Competitors Take on All-Day Breakfast, Chipotle's Image Woes and More

Casual-dining chains same-store sales were up marginally in November. How competitors can take on McDonald’s all-day breakfast. Christmas season drives restaurant sales. Krispy Kreme is adding baristas to boost coffee sales. Chipotle’s image plummets. These stories and a whole lot more This Week In Foodservice. 

Knapp-Track reported that November comparable-store sales for the 50-plus chains participating in Knapp’s survey rose 0.4 percent after declining in October. Guest counts dropped 1.8 percent, which would indicate a 2.2 percent increase in check average. Data from other sources would indicate that all or most of the increase in check average is the result of increased menu prices rather than customers selecting more expensive items.

November same-store sales were up for three of the four weeks but guest counts were up just one week.

It would appear that soft same-store sales and negative guest counts will continue.

Knapp’s information is courtesy of Bank of America Merrill Lynch.

Economic News This Week

  • The November Consumer Price Index was unchanged from October on a seasonally adjusted basis. Over the last 12 months the CPI is up 0.5 percent unadjusted. Both food and energy prices declined in November offsetting increases in other items. (For information on food prices, please see the Foodservice News This Week section below.)
  • Initial jobless claims fell 11,000 to 271,000 for the week ending December 12. The 4-week moving average of claims fell 250 to 270,500. The near identical number of new claims indicates that the layoff picture is remarkably steady.
  • The December Empire State Manufacturing Survey remained in contraction mode for the fifth straight month though the rate of decline improved to minus 4.6, which was up 6 points from November. The New Orders Index was minus 5.1 but the Shipments Index rose to 5.5. The employment picture darkened in New York State with the Number of Employees Index dropping to minus 16.2 and the Work Week Index falling to minus 27.2.
  • The Philadelphia Federal Reserve’s Manufacturing Outlook Survey fell to minus 5.9 in December, down from 1.9 in November. Any number below zero indicates shrinking manufacturing activity in the area covered by the Philadelphia Fed. The New Orders Index fell 6 points to minus 9.5. Shipments increased to 3.7 but the index for Unfilled Orders tumbled from positive territory of 2.4 in November to minus 17.7. Employment improved with the Employment Index rising to 4.1 and the Work Week Index jumping 22 points to a positive 5.5.
  • Industrial Production declined 0.6 percent in November marking 3 straight months U.S. industrial production has dropped. Manufacturing increased 0.9 percent for the month but Mining (which includes petroleum) declined 8.2 percent and Utilities dropped 7.6 percent due to unusually warm weather. The Federal Reserve also reported that Capacity Utilization in November was 77 percent, a rate that is 3.1 percent below its long-run (1972-2014) average.
  • November housing starts for new residential construction rose 10.5 percent over October on a seasonally adjusted annual rate. Housing Starts were up 19.5 percent over November 2014. Single-family housing starts in November were up 7.6 percent from October.
  • November Building Permits issued for new residential construction increased 11.0 percent over October and rose 19.5 percent over November 2014 on a seasonally adjusted basis. Single Family permits issued were up 1.1 percent from October.
  • The Leading Economic Index for November rose 0.4 percent after increasing 0.6 percent in October and reading flat in September. A spokesperson for the conference board stated, “Although the six-month growth rate of the LEI has moderated, the economic outlook for the final quarter of the year and into the new year remains positive.”

Foodservice News This Week

  • How operators look to fight McDonald’s all-day breakfast. With some observers calling McDonald’s offering of some breakfast items on an all-day basis a success, competitors are looking how they can respond. Ideas include offering combos and value meals, extending the hours that the breakfast menu is available, offering menu items that are “natural,” organic and/or GMO free, and use “ethical sourcing” such as cag-0free eggs.
  • The Christmas season drives restaurant spending as consumers are in a festive mood. Shopping malls are closing low-cost fast food operations and adding more trendy places as well as upscale restaurants.
  • Krispy Kreme tests using baristas at a North Carolina location. The chain is attempting to increase their high profit coffee sales by copying Starbucks and other high tone coffee houses.
  • Chipotle’s image took a major hit due to the food poisoning outbreak. It was no big surprise given the widespread nature of the problem as well as the sequence of the events. Just as the E. coli problem subsided the company experienced a norovirus incident in Boston. Chipotle has been proactive with a TV appearance by CEO Steve Ells and newspaper ads, but their YouGov BrandIndex score dropped from 8 the day after the first report of E. coli illness to minus 26 the day after Ells was on the Today Show.
  • YUM CEO says Pizza Hut needs to become “easy.” Greg Creed says the chain has focused on being “better” rather than making life easier for the customer. He pointed out Domino’s has attributed its online ordering system and its mobile app for its sales growth while Pizza Hut has seen comparable-store sales decline for the last 2 years.
  • Food Away From Home Prices continued to increase in November rising 0.2 percent. Food At Home prices fell 0.3 percent, pulling down all food prices 0.1 percent. In the last 12 months the Bureau of Labor Statistics projects food away from home prices have risen 2.7 percent while food at home prices increased 0.3 percent.
  • US Foods will more than double the size of its Seattle distribution center. The facility will be increased from 123,000 square feet to 216,000 square feet when complete in the fall of 2016. Included in the plans is a state-of-the-art kitchen and training center.
  • Uber expanded its foodservice delivery service, UberEATS from 11 a.m. to  2 p.m. to 10 a.m. to 10 p.m. The service is now offered in Atlanta, Austin, Chicago, Dallas, Houston, Los Angeles, New York, San Francisco, Seattle, Toronto, and Washington, DC.
  • Corporate Stirrings: The Pinkberry yogurt chain was sold to Kahala Brands, which also owns Cold Stone Creamery. No terms were disclosed. Bob Evans has signed a letter of intent for a $200 million sale-leaseback contract for 145 restaurant properties. The company calculates the transaction will yield net proceeds of $165 million to $170 million. These types of arrangements are heavily promoted by activist stockholders in order to free up value for stockholders. Darden Restaurants made a sale-leaseback arrangement earlier this year while McDonald’s has announced they will not do a similar deal at this time. The Wall Street Journal reported several months ago that the federal government is examining these transactions to see if legislation is needed.
  • Growth Chains: Wahlburger plans to add up to 150 restaurants in the next 5 years. Wingstop announced the company has signed a 35-unit development agreement with Sizzling Platter, a foodservice management company with 340 locations. Kona Pizza has signed a franchise agreement for 10 restaurants in Atlanta. Fazoli’s plans to open 12 new restaurants in 2016. Charlie Grainger’s World Famous Hot Dogs plans to open 126 locations starting with 40 restaurants in 2016.
  • Comparable Store Sales Reports: Darden Restaurants (corporate up 1.6 percent, Bahama Breeze up 2.4 percent, Capital Grille up 1.5 percent, Edie V’s up 1.1 percent, LongHorn up 2.6 percent, Olive Garden up 1 percent, and Seasons 52 up 4.5 percent.)

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

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