The National Restaurant Association’s Restaurant Performance Index declined in January to a reading of 100.1 percent. Any reading of more than 100 indicates the industry remains in expansion mode.
The overall index was pulled down by the Current Situation Index, which fell by 0.9 percent for a final reading of 98.6. Operators reported that both comparable store sales and traffic declined for the month. The Expectations Index stayed at 101, where it has been for 3 months. Overall, the January numbers seem to indicate that while sales are not doing well now operators think — or at least want to believe — that their sales will pick up in the next 6 months.
As sales turned soft, operators cut back somewhat on investing in their businesses. Just 50 percent of those surveyed said they had made a capital expenditure in the last 3 months for expansion, remodeling and/or new equipment. This is the lowest level of capital expenditures in the last two years.
But operators are more bullish about the future with 55 percent of those surveyed planning to make a capital investment in the next 6 months. This is down only two points from the previous month.
Economic News This Week
- Existing home sales increased 3.3 percent in January, per the National Association of Realtors. This translates into an annual seasonally adjusted rate of 5.69 million homes. Sales were up 3.8 percent compared to January 2016, making this the best sales month in almost a decade. The median price for existing homes increased 7.1 percent from January last year.
- Sales of new single family homes increased 3.7 percent in January to a seasonally adjusted annual rate of 555,000.
- Initial-jobless claims rose 6,000 for a total of 244,000 in the week ending Feb. 18. The 4-week moving average fell 4,000 for a final reading of 241,000. This represents the lowest level for the four-week moving average since July 21, 1973.
- Durable goods orders increased 1.8 percent in January from December, according to the U.S. Census Bureau’s advance report. The increase was driven by sales of transportation equipment, which accelerated by 6.0 percent. Without transportation equipment, new orders declined 0.2 percent. Durable goods shipments were down 0.1 percent and unfilled orders decreased 0.4 percent.
- Consumers will hold on to their income tax refunds. A survey by the National Retail Federation found 66 percent of those surveyed expect a refund but almost half will save the money. Just 7.6 percent of consumers plan to “splurge” on special treats that include dining out.
- The Gallup Organization’s U.S. Economic Confidence Index retreated but still remained in positive territory. The most recent poll was +7, meaning more Americans are positive on the economy than negative. The Current Economic Conditions component of the index remained high at +13 but the Economic Outlook component fell to +1, down significantly from January. Gallup stated that the big drop was due to Democrats and Independents turning negative on the economy’s future. Republicans were just optimistic now as they were last year when the index rose. Perhaps the most interesting aspect of this survey is that it was in negative territory for almost its entire 9-year existence until last November.
- The final February University of Michigan Index of Consumer Sentiment fell from January. The February Index was 96.3 compared to 98.5 in January, the latter of which represents the study’s highest level in a decade. The Current Economic Conditions Index actually increased from 111.3 last month to 111.5 in February. The Index of Consumer Expectations declined to 86.5 from 90.3 in January. A spokesman for the University of Michigan noted that the survey showed “an unprecedented partisan divergence” with Democrats expecting recession and Republicans expecting robust growth.
Foodservice News This Week
- The number of restaurants in operation decreased by 2.0 percent from a year ago, per the NPD Group, which added the decline is the most significant drop since the Great Recession. NPD’s ReCount study states that there are now 620,807 restaurants in the U.S. as of September 2016. The number of independent restaurants declined by 4.0 percent while the number of chain units grew by 1.0 percent.
- Reuters Poll: one-third of consumers are eating out less often than three months ago. Sixty two percent of those who have cut back on their patronage cite restaurant costs as the main reason. On the flip side, 55 percent of those surveyed said they ate out because it was convenient.
- What does Restaurant Business International plan for Popeyes? A Canadian publication speculates that there will be extensive cost cutting, including staff reductions, plus a lot of emphasis on new menu items — especially chicken products — and major international expansion.
- Hand-held menu items account for almost a quarter of foodservice sales according to a study by Technomic Inc. And while burgers are first in sales, Technomic believes Millennial and Generation Z consumers will cause more sales of new types of sandwiches with non-conventional ingredients and flavors.
- Papa John’s cites an usual reason for last quarter’s soft sales. A company executive blamed declining NFL football TV ratings for weak same-store sales. Further, Papa John’s spokesman Peyton Manning played in the Super Bowl last year but now is retired, thus depriving the chain of some marketing impact. Papa John’s reported sales at its North American locations increased 3.8 percent. Sales at its company-owned locations grew by 4.6 percent and franchised locations were up 3.4 percent.
- Corporate Stirrings: Wendy’s sold 30 restaurants in the Virginia Beach/Norfolk area to a new franchisee, the Delight Restaurant Group. Delight plans to open several new Wendy’s restaurants in the area and remodel several existing locations. Price of the acquisition was not provided.
- Growth Chains: Tropical Smoothie Cafe signed a franchise development agreement for 20 cafes in Texas. Dickey’s Barbecue Pit will open restaurants in Georgia, Louisiana, Minnesota and Texas.
- Comparable Store Sales Reports: Cheesecake Factory up 1.1 percent, Cracker Barrel up 0.6 percent, Jack in the Box (system up 3.1 percent, company owned up 0.6 percent and franchised up 3.9 percent), Qdoba (system down 0.1 percent, company owned down 1.4 percent, and franchised own 0.5 percent), Texas Roadhouse (company owned up 1.2 percent and franchised up 2.0 percent) and Zoe’s Kitchen up 0.7 percent.
For details and same-store sales of other chains, refer to the Green Sheet.