New Labor Rule’s Effect on Foodservice, Operators Optimistic for the Future and More

A new labor department rule on overtime pay may have major impact on foodservice. An American Express survey finds operators are optimistic about the future. The NPD Group says independent operators are spending more with broadline distributors. These stories and a whole lot more This Week In Foodservice.

Knapp-Track reported that the 50-plus casual-dining chains that participate in its survey saw same-store sales decline 0.6 percent and guest counts down 3.1 percent. (This would imply that check average was up 2.5 percent, the largest increase since June 2015.)

Knapp notes that given the negative tone of many of the chains’ conference calls, April results would have been expected to be worse.

Sales varied significantly within the month, with the first week coming out marginally positive and the last week of the month coming on strong with both same-store sales and guest counts in positive territory. It will be interesting to see if the performance in late April carries over into May.

Knapp-Track data is courtesy of Bank of America Merrill Lynch.

Economic News This Week

  • The Consumer Price Index rose 0.4 percent in April on a seasonally adjusted basis. All items without food and energy prices – the “core” index – was up 0.2 percent for the month. In the past 12 months all items were up 1.1 percent without seasonal adjustment. The core index was up 2.1 percent in the last 12 months, again on an unadjusted basis. (For the CPI for food, please see Foodservice News This Week below.)
  • Initial jobless claims declined by 16,000 to 278,000 in the week ending May 14. The 4-week moving average fell by 7,500 to 275,500. In the 2 previous weeks the number of claims filed had increased substantially.
  • The Empire State Manufacturing Survey found business activity declined sharply in May for New York manufacturers. The General Business Conditions Index fell 19 points to minus 9.02 after running in positive territory for March and April. (Any number over zero indicates positive business activity. Any number under zero indicates contracting business activity.) The New Orders Index declined by 16 points to minus 5.54 while the Shipments Index fell by over 11 points to minus 1.94.
  • Industrial production rose 0.7 percent in April after falling in February and March, according to the U.S. Federal Reserve. From April 2015 thru April 2016 industrial production is down 1.1 percent. Capacity utilization rose 0.5 percentage points in April to 75.4 percent and now stands 4.6 percentage points below its long run (1972-2015) average.
  • The Philadelphia Federal Reserve’s May Manufacturing Business Outlook Survey was unchanged at minus 1.8. The index has been negative for 8 of the last 9 months. The New Orders Index decreased from flat in April to minus 1.9 in May. The Shipments Index rose 10 points but the Unfilled Orders and Delivery Times Index remained in negative territory.
  • Privately owned housing starts rose 6.6 percent in April at a seasonally adjusted annual rate vs. March but declined 1.7 percent from April 2015. Single-family housing starts were up 3.3 percent from March. Building Permits on a seasonally adjusted annual rate rose 3.6 percent in April from March but fell 5.3 percent from April 2015. Single-family permits issued rose 1.5 percent from March.
  • Existing home sales rose 1.7 percent in April from March to a seasonally adjusted annual rate of 5.45 million. The National Association of Realtors also reported sales are up 6.0 percent from April 2015 and that the median price for existing homes sold in April was up 6.3 percent from April 2015.
  • The Conference Board’s Leading Economic Index increased 0.6 percent In April to 123.9. The Index base of 100 is from 2010. The Leading Economic Index was flat in March and down 0.1 percent in February. A spokesman for the Conference Board believes that the data points to “a moderate growth trend continuing in 2016.” 

Foodservice News This Week            

  • Labor Department ruling means overtime pay is mandatory for 4.6 more million workers. The Department of Labor has raised the threshold of earnings for overtime pay from $23,660 to $47,476. Unless employees earn more than the latter amount they will now earn time and half pay if they work more than 40 hours a week. While employers predict that some employees will have their hours cut and that fewer full-time employees will be hired, the Labor Department contends the new rule simply adjusts the pay scale for inflation. The foodservice industry will be effected by the change because a lot of crew chiefs, assistant managers and even store managers earn less than $47,000 a year.
  • Restaurants are bullish on the future, according to a recent survey of 500 operators by American Express. The report found 39 percent of operators look for the economy to expand in the next 6 months, which will drive an increase in their businesses and 32 percent said their business would grow in the next 6 months regardless of what happens to the economy. The study also reported that technology would help them attract more customers with mobile payments being the most important aspect of new technology. The American Express survey is part of the Food & Wine Classic to be held next month in Aspen.
  • The NPD Group reported that independent restaurants spending with broadline distributors has increased year over year for the last 2 years. NPD says that independent operators suffered most by the economic downturn and high commodity costs but those that survived are doing well.
  • The Consumer Price Index for food away from home rose 0.2 percent in April while prices for food at home increased 0.1 percent. Both stats are adjusted for seasonal variations. In the past 12 months the price for food away from home is up 2.7 percent while the price for food at home has declined 0.3 percent.
  • Taco Bell is testing four new restaurant designs. Stating that “One size no longer fits all…” the chain offers the following new designs: Modern Explorer, California Sol, Heritage and Urban Edge. The chain expects franchisees to select one of the concepts when building a new unit or modernizing an existing one. Taco Bell declined to provide cost data for the new designs.
  • The Performance Food Group Company announced that in the firm’s last fiscal quarter net sales rose 3.0 percent, case volume increased by 4.1 percent and income increased by 224 percent to $9.4 million.
  • Burger King has opened a restaurant in Finland with a spa. The Helsinki restaurant offers 2 different saunas which the chain says are “ideal for birthday parties and social gatherings.” The cost of the Whopper-themed saunas starts at $285 USD for 3 hours.
  • Amazon launched restaurant meal delivery in New York City. There are over 350 restaurants participating in the delivery program but the service is only available to Amazon customers who belong to Amazon Prime Now and who pay either $99 a year or $10.99 a month. There will not be any delivery fees or service fees but the restaurant must pay Amazon 27.5 percent of cost of each order. Restaurants cannot raise menu prices or charge extra fees.
  • Breakfast consumption is forecast to grow by 5.0 percent thru 2019. The NPD Group says the growth will be both in home and away from home. In the year ending February 2016 breakfast visits to quick-serve restaurants rose 5.0 percent on top of a 3.0 percent increase a year earlier.
  • Corporate stirrings: Famous Brands has taken a 51 percent stake in Salsa Mexican Grill. Both firms are based in South Africa.
  • Growth Chains: Which Wich with 390 locations currently, plans to open 75 more restaurants this year. Shake Shack will open 16 restaurants in the U.S. this year. Taco Bell plans to open 2,000 new restaurants by 2022. The Freshii chain has opened restaurants in Walgreen stores, in Chicago and Miami, and said more partnerships with Walgreens are planned. Pizza Patron has signed a development agreement for 6 stores in the Brownsville, Texas, area. Pei Wei Asian Diner will open 15 restaurants this year.
  • Comparable store sales reports: CEC Entertainment* up 6.0 percent (Note: CEC Entertainment combined the comp store sales of Chuck E. Cheese and Peter Piper Pizza. This has not been the company’s reporting procedure in the past. A call to the company seeking an explanation was not returned before our deadline.), Kona Grill up 3.6 percent, One Hospitality Group up 2.4 percent, Papa Murphy’s down 2.8 percent, Red Robin down 2.5 percent, and Texas Roadhouse (company-owned up 4.6 percent and franchised up 3.1 percent).

For details and same-store sales of other chains, please click here for the Green Sheet.

Related Articles