In an interview with Columbus Business First, Tom Ryan, co-founder and chief concept officer of Smashburger, said restaurants of the past had trained consumers to choose between convenience or quality. Ryan attributes the success of fast-casual concepts to their ability to provide both convenience and quality.
Ryan added that Smashburger got “room to operate because burgers got ‘commoditized.’” Regarding those fast-food companies now developing fast casual concepts, he says they are “pickpockets on the Titanic. They are just getting in the other guy’s wallet while the ship is going down.”
While Ryan’s points are interesting, it’s also important to note how much the foodservice industry seems to change and evolve. Today’s hot trend can disappear tomorrow. Decades ago fast-casual hamburger places were called “adult hamburger” operators. Most didn’t make it. It seems unlikely that all of the fast-casual hamburger chains will be successful. And the same applies to fast-casual operations of any menu type. Ten years from now it will be interesting to learn who survived and to see what’s emerged as the next big thing.
Economic News This Week
- The U.S. Commerce Department’s second estimate for fourth quarter gross domestic product increased to 1 percent, up from the previous 0.7 percent estimate. One factor driving the increase was a major jump in the valuation of inventories which could come back to haunt the economy this year as the inventory is sold off and production is reduced.
- Initial jobless claims totaled 272,000, an increase of 10,000 for the week ending February 20. The 4-week moving average was 273,250, a decline of 1,250.
- The unemployment rate decreased in 47 states in 2015. Two states – West Virginia and Wyoming – saw the unemployment rate increase. North Dakota’s unemployment rate did not change.
- Personal income increased 0.5 percent in January while personal expenditures also grew by 0.5 percent. In effect, the two neatly offset each other and exceeded forecasts.
- Existing home sales increased 0.4 percent in January to a seasonally adjusted rate of 5.47 million. This is the highest rate since April of last year and is up 11 percent over January 2015. Home prices rose 8.2 percent from January last year.
- Sales of new homes declined in January with the Census Bureau reporting a seasonally adjusted annual rate of 494,000. This is 9.2 percent below December sales and 5.2 percent lower than January 2015.
- Manufactured durable goods orders rose 4.9 percent according to the US Census Bureau’s advance report for January. Transportation equipment drove the increase, jumping 11.5 percent. Excluding transportation equipment, new orders were up 1.8 percent. Shipments rose 1.9 percent and unfilled orders increased 0.1 percent. New orders for capital goods – those products used to manufacture other goods – jumped 21.6 percent.
- The Chicago Business Barometer retreated by 8 points to 47.6 in February. Any reading of less than 50 indicates business activity is contracting. New orders, back orders, and employment all slid into negative territory.
- The Conference Board’s Consumer Confidence Index fell to 92.2 in February from 97.8 in January. The Present Situation Index dropped to 112.1 in February from 116.6 in January. The Expectations Index declined to 78.9 in February from 85.3 in January. A Conference Board spokesperson said they believe the strength of the Present Situation Index suggests that the economy should experience moderate growth near term.
- The University of Michigan February Consumer Sentiment Index improved a bit from the mid-February advance readings but still was down slightly from January. The Index was 91.7 for the month, down from 92 in January. But the Current Economic Conditions Index rose from 106.4 in January to 106.8 in February. The Consumer Expectations Index dropped to 81.9 from 82.7 in January.
Foodservice News This Week
- The number of restaurants declined by 1.0 percent in 2015 according to the NPD Group’s ReCount survey. The number of independent restaurants dropped by 3.0 percent which represents a decline of approximately 11,000 locations. This was partially offset by an increase of 2,000 chain units. There are still far more independent operations than chain restaurants. ReCount puts the number of independent units at 340,135 vs. 288,585 chain locations.
- US Foods agreed to purchase the assets of Cara Donna Provision Co., a Baintree, Mass., distributor servicing New England.
- Saladworks introduced a new look. The chain’s new “open air” design offers warmer earth tones replacing bright primary colors. The redesign includes a WiFi bar and the whole concept is aimed at attracting more millennials. The new look is also less expensive, costing about $494,000 vs. $625,000 for the previous design.
- Chick-fil-A gets disinvited by the University of Nebraska. In January, University of Nebraska students were asked to vote for the foodservice companies they wanted on campus. The number one choice was Chick-fil-A. (Also selected were Panda Express, IHOP, A&W, and Sbarro.) But then a minority of students, including the Queer Straight Alliance, protested because of the chain’s CEO’s view on traditional marriage. If majority ruled and minorities were told if they didn’t like Chick-fil-A’s position on social and legal issues they could protest by not eating there, there wouldn’t be a story. Instead Chick-fil-A was told to get lost.
- Corporate Stirrings:Black Bear Diner received an investment from PWP Growth Equity, a private equity fund. The funds received, the amount of which was not divulged in the press release, will aid the company in expansion. Bob Evans signed sale and leaseback agreements with 2 property companies covering 145 restaurants. The deal will generate $200 million for Bob Evans. Bonefish Grill will close 14 restaurants. Bloomin’ Brands, Bonefish’s parent company did not indicate the locations of the restaurant to be closed. The Bravo Brio Restaurant Group will close some restaurants but the multi concept operator did not state which brands or how many. The only information regarding the units was that the company will probably close restaurants with expiring leases. Bravo Brio reported a $2.7 million dollar loss in their last quarter and a same-store sales decline of 4.6 percent. The chain’s stock price has dropped by half in the past year. The Fiesta Restaurant Group intends to separate its Taco Cabana and Pollo Tropical businesses by the distribution of 100 percent of Taco Cabana stock to Fiesta shareholders and rename Fiesta as Pollo Tropical.
- Growth Chains: Texas Roadhouse will open 30 restaurants this year. Kono USA will add 75 to 100 restaurants in the U.S. this year. Qdoba will open as many as six restaurants in Buffalo. Hot Head Burrito will open three restaurants in Ohio and two in Nevada in the next two months. Pizza Patron will open 60 restaurants in the Houston area in the next 5 years. McDonald’s plans to open 16 restaurants in Kazakhstan. Bojangles signed multi-store development agreements with franchisees in Northern Florida, Georgia and Alabama. Dunkin’ Donuts is looking for a franchisee to open 50 locations in Puerto Rico in the next 7 years. Chuy’s, which currently has 69 restaurants, is looking to double the number of their units in the next 3 to 5 years. Smashburger is targeting casinos for expansion with two casino locations currently operating and two more expected to open this year. Bob’s Steak & Chop Houses will open restaurants in Omni Hotels in Florida, California and New York City. Nestle Toll House Café will open 30 units in the US and 20 in the Middle East.
- Comparable Store Sales Reports: Applebee’s down 2.5 percent, Bravo Brio (Total down 4.6 percent, Bravo down 5.2 percent & Brio down 4.3 percent), Domino’s (System up 10.7 percent, Company owned up 1.0.0 percent & Franchised up 10.7 percent), Fiesta Restaurant Group (Pollo Tropical up 0.4 percent & Taco Cabana up 3.3 percent), IHOP up 1.4 percent, Noodles & Company (System down 0.3 percent, Company owned down 0.2 percent, & Franchised down 0.9 percent), Papa John’s (System up 1.9 percent, Company owned up 3.4 percent & Franchised up 1.3 percent), Popeye’s up 5.9 percent, and Zoe’s Kitchen up 7.7 percent
For details and same-store sales of other chains, Please Click Here for the Green Sheet.