Slow but not Slowing Economic Growth, Burger Giant Readies Fast-Casual Design and More!

Knapp-Track reports weak sales in March for casual restaurant chains. First time jobless claims hit a 40-year low. Global foodservice sales rose in 2015. The Wawa c-store chain is staffing up with foodservice managers. Shake Shack needs to improve their site selection process for new restaurants. These stories and a whole lot more This Week In Foodservice. 

The Knapp-Track data for March showed a 2.1 percent increase in same store sales for the 50 plus casual restaurant chains that participate in Mr. Knapp’s study. Guest counts, however, declined 3.6 percent. This data would indicate a check increase of 1.5 percent which is the lowest year-over-year increase in almost 2 years. Same-store sales and traffic counts were down all 4 weeks of the month. The second week of the month was the worst, not the week including the Easter holiday.

Same-store sales for the first quarter were down 0.7 percent marking the first time in 6 quarters that comp sales were not up or at least flat.

The March results are particularly disappointing, given moderately good overall economic performance and a reasonably good jobs picture.

Mr. Knapp reported that early April results might indicate an improving sales performance but he thinks that consumers are being influenced by non-economic factors such as the political campaigns.

The Knapp-Track data and Mr. Knapp’s observations are courtesy of Bank of America Merrill Lynch.

Economic News This Week

  • Initial jobless claims hit a 40-year low for the week ending April 16. First-time claims totaled 247,000, a decline of 6,000. The less volatile 4-week moving average was 260,500, a decline of 4,500.
  • March housing starts were at a seasonally adjusted annual rate of 1,089,000. This is 8.8 percent less than the number of February 2016 housing starts but 14.2 percent more than March 2015. Single family home starts were 9.2 percent less than February 2006. Building permits issued for housing in March were 1,086,000 on a seasonally adjusted annual basis, which represents a 7.7 percent decline from February but a 4.6 percent increase compared to March 2015. Single family permits issued were down 1.2 percent from February.
  • Sales of existing homes increased 5.1 percent in March for a seasonally adjusted annual rate of 5.33 million. Median existing home prices were up 5.7 percent from March last year.
  • New home sales reached a seasonally adjusted annual rate of 511,000 in March. The U.S. Census Bureau reported that new homes sales fell 1.5 percent from February 2016 but rose 5.4 percent from March 2015.
  • The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey plummeted in April with the current activity index falling to minus 1.6 from 12.4 in March. The new orders index also tumbled, dropping to 0 from 15.7 in March. The current shipments index crashed to minus 10.8 from 22.1.
  • The Conference Board’s Leading Economic Index increased 0.2 percent in March after dropping 0.1 percent in February and 0.2 percent in January. The Index now stands at 123.4 with a base of 100 in 2010. The Board sees slow growth ahead but not slowing growth.

Foodservice News This Week

  • Global Foodservice sales grew 5.7 percent in 2015. This is up from 5.3 percent in 2014 according to a newly released study from Euromonitor International. The fast casual segment was the strongest growth area with sales up 10.4 percent.
  • C-store chain Wawa has hired a food and beverage manager and a food and beverage supervisor for each store. The 725-unit operation reports more than 50 percent of its sales comes from foodservice.
  • Shake Shack is not efficient at picking sites according to Bloomberg Intelligence’s analysis of a Fishbowl study. Weaker site selection may put the chain’s high average unit sales at risk while also limiting dollar sales growth. Shake Shack’s goal is to have 450 restaurants but the company’s shares are down 41 percent in the last 12 months due to slow sales growth.
  • Qdoba Mexican Eats tests a full bar concept. The operation in Kansas City, Mo., is the first corporate restaurant to offer a bar. A franchised unit in Philadelphia has a bar. The company’s idea is to attract consumers who are not just looking for a fast meal but want to have a place to “gather.”
  • What is being billed as McDonald’s first fast-casual restaurant is scheduled to open this July in St. Joseph, Mo. As for appearance the restaurant is said to look more like a casual restaurant with arm chairs and couches for “hanging out.” The new design will have table service and also offer customized burgers and unlimited French fries.
  • McDonald’s turnaround rolls on. Big Mac reported a strong first quarter with global comparable store sales up 6.2 percent. U.S. comparable store sales were up 5.4 percent driven by the all-day breakfast program and the McPick 2 promotion. Total corporate sales were down 1.0 percent but were up 3.0 percent on allowing for currency valuations. Earnings per share were an impressive $1.23 vs. $0.84 per share in the first quarter last year. The per share earnings significantly beat the consensus forecast of $1.16.
  • Starbucks says food items now account for 20 percent of its U.S. sales. Not too long ago, that figure was less than 5 percent.
  • Corporate Stirrings: Bob Evans announced the completion of two sale-leaseback agreements. One agreement involved 117 Bob Evans restaurant properties to National Retail Properties and the second to Mesierow Realty Sale-Leaseback, Inc. for 26 Bob Evans restaurant properties. The total revenue generated by the arrangement is $197 million. Travel Centers of America has completed its previously announced acquisition of the Quaker Steak & Lube restaurant chain. Quaker Steak has 10 company owned restaurants as well as well as 40 franchised locations. Terms of the acquisition were not disclosed.
  • Growth Chains: Tropical Smoothie Café has signed franchise agreements for 36 new cafés in the first quarter of this year. Muscle Maker Grill will open restaurants in the Texas cities of Dallas, El Paso and Houston. Starbucks will open 12 to 15 stores in South Africa in the next 2 years. Margaritas Mexican Restaurants plans to open 10 units in the Northeastern U.S. Smashburger will open at least 5 restaurants in Broward County, Fla. The Roy Rogers chain will open six restaurants. The Your Pie franchisee in North Carolina plans to add three to five locations in the next five years.
  • Comparable Store Sales Reports: BJ’s Restaurants up 0.6 percent. Brinker International (Chili’s Company owned down 4.1 percent, Chili’s Franchised US down 1.7 percent, & Maggiano’s up 0.2 percent), McDonald’s up 5.4 percent, Starbucks up 7.0 percent, And YUM Brands (KFC up 1.0 percent, Pizza up 3.0 percent, & Taco Bell up 1.0 percent.)

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

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