data. These are “advance” results based on limited responses and are subject to revision. The Census Bureau’s survey covers only restaurants and bars and does not include hotel foodservice, retailers, employee feeding, health care, education or military feeding. The data is adjusted for weekends, holidays and seasonal differences but not for menu price changes.
Economic News This Week
- The National Labor Relations Board is expected to issue a ruling that will redefine what constitutes an employer this month. The specific case involves a waste disposal company that gets its employees from a staffing company. It is believed the NLRB will find that the waste disposal company is a joint employer, which makes the company open to union organization. While such a ruling would affect many industries it will mean that foodservice chains would be joint employers of their franchisees’ workers. Dealing with one large company would make it far easier for unions to organize the employees.
- Initial-jobless claims increased to 274,000, up 5,000, for the week ending August 8. The 4-week moving average declined to 266,250, a dip of 1,750. This is four week average’s lowest level since the week of April 15, 2000.
- The Producer Price Index for Final Demand increased 0.2 percent in July. The index for final demand goods fell 0.1 percent with foods down 0.1 percent and energy down 0.6 percent. Without food and energy the index was flat.
- U.S. labor productivity increased at an annual rate of 1.3 percent during the second quarter according to the Bureau of Labor Statistics’ preliminary estimate. Productivity fell 3.1 percent in the first quarter. Unit labor costs rose 0.5 percent in the second quarter.
- The Reuters/University of Michigan Consumer Sentiment Index dipped slightly, falling to 92.9 for the August preliminary reading. In July, the index hit 93.1. As seems to be the case with a lot of the consumer confidence polls, Americans are nervous about the future. The Expectations Index declined to 83.8 in August from 84.1 in July.
- Sysco will focus on smaller acquisitions after the giant broadline distributor giant was rebuffed by the courts in its attempt to merge with US Foods. Sysco’s CEO said the company will also look to “internal cost cutting and updating its product assortment and technology…” Sysco’s profit fell 71 percent in their most recent quarter the primarily caused by merger related costs.
- Sysco has drawn the attention of Trian Fund Management which now holds 7.0 percent of the broadliner’s stock. Trian is run by Nelson Peltz, commonly described as an “activist” stockholder. Trian has become involved with a number of major companies in past years including Wendy’s, Heinz, Mondelez International, Bank of New York Mellon, and DuPont Company.
- Subway may have grown too big, or so a Wall Street Journal article implies. With 27,000 domestic stores – almost twice as many as McDonald’s – Subway is the largest retailer in the country in terms of locations. But sales fell 3.3 percent last year and the Journal says some franchisees are bailing out by selling their restaurants at reduced prices. Part of the problem is undoubtedly competition from fast-casual operations, but according to the story, there are too many Subway locations and they are cannibalizing one another’s sales. The company denies this and says stores in “Subway dense markets” have higher sales. A spokesman added that company plans on continuing expanding at 400 plus units per year.
- Consumer focus continues to shift from tangible items to experiences according to a NY Times article and this should bode well for restaurants. The things vs. experiences concept is hardly a new concept but the Census Bureau sales data for July shows restaurant sales increased while department store revenues declined.
- Ten Years after Hurricane Katrina, New Orleans is booming. Last year New Orleans welcomed 9.5 million visitors, still less than the 10.1 million visitors from the year before Katrina but way better than the 3.7 million folks that came the year after the devastating hurricane. While the New Orleans population is down 18 percent from when Katrina hit, the city’s hotels’ have more rooms, higher revenue, and a higher occupancy rate than they had in 2004, the year before Katrina. The city added a dozen attractions and, amazingly, New Orleans has 600 more restaurants than it did in in 2005.
- The Fiesta Restaurant Group set a goal to double its off-premise business over the next 10 years. The parent of Pollo Tropical and Taco Cabana will look to increase its to-go business, online ordering, catering, drive-thru and mobile app orders.
- The Middleby Corporation reported a 9.4 percent increase in sales for its Commercial Foodservice Equipment Group for the quarter ending July 4. Without the impact from recent acquisitions, sales were up 5.3 percent.
- More than 60 food trucks have taken to the streets of Nashville, up from slightly more than a dozen 4 years ago.
- Domino’s plans to host a hiring day in North Carolina. The chain’s 200 locations hope to add 2,000 new employees covering all positions, including management.
- Corporate Stirrings: Darden plans to spin off a real estate organization, effective January 1, 2016. Named Four Corners Property Trust, the spinoff will initially consist of 424 properties in 44 states. While Darden will be the sole tenant at the beginning, the trust plans to lease to other operators as well. Travel Centers of America has acquired 33 convenience stores in Northern Illinois which it will be as Minit Marts.
- Growth Chains: Cinnaholic has commitments for 25 franchised locations. Smoothie King plans to open up to 100 new locations this year. Hot Head Burrito plans to open its first restaurant in Las Vegas and plans several more locations for its home state of Ohio. McDonald’s plans on closing 180 underperforming U.S. locations and open 125 new restaurants this year. Papa Murphy’s plans to open as many as 115 domestic locations this year of which 15 or 20 will be company run. McAlister’s Deli has signed a development agreement for three restaurants in Southern Mississippi. KFC will open 400 stores in Turkey in the next 5 years. MOD Pizza will have opened 15 new locations this year by the end of September.
- Comparable Store Sales Reports: El Pollo Loco (systemwide sales up 1.3 percent, company-owned down 0.5 percent, and franchised up 2.6 percent.), Frisch’s up 2.5 percent, NPC International (Pizza Hut flat and Wendy’s down 0.5 percent), Papa Murphy’s (domestic up 4.5 percent, company-owned up 4.9 percent, and Franchised up 4.5 percent), Red Robin up 2.9 percent, and Shake Shack up 12.9 percent.
Foodservice News This Week
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