Comparing Industry Forecasts, Two New C-Store Prototypes and More!

Forecasts predict moderate restaurant industry sales increases for 2016. Jack in the Box says competitive activity hurt its financial results. Sysco makes a major acquisition overseas. These stories and a whole lot more This Week in Foodservice.

The National Restaurant Association’s just-released 2016 forecast calls for the foodservice industry to grow total sales by 5.0 percent this year. When adjusted for inflation, the NRA says sales will rise 2.1 percent. Total sales are expected to rise to $782 billion up from $745 billion in 2015.

Comparing the NRA’s estimates for this year shows a lot of similarities with Technomic’s numbers. Perhaps the most interesting facet of the forecasts is that some of Technomic’s predictions are more optimistic than the NRA’s. Technomic sees nominal growth of 4.7 percent but has “real” growth up 2.4 percent. Technomic estimates 2015 sales at $814 billion and 2016 sales hitting $852 billion.

The explanation for the huge difference in dollar sales between the two organizations is that Technomic uses a “commercial equivalence” factor. To make comparisons between commercial and non-commercial segments realistic, Technomic adjusts non-commercial sales to reflect what they would be if the food were sold in a restaurant.

Another major similarity between the two projections is that both have restaurant and bar sales increasing at 2.4 percent when adjusted for inflation.

There are some significant differences in the forecasts. The NRA breaks out contract managed operations from self ops. Technomic does not. Technomic breaks out fast casual restaurants as a separate category while the NRA puts fast casual in with quick service.

Aside from how the data is arranged there are some disagreements in projections for 2016. The NRA has negative performance for airlines while Technomic sees 1.5 percent real growth. The NRA has primary and secondary school feeding as negative but Technomic sees them up slightly.

But overall the two efforts to look into the future are reasonably close to one another. Both see operators continuing to take menu price increases and about 2.0 percent real growth that we would expect from a mature industry.

Economic News This Week

  • Initial jobless claims totaled 262,000, a decline of 7,000 for the week ending February 12. The 4-week moving average was 273,250, a decline of 8,000.
  • The January Producer Price Index for Final Demand advanced 0.1 percent on a seasonally adjusted basis. The index for final demand goods dropped 0.7 percent while the index for final demand services rose 0.5 percent. The final demand index fell 0.2 percent in the last 12 months on an unadjusted basis. The index for food rose 1.0 percent in January while the index for energy declined 5.0 percent for the month.  The “core Index” (not counting food and energy prices) was flat in January.
  • The Consumer Price Index did not change in January, on a seasonally adjusted basis. A 2.8 percent decline in energy prices held the overall index down. In the past 12 months the CPI is up 1.4 percent. If food and energy prices are excluded from the index, consumer prices were up 2.2 percent in the last 12 months. www.bls.gov/news.release/pdf/cpi.pdf
  • Industrial production increased 0.9 percent in January according to the U.S. Federal Reserve. Manufacturing output rose 0.5 percent from December and was up 1.2 percent from January 2015. The index for utilities increased 0.5 percent in January after being depressed by unusually warm weather in December. Mining production (which includes petroleum and natural gas production) was unchanged from December after four months of decline. Capacity Utilization was estimated at 77.1. This is 2.9 percentage points under its long run (1972-2015) average.
  • The New York Federal Reserve’s February Empire State Manufacturing Survey showed manufacturing activity in the NY region continued to contract with the index reading minus 16.6. This was a three point improvement from January. The New Orders Index rose 12 points but stayed well into negative territory at minus 11.6. The Shipments Index rose 3 points but was still a disappointing minus 11.6. The employment indexes indicated that employment levels were flat. Overall the data indicates manufacturing activity continues to decline but at a slower rate than in January.
  • The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey reported current activity remained in negative territory. The index improved slightly, rising to minus 2.8 in February from the January reading of minus 3.5.
  • The Census Bureau’s New Residential Construction Report for January showed housing starts down 3.8 percent from December but up 1.8 percent from January 2015. The number of building permits issued dropped 0.2 percent from December but increased 13.5 percent from January 2015.  Permits for single family homes were down 1.6 percent from December.
  • The Conference Board’s Leading Economic Index declined 0.2 percent in January to 123.2. A Conference Board spokesman stated the decline doesn’t indicate a coming recession and the index is consistent “with a modest economic expansion through early 2016.”

Foodservice News This Week

  • Jack in the Box places blame for disappointing performance. The quick-service chain missed both sales and profit forecasts for the 16-week period ending January 17. The reason for missing the mark? Competitors’ “aggressive value offers,” according to the Jack in the Box CEO. He went on to say “…we believe a competitor’s messaging around its launch of all day breakfast had some impact on our results, particularly in the 10:30 a.m. to noon period.”
  • Sysco has purchased The Brakes Group, a giant European foodservice distributor based in London. The Brakes group has annual revenue of almost US$5 billion and has operations in the United Kingdom, Ireland, France, Sweden, Spain, Belgium and Luxembourg. The transaction is valued at approximately US$3.1 billion. Recently Sysco’s CEO has indicated the company is looking for acquisitions overseas.
  • Food away from home prices increased 0.3 percent in January, the largest increase in the last 4 months. Food at home prices fell 0.2 percent. In the last 12 months food away from home prices are up 2.7 percent while food at home prices are down 0.5 percent in the same time period. What impact this will have on consumers’ eating choices remains uncertain, but some customers could balk at paying higher menu prices.
  • Cracker Barrel plans to open a new concept this spring. Called Haller & Dash, it is described as a fast-casual restaurant committed to Southern food. The operation will be located in Homewood, Ala.
  • McDonald’s franchisees are an unhappy group according to an internal survey that ended up in the media. Franchisees responded negatively to virtually every query, but McDonald’s pointed out that the survey was run in late September and early October. This was before the national rollout of the all-day breakfast program and before sales improved in the last quarter of the year.
  • Rutter’s Farm Stores introduced a large new store format. The new location measures 9,100 square feet, roughly double the size of a typical C-store. Rutter’s describes the new location’s foodservice operation in the new store as “robust.” Customers can use a touch screen kiosk to order fresh-sliced pastrami, Angus beef burgers, wraps, sandwiches, fruit parfaits, homemade salads, and a variety of coffee and other beverages. The foodservice menu is available 24/7 and items are freshly made and can be customized. Rutter’s Farm’s operates more than 60 stores in Central Pennsylvania.
  • Kum & Go debuts a newly designed prototype. The 6,000 square foot store offers as its centerpiece an “elevated foodservice experience with Kum & Go’s ‘Go Fresh Market.’” The chain operates 430 stores in 11 states and plans to open 28 of the new concept stores this year.
  • As part of Fuddrucker’s franchise agreement with TravelCenters of America the burger chain now has a location at a truck stop in Commerce, Ga.
  • Casey’s General Store will open a distribution center in Terre Haute, Ind. The company said the 300,000 square foot, $50 million facility will allow it to expand to the east and south of its current market area. Casey’s is one of a few c-store chains that doesn’t use distributors but delivers to its stores directly from their warehouses.
  • Growth Chains: Sliderz opened its first restaurant in Miami and plans to open six more. Dunkin’ Donuts will open three restaurants in Terre Haute, Ind. Moe’s Southwest Grill has opened its first unit in San Antonio and plans to add six to eight more. Bojangles will open a restaurant in Tallahassee and plans to open “multiple locations” in the area.
  • Comparable Store Sales Reports: Bloomin’ Brands (combined down 2.8 percent, Outback down 2.2 percent, Carrabba’s down 4.0 percent, Bonefish Grill down 5.4 percent, and Flemming’s down 0.3 percent), Burger King up 2.8 percent, Cheesecake Factory up 1.1 percent, Jack in the Box (Systemwide up 1.4 percent, company owned up 0.5 percent, franchised up 1.5 percent), Potbelly up 3.7 percent, Qdoba (System up 1.8 percent. Company owned up 1.5 percent, and franchised up 2.1 percent), Texas Roadhouse (Company owned up 4.5 percent and franchised up 4.0 percent), and Tim Horton’s up 5.8 percent.

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

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