Published on Tuesday, 12 April 2016
Written by Jerry Stiegler
Economists predict more of the same ahead. Fast-casual growth continues to outpace the foodservice industry. A Domino’s franchisee in Australia has ambitious expansion plans. KFC “re-colonelizes.” These stories and a whole lot more This Week in Foodservice.
Economists see slow growth ahead but no recession. A Wall Street Journal survey of 69 economists found they have trimmed back their estimates for both gross domestic product and job creation. One economist stated the risk for lackluster growth is much greater than having full blown recession. The average estimate of a recession was 19 percent in this survey vs. 20 percent the month before.
Some economists see weakness in Europe and Japan and a slowdown in China as the biggest threats to the U.S. economy. Another risk comes in the form of U.S. politics. Last month a number of economists stated that the election of either Donald Trump or Bernie Sanders “could pose a significant risk to the economy next year.”
The puzzling aspect of the economy has been that while there has been no relapse since the end of the “Great Recession,” neither have the predictions for stronger recovery come to fruition.
Economic News This Week
- Initial jobless claims totaled 267,000, representing a decline of 9,000 for the week ending April 2. The less volatile 4-week moving average was 266,750, an increase of 3,500.
- The Institute for Supply Management’s Non-Manufacturing Survey showed service business activity grew for the 74th consecutive month. In March the index rose 1.1 percentage points from February to 53.4 percent. The New Orders Index increased 1.2 percentage points to 55.5 percent while the Employment Index rose 50.3 percent, an increase of 0.6 percentage points over February. The Accommodation & Foodservice industry was among the 12 non-manufacturing industries reporting growth in March.
- Factory orders for manufactured goods declined by 1.7 percent in February according to the U.S. Census Bureau’s full report. New orders for durable goods fell by 3.0 percent and new orders for manufactured non-durable goods fell 0.4 percent. Shipments and unfilled orders also declined for all categories.
- Consumer borrowing increased 5.8 percent in February on a seasonally adjusted annual basis. Revolving credit (mostly credit card debt) bounced back in February, rising 3.7 percent after declining by 0.3 percent in January. Non-revolving credit, such as auto loans, student loans, etc., rose 6.6 percent for the month.
Foodservice News This Week
- Fast-casual restaurants keep growing. The NPD Group reports the fast-casual segment increased its number of units by 5 percent to 19,043 locations. Consumer traffic for the segment increased 6.0 percent compared to just a 1 percent traffic increase for the foodservice industry as a whole. Here’s a quick look at the top five fast-casual chains by number of units and their unit growth in the past year: Chipotle (1,896 units, up 9.0 percent) Panera Bread Co. (1,869 locations, up 9.0 percent), Panda Express (1,729 units, up 5.0 percent), Five Guys Burgers & Fries (1,225 units, up 4.0 percent) and Firehouse Subs (925 restaurants, up 10.0 percent).
- Domino’s Australian franchisee strives to develop a program called Project 3-10. By using new high speed cooking technology, the chain wants to offer a pizza to in-store customers in three minutes. And, through the use of military-grade robots, Domino’s plans to deliver a pizza in 10 minutes. Currently, the company’s best cooking time is four minutes and it will take three years before the wheeled robots will be ready to be on the streets.
- KFC Announces a “Re-Colonelization”, a recommitment to the standards set by Colonel Sanders. Every KFC manager and cook has been recertified in the 25-minute process for prepping and cooking the chain’s renowned Original Recipe chicken. KFC will offer a new satisfaction guarantee as well as remodel 3,000 stores in the next 3 years.
- Mexico invades Texas. More properly, two Mexican c-store chains have set their sights on entering the Texas Market. PEMEX, the Mexican state-owned petroleum company, may have slowed its investment due to the fall in oil prices but OXXO seems to be moving ahead with the company’s plans to open 90 stores a year for the next 10 years. OXXO has the reputation to be able to build quickly and effectively.
- Coffee shops are the rage in South Korea with nearly one in every two buildings featuring a coffee shop in fashionable areas in southern Seoul. But the crowded market has led to price cutting which in turn has caused operators to believe they’re at a saturation point. C-stores such as 7-Eleven sell coffee at 1,000 won or 87 U.S. cents, a price which coffee shops claim won’t allow them any profit.
- California Pizza Kitchen opened a flagship restaurant in Las Vegas. The new location features an extensive new menu as well as a fascinating new design and décor.
- US Foodservice will close its Maryland distribution center and shift operations in the region to Virginia and Pennsylvania. In announcing the move, the company attributed the closings to being unable to negotiate cost savings with Maryland facilities’ unions.
- Growth Chains: Domino’s Australian franchisee plans to grow to 4,250 units by 2025, an increase of almost 2,000 from its current number of stores. Paris Baguette, which currently has 345 restaurants in the U.S., will open 350 locations by 2020 with California, New Jersey, New York and Pennsylvania serving as immediate growth areas. Dunkin’ Donuts signed 4 development deals with separate franchise groups for a total of 29 restaurants in California and also signed a new franchisee that plans to open 10 restaurants in Oklahoma and 4 in Arkansas. Slim Chickens plans to open 10 restaurants in the Houston area in the next 3 years. Dickey’s Barbecue plans to open 10 restaurants in Arizona in the next 5 years. McAlister’s Deli will open 5 restaurants in Nebraska. Bruster’s Real Ice Cream plans to open 10 stores in South Korea.
- Comparable Store Sales Reports: Bad Daddy’s up 1.9 percent, COSI up 2.2 percent, Darden (Bahama Breeze up 6.5 percent, Capital Grille up 4.3 percent, Eddie V’s up 1.3 percent, LongHorn up 5.2 percent, Olive Garden 6.8 percent, Seasons 52 up 5.3 percent & Yard House up 3.1 percent), Good Times Burgers up 0.5 percent, and Ruby Tuesday down 3.1 percent.
For details and same-store sales of other chains, Please Click Here for the Green Sheet.