Published on Tuesday, 03 January 2017
Written by Jerry Stiegler
The Food Institute sets “real sales” at restaurants higher than other projections; Worldwide restaurant traffic rose in the third quarter and Technomic believes foodservice sales will improve in 2017.
The Food Institute uses U.S. Census monthly sales numbers, then adjusts the data using the U.S. Bureau of Labor Statistics’ consumer price index figures for food away from home to determine “real” sales at restaurants. It is simply a matter of 3rd grade arithmetic. For 2015, the Food Institute calculates real growth at +6.03 percent. For the first 10 months of 2016, the Food Institute projects real growth at a much slower rate of 3.67 percent.
However, this same formula projects grocery store real sales increased 2.32 percent through October 2016 compared to just +1.8 percent in 2015. That means as real restaurant sales slowed in 2016, grocery store sales real growth increased.
A fair question in evaluating this data: Is it accurate to take two different studies run by two different researchers over different audiences and meld them together? That’s for you to decide but this historical approach does provide some interesting food for thought.
Further, other research groups, such as the International Foodservice Manufacturers’ Association, National Restaurant Association, and Technomic Inc., all place real sales growth at a much lower rate.
Economic News This Week
- The Bureau of Economic Analysis’ third estimate of gross domestic product increased to 3.5 percentfor the third quarter. This was an increase from the Bureau’s second estimate of +3.2 percent and better than the consensus estimate of +3.3 percent. Given weak GDP in the first two quarters of this year, the third quarter brings 2016 in line with other years of the recovery.
- Initial jobless claims rose 21,000 for a total of 275,000 in the week ending Dec. 17. The 4-week moving average increased 6,000 to 263,750. For the week ending Dec. 24, claims fell by 10,000 for a total of 265,000 with the 4-week moving average falling by 750 for a total of 263,000. While the Department of Labor contends that they can accurately adjust the number of claims filled for seasonal variations, some labor experts believe that layoffs following the Christmas season can mess up the numbers.
- November existing home sales rose 0.7 percent from Octoberto a seasonally adjusted rate of 5.61 million. This is a 15 percent increase from November 2015 and the highest since sales hit 5.79 million in February 2007. However, the National Association of Realtors pointed out that sales varied widely, with the Northeast up 8 percent and the South up 1.4 percent, but sales dropped in the West and Midwest. The Association spokesman noted that the supply of homes on the market is down from 9 percent in November 2015, which is pushing up prices. This could weigh on the real estate market in 2017.
- New home sales rose in November to 592,000
- Personal income was virtually flat in November, increasing just 0.1 percent while personal consumption expenditures increased 0.2 percent.
- November Manufactured Durable Goods Orders fell 4.6 percent, led by a 13.2 percent drop in transportation equipment according to the U.S. Census Bureau’s advance report. Durable goods shipments increased 0.1 percent but unfilled orders fell 0.2 percent. New orders for capital goods — equipment used to manufacture other goods — decreased 19.5 percent while defense new orders for capital goods increased 29.1 percent.
- The Conference Board’s Leading Economic Index was unchanged at 124.6 in November. The index was up 0.1 percent in October and up 0.3 percent in September. The Conference Board believes the U.S. economy will continue to expand in the first half of 2017 but growth is unlikely to accelerate.
- The University of Michigan’s Index of Consumer Sentiment hit its highest point since January 2004. The report indicates the rise in consumers’ attitudes to the result of the presidential election. The final reading for December showed the Index for Consumer Sentiment at 98.2, up from 93.8 in November. The Current Economic Conditions Index was at 111.9 vs. 107.3 in November and the Index of Consumer Expectations was at 89.5 vs. 85.2 in November.
- The Conference Board Consumer Confidence Index increased for the second consecutive month. The index rose to 113.7 in December, up from 109.4 in November. The index was driven by a significant increase in the Expectations Index, which jumped to 105.5 from 94.4 in November. But the Present Situation Index fell from 132 in November to 126.1 in the December survey. The Conference Board stated continued consumer confidence will be determined on whether or not expectations are met.
Foodservice News This Week
- The Global Foodservice Market improved in the third quarteraccording to The NPD Group. Visits to European restaurants were at least flat while traffic in Australia, Canada, Great Britain and Japan was up. Brazil, China, Russia, and the U.S. all saw the number of restaurant visits decline.
- Technomic: 2017 “just a little bit better” than 2016.Technomic lowered its 2017 forecast in November but projects sales at full-service restaurants will increase 0.8 percent in real terms (that is, sales with menu price increases factored out) while limited-service restaurants will perform better. Technomic also projects that fast-casual restaurants will continue to be the fastest growing foodservice segment.
- Checkers & Rally’s are using reclaimed shipping containersto build new restaurants. The system reduces both cost and construction time.
- DineEquity plans to open its first combination IHOP and Applebee’s in Detroit at the end of this year. The restaurant will offer a coffee bar and will feature a Detroit-centric design. The company continues to work out the menus and other facets of the restaurant.
- The Murray brother’s Caddyshack restaurant may open a second unit. Details are scarce but rumors are the restaurant will open in Rosemont, Ill. Actor Bill Murray, who starred in the movie, and his brothers opened the first Caddy Shack restaurant in St. Augustine, Fla. The concept is described as a country club gone awry.
- The cashless society is here according to the Sweetgreen salad chain. The 64-location operation will no longer accept cash. The company says the advantages are numerous. The chances of robberies diminish, it is more hygienic and the need for cash registers disappears, along with the need to keep a supply of cash to make change and any armored car expense. It also frees up management time and employees can handle more transactions.
- Tijuana Flats will debut a new design in the Orlando area. The design has a lot of familiar facets for Tijuana customers but will add a grab-and-go area, new furniture, banquettes, pre-finished wood on the walls, sealed concrete floors and a patio with 24 picnic bench seats.
- McDonald’s is being sued because Extra Value Meals cost more than if purchased separately. A lawsuit by an Illinois man claims the individual items cost 41 cents less than the extra value meal bundle. He claims consumer fraud and deceptive practices.
- Corporate Stirrings: Carrol’s Restaurant Group announced an agreement to purchase 43 Burger King Restaurantsin the Cincinnati market. Carrol’s owns 762 Burger King’s in the U.S. GPS Hospitality Group will acquire 194 Burger King restaurants, extending the chain’s reach into Alabama, Arkansas, Florida, Louisiana, and Mississippi. Atlanta-based GPS will have 424 Burger King restaurants, making them one of the 3 top Burger King franchisees in the U.S. Bruegger’s Bagels asked a bankruptcy court judge to accept its bid to take over the company’s largest franchisee and reject a bid from Canal Mezzanine Partners, a lender to the franchisee. Bruegger’s contends that Canal Mezzanine has no experience running a restaurant chain. The operation in question is for 28 stores in upper New York.
- Growth Chains: Marco’s Pizza expansion plans for 2017 include adding 60 stores in Minneapolis, 40 in Pittsburgh, 35 in Kansas City, 25 in Wisconsin, 15 in Iowa, 10 in New Mexico, and 5 in Reno. Sweetgreen will open 30 restaurants this year in the 8 markets where the chain is currently operating. Blast & Brew has signed a 12-unit deal for the central coast area of California. International Dairy Queen plans to open 50 locations in South Korea in the next 5 years. Melt Shop which currently has 4 locations in Manhattan plans to open 7 more this year.
- Comparable Sales Reports: Ark Restaurants down 7.0 percent and Darden (all brands up 1.7 percent, Bahama Breeze up 2.6 percent , Capital Grille up 1.2 percent , Edie V’s up 2.2 percent , Longhorn up 0.1 percent , Olive Garden up 2.6 percent , Seasons 52 down 0.7 percent and Yard House up 0.7 percent).
For details and same-store sales of other chains, see the Green Sheet.