The Curious Case of Chipotle, A Positive Projection for Casual Dining and More

The Chipotle saga continues. Foodservice operators were hiring in December. Malcolm Knapp is modestly optimistic about casual restaurant sales in 2016. These stories and a whole lot more in This Week in Foodservice.

Chipotle Mexican Grill’s outbreak of foodborne illness seems to roll on without an end in sight, and right now there seem to be more questions than answers. Was this a case of a major chain suddenly getting sloppy in its food handling procedures? Or, was it about a company that decided to cut back spending on its training? Could the chain have a supplier that’s not following its food-safety protocols?

The questions above don’t seem to fit with the wide-spread nature of Chipotle’s problem. Geographically the outbreak ranged from Boston to California and involved several different organisms.

Last week the strange situation turned absolutely weird when news broke about a Federal grand jury in California serving Chipotle with a subpoena. Criminal probes into restaurant food safety issues are rare. Now, grand juries investigate events all the time without taking any action and it is not even clear if Chipotle is the subject of the investigation. The Wall Street Journal speculated that Chipotle may have been the victim of a deliberate attack by someone.

Meanwhile, Chipotle’s sales are getting hammered as this wacky situation drags on. Perhaps a report from the Center for Disease Control and Prevention will provide the answers. Then again, maybe not.

Economic News This Week

  • U.S. auto sales enjoyed a record year in 2015 with 17.5 million cars and light trucks sold. December sales did retreat from November and manufacturers appear to be spending heavily on incentives. Still, most auto makers saw sales rise in December vs. December 2014 with many companies having double digit increases.
  • New orders for manufactured goods slipped by 0.2 percent in November according to the Commerce Department’s full report for the month. Shipments increased 0.2 percent as did unfilled orders. New orders for durable goods were virtually unchanged while durable goods shipments increased 0.8 percent and unfilled orders rose 0.2 percent.
  • The Institute for Supply Management’s Production Manufacturing Index for December fell to 48.2, which indicates a decline in activity. This is the lowest result since the 2009 recession. (Any number less than 50 means declining activity.) The Index was negative in November as well at 48.6. The biggest factor in the decline was the Employment Index at 48.1, down 3.0 percent from November. The Production Index stayed in contraction mode but did rise 0.6 percent to 49.8. The Export Index did make it into the expansion area at 51.0, a 3.0 percent rise from November. The Institute reported that of 18 manufacturing industries surveyed, 10 had contracting manufacturing activity.
  • The Institute for Supply Management’s Non-Manufacturing Index stood at 55.3 in December, showing continued growth in the services area. The December New Orders Index was 58.2, an increase of 0.7 percent. The Employment Index was 55.7, an increase of 0.7. Out of 18 non-manufacturing industries studied by the Institute, 11 reported expansion with Accommodations & Foodservice reporting the most growth.
  • ADP reported strong hiring in December with employers adding 257,000 new employees. This was the largest increase since December 2014. Large firms (those with 500+ employees) led the way with 97,000 new hires followed closely by small employers (less than 50 employees) who added 95,000 people.
  • Initial-jobless claims totaled 277,000, a decline of 10,000, for the week ending January 2. The 4-week moving average for claims was 275,750, a decline of 1,250.
  • Jobs Friday brought good news for December with a total of 292,000 new jobs added to the economy on a seasonally adjusted basis. The private sector employment increased by 275,000 while various government agencies added 17,000. The unemployment rate remained constant at 5.0 percent. Of most concern by labor experts was that wages continued to increase slowly.

Foodservice News This Week

  • Foodservice experienced strong job growth in December with the industry adding 36,900 new employees. Thus, foodservice accounted for more than 13 percent of all the hiring in the private sector last month. According to the Bureau of Labor Statistics, more than 11,275,000 people are now employed in US foodservice.
  • Knapp-Track reported a 0.4 percent decline in same-store sales for the 50-plus casual restaurant chains participating in Mr. Knapp’s program. Mr. Knapp noted that same-store sales were up 1.4 percent for the first 3 weeks in December but were pulled down by a negative 6.0 percent comparable in Christmas week. Part of the cause may have been weather related. Guest counts for the month were down 3.0 percent. Mr. Knapp has been somewhat encouraged about 2016 with comps improving slightly, as well as wage and employment growth. (Mr. Knapp’s data is courtesy of Bank of America Merrill Lynch.)
  • Food-away-from-home prices grew faster than food-at-home last year. Over the last 20 years food-away-from-home prices rose 2.7 percent while food-at-home prices increased 2.6 percent, according to The Food Institute’s analysis of U.S. Department of Agriculture data. Last year, though, food-away-from-home prices increased 2.8 percent, better than double the rate of 1.2 percent than food at home rose.
  • Shake Shack announced menu price increases in response to minimum wage hikes. The company reports that 32 of the 49 markets in which it operates have either increased minimum wages or will do so shortly. The increases run from 4 cents to 25 cents per menu item. The chain believes that even with the increase they will remain competitive with its direct competitors.
  • Growth Chains: CST Brands plans to open 350 new stores during the next 5 years. Firehouse Subs will open 75 restaurants in Northern Illinois and Northwest Indiana. Smashburger’s franchisee in the Columbus, Ohio area had three units closed for failing to pay taxes but the company plans to reopen all three units and add five more locations. The Submarine House, headquartered in Dayton, will open two new locations in that market. Sweetfin Poke will open five restaurants in Southern California this year. Love’s Travel Stops plans to open more than 40 locations in 26 states this year.
  • Comparable Store Sales Reports: Ruby Tuesday up 0.8 percent, Sonic Drive In (Systemwide sales up 5.3 percent, company-owned locations up 4.4 percent, and franchised units up 5.4 percent,) and Tropical Smoothie Café up 11.2 percent.

For details and same-store sales of other chains, Please Click Here for the Green Sheet.

 

 

Related Articles