Published on Tuesday, 24 November 2015
Written by Jerry Stiegler
What really happened during the recent restaurant “strike?” One in ten Americans will eat their Thanksgiving dinner in a restaurant. Food-away-from-home prices continue to increase faster than grocery store prices. Consumers still aren’t in a mood to spend. These stories and whole lot more This Week In Foodservice.
On Tuesday, October 10, there was a labor action involving fast food restaurants.
That seems to be the only concrete fact regarding the day. USA Today reported there were walkouts in “hundreds of cites” but two paragraphs later the article stated rallies were planned for “…1,000 cities across the nation…” One source said 500 cities were involved while the number 270 appeared in a several of reports.
How many people were involved? Various numbers appeared, ranging from hundreds to thousands to tens of thousands. Two weeks after the event there doesn’t appear to ben any agreement on a firm number of people involved. As to who participated some reports stated that action involved “supporters,” home care providers, janitors, airport baggage handlers, and various other industries. Several published photos showed children. Reviewing several dozen reports failed to turn up any estimate of how many restaurant employees participated.
Which raises a question about how many of the people striking were scheduled to work and either walked off their jobs or didn’t show up. I was able to find one interview with a demonstrator saying she was supposed to be working. Approaching the question from a different angle, how many fast food locations experienced an interruption in their business as a result of the protest? I could find just two reports of closings. Both were McDonald’s – one near Pittsburgh and one in St. Louis.
Trying to find factual information about what happened proved very frustrating. I could not find anyone at a half dozen major fast food chains who would even discuss the matter. (A person at McDonald’s corporate headquarters told me they did not have a press relations department. McDonald’s did not respond to an email with questions about the event.)
A different approach failed as well. I spoke with a gentleman at Service Employees international Union who declined to answer any questions but directed me to the Fightfor15 website. Unfortunately, there wasn’t any information there addressing the points raised above.
At least based on the information available on the web, the demonstration or protest or strike or whatever does not appear to have a major impact on the business. It may be that those fighting for the $15 an hour wage may have more success in getting it through political action than by unionization.
Economic News This Week
- The Consumer Price Index increased 0.2 percent in October. The Bureau of Labor Statistics also reported that consumer food prices rose 0.1 percent while energy prices rose 0.3 percent. “Core” consumer prices — all items without food and energy price — increased 0.2 percent in October. In the past 12 months the CPI has risen 0.2 percent even though the Board of Governors of the Federal Reserve has set a target of 2.0 percent for inflation. (For a closer look at food prices, please see Foodservice News This Week below.)
- Initial jobless claims fell by 5,000 to 271,000 for the week ending November 14. The 4-week moving average rose by 3,000 to 270,250. The relatively low number of claims continues to show employment remains stable.
- Industrial production fell 0.2 percent in October with mining (which includes petroleum production) down 1.5 percent and utilities down 2.5 percent. Manufacturing rose 0.4 percent. The Federal Reserve also reported capacity utilization fell 0.2 percent to 77.5 percent. This rate is 2.6 percentage points below its long-term (1972-2014) average.
- The Philadelphia Federal Reserve Manufacturing Business Outlook Survey showed improvement in November with the index rising to 1.9 from minus 4.5 in October. (Any reading over zero indicates increasing activity.) New orders and shipments indexes also improved but both stayed in negative territory.
- Housing starts In October fell 11.0 percent from September and were down 1.8 percent from October 2014. Single-family housing starts were down 2.4 percent from September.
- Building permits issued in October Increased 4.1 percent over September and were up 2.7 percent over October 2014. Single-family building permits issued were up 2.4 percent from September.
- Existing home sales declined 3.4 percent in October to a seasonally adjusted annual rate of 5.36 million. While a significant drop, the National Association of Realtors pointed out that September was a strong sales month and October volume was up 3.9 percent from October 2014. Median existing home prices increased 5.8 percent over October 2014. Total housing inventory was down 2.3 percent from September and down 4.5 percent from October last year.
- The Leading Economic index increased “sharply” in October by 0.6 percent with the Conference Board predicting the U.S. economy remains on track for continued expansion heading into 2016.
Foodservice News This Week
- Ten percent of Americans will eat their Thanksgiving meal in a restaurant. The National Restaurant Association said that 40 years ago just 4.4 percent of consumers ate on out Turkey Day but this year 33 million are expected to patronize restaurants. Then there are also those Americans who arrange takeout food for all or part of their holiday feast.
- Consumers paid 0.1 percent more for food in October according to the Consumer Price Index. Food-at-home prices rose 0.1 percent while the cost of food away from home rose 0.2 percent. In the past 12 months, food prices are up 1.6 percent with food-at-home prices up 0.7 percent and food-away-from-home prices up 2.9 percent. It appears that foodservice operators have been aggressive in increasing menu prices in response to higher commodity costs.
- Most consumers are still holding back on spending, according to a recent study by ORC International commission sponsored by the National Restaurant Association. Just 27 percent of the adults in the study said they were not holding back on personal spending, 38 percent were holding back somewhat, and 32 percent said they were holding back significantly. This would seem to mirror Malcolm Knapp’s “allocation nation” theory.
- Jamba Juice announced an entirely new concept store to open in Pasadena, Calif. The new design will offer an interactive bar area, a modern test kitchen, a wi-fi enabled seating area, and “other innovative concepts.”
- Tim Horton’s testing the elimination of permanent ware. China mugs and plates have been removed from what a spokeswoman called a “small handful of locations” that are at “non-traditional” sites where dine-in service is not common. She added that Tim Horton’s is not considering removing china chain wide. One observer points out that Horton’s parent, 3G Capital Partners, is well known for cost savings efforts.
- Dippin’ Dots and Doc Pop Corn are in a new co-branded prototype kisok in Las Vegas. Dippin’ Dots purchased Doc Pop Corn last year.
- Dunkin’ Donuts is testing delivery service and online ordering. The smart phone online ordering system is being tested in Portland, Maine, while 19 Dunkin’ units in Dallas are testing the delivery program. The delivery test will soon be expanded to Atlanta, Chicago, Los Angeles and Washington.
- A New York City Papa John’s franchisee is going to jail for 60 days for not paying the correct minimum wage when employees put in for overtime. He was also convicted of falsifying records to make it appear other employees were working the overtime hours. Over 300 employees were involved at the 9 franchised units. The franchisee, Abdul Jamil Kookhar, was also hit with paying back wages, along with damages and $50.000 in penalties.
- Corporate Stirrings: Travel Centers of America is going to acquire the Quaker Steak & Lube restaurant chain. Quaker Steak & Lube, which has over 50 locations in 16 states, is currently in Chapter 11 bankruptcy proceedings. Travel Centers of America plans to convert some of their existing full-service restaurants to the Quaker Steak & Lube brand and will expand the Quaker Steak & Lube franchise development program. Pizzeria Vetri, a 3-unit upscale restaurant chain owned by the Vetri Family Group, has been purchased by the Urban Outfitters apparel chain. Urban Outfitters’ CEO sees more growth potential in the restaurant market than the apparel business. Various news reports did not make it clear if the deal included other restaurants in the Ventri group were part of the deal. Wendy’s held onto 18.5 percent of Arby’s when they sold the chain to the Roark Capital Group in 2011. Arby’s improved performance means Wendy’s is now making more money from the company now than when they owned them. The dividends from Arby’s is considered investment income and is not counted in Wendy’s sales. Cajun Operating Co., parent company of Church’s Chicken, stepped in to rectify a situation with the company’s franchisee in Tulsa and Oklahoma City when the state shut down 15 stores for the non-payment of sales tax. The corporate headquarters is paying $434,000 back taxes owed by the franchisee, Reciprocity Restaurant Group, as well as paying back wages owed to employees. The company is working with the state to reopen the restaurants. The owner of Reciprocity, Lyndon Johnson, has not been seen since the day before the Oklahoma Tax Commission shut down the restaurants. Tim Horton’s has closed 15 locations in Central New York and 6 locations in Maine. Tom & Chee appears to have closed the chain’s 3 Columbus area restaurants but neither the chain headquarters nor the franchisee have responded to inquiries by press time.
- Growth Chains: Pizza Studio, which has 33 locations currently, has 300 restaurants in development including an 80-unit franchise deal for the Mid-Atlantic states. Jollibee’s, the giant chain based in the Philippines, plans to open 300 restaurants next year primarily in the U.S., China and the Philippines. Newk’s Eatery will open 3 restaurants in the Mobile, Al., area. Smoothie King expects to open a minimum of 80 locations this year and plans to have a total of 1,000 units by the end of 2017.
- Comparable Store Sales Report: Jack in the Box (system up 6.2, company owned up 4.1 percent, and franchisee up 6.9 percent), Qdoba (system up 6.6 percent, company owned up 6.1 percent and franchised up 7.2 percent), and Zoe’s Kitchen up 4.5 percent.
For details and same-store sales of other chains, please click here for the Greens Sheet.