Pizza Hut’s New Ovens, Olive Garden Adds Catering and Much More!

Incentives are the norm for selling franchises. Economic expansion slowed to a crawl in the fourth quarter. Pizza Hut is investing in new ovens. Olive Garden takes their catering program nationwide. Seattle’s $15 minimum wage is being challenged in court. These stories and a whole lot more This Week in Foodservice.

With all the franchises now available, the Wall Street Journal reports that it has created a buyers’ market. As a result, franchisers now offer such incentives as discounted franchise fees and reduced royalties to sign new franchise operators.

Wings & Rings, headquartered in Cincinnati, sold one franchise in 2013 but sold 17 in 2014 after reducing the franchise fee to $5,000 from $35,000. Other incentives include not charging royalties for the first six months and contributing funds towards the franchisee’s grand opening marketing program.

The Journal article states that the larger, better established chains are offering the incentives to existing franchisees with multiple stores. Denny’s gives new franchisees a break of up to $1 million on initial fees and other costs if they develop six new restaurants “within a reasonable time frame in new and emerging markets.”

Do the incentives work? The article points out that the wealthiest people in the world still want the best deal.

Economic News This Week

  • Gross Domestic Product increased 0.7 percent in the fourth quarter, according to the Department of Commerce’s advance estimate. While consumers continued to spend, businesses cut spending. GDP grew 3.9 percent in the 2nd quarter and 2.0 percent in the 3rd quarter so the momentum of the economy appears to be trending down. For all of 2015, GDP expanded at 2.4 percent which is identical to 2014. Some observers believe that 3.0 percent growth per year was “average” but 2015 is the 10th year in a row without GDP hitting 3.0 percent once.
  • Personal Income rose 0.3 percent in December but Personal Spending was flat. Why consumers suddenly turned frugal in December and decided to save their increased earnings is unclear but for the entire year spending was the highest it has been in a decade.
  • Initial-jobless claims totaled 278,000, a decline of 16,000 for the week ending January 23. The more stable 4-week moving average was 283,000 which is a decline of 2,250.
  • The Chicago Purchasing Managers Index bounced back in January to 55.6, an increase of 12.7 points. Readings that exceed 50 indicate increasing business activity. The January reading marked the highest growth in a year. The New Order Index jumped 20.2 points to 58.8. The Production Index also ended up well over 50. It is encouraging to see some good news about manufacturing.
  • New single family home sales jumped in December to a seasonally adjusted annual rate of 544,000. The US Census Bureau reports this is a 10.8 percent increase over November. For 2015 the Bureau estimates single family home sales were 501,000, a 14.5 percent increase from the estimated 437,000 homes sold in 2014.
  • The Gallup Organization’s U.S. Economic Confidence Index is at its highest levels since June. Yet the index shows most Americans still have a negative outlook about the U.S. economy. With the exception of a few weeks early last year when the numbers were slightly positive, the Gallup study has been in negative territory since its inception in 2008.
  • January’s Consumer Confidence Index hit 98.1, a 1.8 point increase compared to December. In explaining the increase, the Conference Board pointed to an uptick in the Expectations Index, which went to 85.9 in January from 83.0 the previous month. The Current Situation Index was unchanged at 116.4.
  • The University of Michigan Consumer Sentiment Index edged down slightly in January falling to 92.0 from 92.6 in December.

Foodservice News This Week

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