This Week In Foodservice: Restaurants Meet Customer Demands (Minus Noise); Obamacare Impacting Restaurant Sales (Says One); and Chipotle Abandons Asian Concept (in Favor of Burgers and Pizza)
Stories worth a second look this week: Consumer Reports shows full-service chains are doing well in meeting customers’ needs. The CKE Restaurant chief says Obamacare is hurting restaurant sales. Chipotle will give up on its Asian concept to develop the company’s burger and pizza concepts. Round Table Pizza’s Clubhouse design pays off in enhanced sales performance. Plus, comparable store sales for a dozen chains. These stories plus a whole lot more This Week In Foodservice.
The November issue of the widely respected Consumer Reports magazine featured an evaluation of 232 full-service restaurants based on a survey of thousands of the magazine’s readers. The study was by no means a love letter to the industry. The number one complaint was noise, with the three biggest offenders being Texas Road House, Duffy’s Sports Grill and Dave & Busters. Taco Mac had the dubious distinction of being the worst offender in the poor service category. While problematic food prep was the third biggest area for complaints, none of the chains doing badly in this area really stood out. And, while we frequently hear that lack of cleanliness is the biggest customer turn off, it was only the fourth major problem in the Consumer Reports survey, with the top offenders being Huddle House and Waffle House.
Moving down the overall rankings, determined by consumers’ overall satisfaction, a score of 100 meant customers were totally satisfied, a score of 80 score meant diners were very satisfied, while 60 indicated customers felt fairly well satisfied. The restaurants were divided into 10 categories. The article stated that differences of less than 5 points are not meaningful.
The first thing that stood out was how close the rankings fell. The highest score was an 88 (Hillstone) but less than a dozen chains scored better than an 85. But, no chain scored less than an 80. In 6 of the 10 categories the range was 85 to 80 or less. In other words, the data would indicate that all of the operations are seen as performing pretty much equally in the eyes of their customers.
There are probably chain executives that would state the only acceptable score is 100 for a completely satisfied customer. Further, research has shown a significant difference between a satisfied customer and a totally satisfied customer. A score of 100 may be a great goal to shoot for but in the real world it is difficult to get a totally satisfied customer. Some people simply won’t give anyone the top score. In truth, a very satisfied customer is a great evaluation and thus, the study says the industry is doing very well. This is probably why studies of customer satisfaction in various industries show that restaurants are at or near the top of the list in meeting their customers' demands.
Economic News This Week
- The Department of Commerce reports Gross Domestic Product rose 2.9 percent in its advance estimate for the third quarter. The composite forecast was a mediocre +2.4 percent. GDP grew 1.4 percent in the second quarter. The third quarter estimate is the highest GDP has been since the third quarter of 2014.
- Initial jobless claimstotaled 258,000, a decline of 3,000 for the week ending Oct. 22. The 4-week moving average totaled 253,000, an increase of 1,000. This marks the 86th consecutive week that claims have been less than 300,000. The last time this occurred was in 1970 when the U.S. labor force was considerably smaller.
- New single family home sales increased 3.1 percent in September compared to August 2016. The U.S. Census Bureau reports sales, on a seasonally adjusted annual basis, were also up 29.8 percent vs. September 2015.
- Deloitte University’s 2016 Deloitte Holiday Survey forecasts a 3.6 percent to 4.0 percent increase in holiday sales. Consumers plan to spend as much online as they do in stores. Deloitte predicts a 17 percent to 19 percent increase in sales on the internet.
- Durable goods orders declined 0.1 percent in September, according to the . This follows two consecutive months of increasing new orders. Excluding transportation equipment, durable goods orders increased 0.2 percent. Shipments of capital durable goods, i.e., equipment used in the manufacturing of other goods, grew by 1.5 percent.
- The MNI Chicago Business Barometer declined 3.6 points in October to 50.6. Any number that exceeds 50 indicates expansion. The Production Index fell 5.4 points to 54.4 but remained above the average for 2016. New Orders and Order Backlog stayed in negative territory but the Employment Index rose back into the expansion area.
- The Conference Board Consumer Confidence Index fell to 98.6 in October from 103.5 in September. The Index had advanced in August and September. The Present Situation Index fell to 120.6 from 127.9 in September. The Expectations Index also declined, dropping from a September reading of 87.2 to 83.9. Nevertheless, a Conference Board spokesperson said that the economy should continue to expand moderately in the near term.
- The University of Michigan Index of Consumer Sentiment slipped in its final October reading to 87.2 from 91.2 in September. This is the same record low of last September and is the lowest level since October 2014. The Current Economic Conditions Index dipped 1.0 percentage point from September while the Index of Consumer Expectations fell to 76.8 from 81.7 in September. A spokesperson for the University said the October results may simply be consumer uncertainty over the presidential election.
Foodservice News This Week
- The CEO of CKE Restaurants blames the “restaurant recession” on Obamacare. In an op-ed piece in the Wall Street Journal, Andy Puzder, the outspoken chief of Hardee’s and Carl’s Jr., said rising healthcare premiums and declining coverage are responsible for a slowdown in restaurant sales, with consumers spending dollars on healthcare that they would prefer to spend eating out.
- Chipotle will move on from ShopHouse, its Southeast Asian concept and concentrate on developing its pizza operation, Pizzeria Locale, and its burger concept, Tasty Made. Chipotle said it “will pursue strategic alternatives” for the ShopHouse chain, which probably means the company will look to sell the 15 restaurants it now has.
- Round Table Pizza has hit higher unit volumes due to its Clubhouse concept. The pizza chain reports sales at its Clubhouse locations improved by almost 50 percent in 2015 vs. its average Round Table Pizza unit. Round Table Pizza has 14 clubhouse restaurants in operation with 14 more scheduled by the first quarter of 2017.
- More than 40 percent of U.S. adults have ordered food for delivery in the past 3 months according to Mintel data in an article in The Washington Post. Nearly 60 percent of adults said they did so to avoid going out. Millennial men were the biggest consumers of delivered food, with 69 percent using the service.
- Jack in the Box has partnered with delivery service DoorDash in San Francisco. Jack in the Box’s entire menu will be available for delivery and the service will be available up to 3 a.m.
- GrubHub’s takeout and delivery revenue grew 44 percent to $123.5 million in the quarter ending Sept. 30. Earnings per share rose 92 percent while “active diners” increased 19 percent to 7.69 million. The criticism of the delivery concept when it was first developed was that it would be difficult to make money. It appears that GrubHub has determined how to do that.
- Corporate Stirrings: Fiesta Restaurant Group closed 10 Pollo Tropical restaurants. This includes eight restaurants in Texas and one each in in Nashville and Atlanta. Up to three of the locations in Texas will be rebranded as Taco Cabana restaurants. Some months back the chain announced its plans to sell Pollo Tropical, then reversed that decision and reports now indicate plans to possibly sell the entire company. The Buffalo Wild Wings CEO is giving “thoughtful consideration” to proposals from an activist investment firm that the chain diversify its board of directors, make some executive changes, and refranchise most of its company-owned units.
- Growth Chains: Mooya will open 30 restaurants in 2016, which will give the chain more than 150 locations. Tim Horton’s plans to expand in the United Kingdom and the Philippines. Dickey’s Barbecue Pit has opened restaurants in Texas, Colorado, and South Carolina.
- Comparable Store Sales Reports: Arby’s up 2.4 percent, Bloomin’ Brands (combined down 0.7 percent, Outback down 0.7 percent, Carabba’s down 2.1 percent, Bonefish Grill up 1.7 percent, and Flemming’s down 1.9 percent), Brinker International (Chili’s company owned down 1.4 percent, Chili’s franchised down 1.6 percent & Maggiano’s down 0.6 percent), Buffalo Wild Wings (company owned down 1.8 percent and franchised down 1.6 percent), Captain D’s up 2.8 percent, Cheesecake Factory up 1.7 percent, Chipotle down 21.9 percent, Kona Grill up 0.7 percent, Panera Bread (system up 1.7 percent, company owned up 3.4 percent and franchised up 0.2 percent), and Ruth’s Chris up 2.1 percent.
For details and the same-store sales of other chains, read the Green Sheet