In Search of Chipotle’s Customers, The All-Day Breakfast Bonanza and More!

Where did Chipotle’s customers go? Food away from home prices continue to increase faster than at retail stores. McDonald’s operators find all day breakfast works as fourth quarter sales improve. These stories and a whole lot more This Week in Foodservice.

Where have all the diners gone? The Wall Street Journal raised the question of what happened to the consumers who abandoned Chipotle Mexican Grill due to the chain’s food safety struggles. Chipotle reported sales were down 14.6 percent in the fourth quarter and a whopping 30 percent in December. The Journal speculated that Brinker might gain from Chipotle’s problems since Chili’s now gets almost half of its sales from higher end Mexican food.

This may be true, but if Chili’s got a boost from Chipotle’s misfortunes it didn’t drive a lot of volume in the last quarter. Chili’s company-owned units saw a 2.8 percent decline in same-store sales and domestic franchised same store sales declined 0.1 percent during the fourth quarter.

It’s a pretty safe bet that Chipotle’s worried customers who stayed away in droves didn’t simply skip the meal. Of course, some may have elected to eat at home but certainly some took their business elsewhere. But ‘where’ is the question.

Note that McDonald’s sales exceeded both company projections as well as a lot of the financial experts’ forecast. And, while neither Burger King nor Wendy’s have reported their fourth quarter sales figures yet, the Wall Street gurus forecast good results for both chains.

Unless someone does a major consumer survey, we may never know who gained from Chipotle’s difficulties, but it’s a safe guess someone did.

Economic News This Week

  • December’s Consumer Price Index declined by 0.1 percent. The food index fell 0.2 percent and the energy index fell by 2.4 percent. The “core” index – that is without food and energy – rose 0.1 percent for the month. For all of 2015 the CPI was up 0.7 percent while the “core” index for the year increased 2.1 percent.
  • Initial-jobless claims increased for the second consecutive week. For the week ending January 16 claims totaled 293,000, an increase of 10,000. The 4-week moving average was 285,000, an increase of 6,500.
  • The U.S. Department of Commerce reports housing starts fell 2.5 percent in December compared to November but were up 6.4 percent compared to December 2014. Building permits issued declined 3.9 percent in December vs. November but were up 14.4 percent from December 2014. December single family authorizations were up 1.8 percent from November.
  • Existing home sales surged 14.7 percent in December vs. November to a seasonally adjusted annual rate of 5.46 million homes. This was the largest one month rise ever recorded and pushed sales up 7.7 percent compared to the previous year. The National Association of Realtors also reported that median existing home prices were up 7.6 percent from December 2014.
  • The Philadelphia Federal Reserve’s January Manufacturing Business Outlook Survey came in at minus 3.5. While this still indicates contraction it represents an improvement from December’s minus 10.2. The New Orders Index remained negative but increased 10 points to minus 1.4 while the Shipment Index jumped 12 points, for its first positive reading in 4 months.
  • The Conference Board’s Leading Economic Index fell 0.2 percent in December, slowed by a drop in housing permits issued and weak new manufacturing orders. A spokesman for the Conference Board noted that while the economy was “losing some momentum at the end of 2015” it was “too early to interpret this as a substantial rise in the risk of recession.”

Foodservice News This Week

  • The Consumer Price Index for food fell 0.2 percent in December. Food-at-home prices fell 0.5 percent while food-away-from-home prices rose 0.1 percent for the month. Overall for 2015, food-at-home prices dropped 0.4 percent and food-away-from-home prices increased 2.6 percent.
  • The Governor of Arizona denounced cities setting their own minimum wage rate. Governor Doug Ducey described plans to create “a patchwork of different wage and employment laws” as ill-advised. He added that having cities and towns set their own rules is not local control but “California style chaos.”
  • McDonald’s operators are loving all-day breakfast. Forget the widely circulated stories a couple of months ago that franchisees hated the concept. The source of both views is a tiny sample of McDonald’s franchisees offered by Mark Kalinowski of Nomura. Now Scott Hume, publisher of BurgerBusiness reports a survey of Mr. Kalinowski’s 28 franchisee partners shows enthusiastic support of the breakfast program. One operator stated that the brand’s profile was raised while it brought back people who were bored with McDonald’s. Another franchisee supported this statement by noting that former customers were returning.
  • McDonald’s staged a fourth quarter comeback as comparable store sales increased 5.0 percent worldwide and 5.7 percent in the US. McDonald’s attributed the comp store increase to the launch of its all-day breakfast program and unusually mild weather. But the improvement in McDonald’s performance still wasn’t enough to offset an overall sales decline. Global sales fell 4.0 percent for the quarter and 7.0 percent for the year.
  • White Castle will provide health inspection scores to the public. The chain announced the launch of a website, WhitCastleClean.com, which lists the county health inspection scores for each White Castle restaurant.
  • Uber will offer meal delivery in 10 U.S. cities using a new, dedicated UberEats app. Uber sees this as a way to test using their existing drivers to deliver food from full menus of “dozens” of local restaurants. The Wall Street Journal calls the food delivery “a highly competitive and still speculative business.”
  • Burger King signed a lease for a new headquarters in Miami Dade County. The 150,000 square foot space leased is smaller than the chain’s current 200,000 square foot offices. There was speculation that BK would relocate to the corporate headquarters of Restaurant Brands International in Canada but this latest move seems to indicate Burger King will remain in Southern Florida for the foreseeable future.
  • Gordon Foodservice will open a distribution center in Kannapolis, N.C. in April. The 3000,000 square foot facility cost $58 million and is expected to employ 300 people within 5 years.
  • Product redistributor Dot Foods expanded its operation into Canada with the purchase of Marketwest of Vancouver.
  • Corporate Stirrings: Panda Express has taken a minority stake in the fast casual chain, Pieology Pizzeria. Financial terms were not disclosed.
  • Growth Chains: Papa John’s signed a development agreement for more than 100 restaurants in the Madrid, Spain market. Tropical Smoothie Cafe has an agreement for 37 locations in Michigan and the Northern Ohio area with 20 units scheduled to open this year. Tropical Smoothie Café also plans on opening 23 locations in the greater Atlanta area. Five Guys Burgers will add three additional restaurants in Minnesota. McDonald’s plans on opening more than 60 restaurants in Russia in 2016. PizzaRev will open their 30th restaurant next month and plans on doubling their current number of units this year. MOOYAH Burger plans to add up to 30 new locations this year.
  • Comparable Store Sales Reports: Brinker International (Chili’s Company owned down 2.8 percent, Chili’s U.S. Franchised down 0.1 percent and Maggiano’s down 1.8 percent), Luby’s (All concepts up 1.4 percent, Luby’s Cafeteria up 1.2 percent, Fuddrucker;s up 1.3 percent and Cheeseburger in Paradise up 5.5 percent), McDonald’s up 5.7 percent, and Starbuck’s up 9.0 percent.

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

 

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