This week in foodservice: McDonald’s determines its competition, Technomic reports supermarket prepared food is growing at a double digit clip and internet sales drive Domino’s volume.

 

McDonald’s new strategy? Burgers.

After a major consumer research effort, McD’s has concluded that its competition was not upscale and/or fast-casual restaurants but rather other fast-food restaurants. So, after years of offering “heathier” menu items, the burger giant will embrace its role as a fast-food operation and improve quality, especially its burgers.

None of this should really be surprising. More than a quarter a century ago an editor I worked with said that people who are really interested in eating healthy are not going to go to fast feeders.

Economic News This Week

  • Gross Domestic Product increased 1.9 percent in the fourth quarter of 2016. This second estimate from the Bureau of Economic Analysis is unchanged from the bureau’s initial estimate and is less than the consensus forecast. While 1.9 percent is far from a stellar performance, it seems most experts took the fourth quarter data in stride and were looking forward to a better performance in 2017.
  • February car and light truck sales declined compared to the same period in 2016 despite heavy incentives from the manufacturers. But while sales declined by 1.0 percent, they remain high on a historical basis, running at 17.5 million annually.
  • Personal income increased 0.4 percent in January while personal spending increased 0.2 percent. The Bureau of Economic Analysis reported that in 2016 personal income increased 3.6 percent compared to a 4.4 percent personal income increase in 2015. Personal spending income increased 3.8 percent vs. a 3.5 percent increase in spending in 2015.
  • The Institute for Supply Management’s Production Manufacturing Index increased 1.7 points in February for a final reading of 57.7. (Any number that exceeds 50 indicates expanding activity.) The New Orders Index jumped 4.7 points for a final reading of 65.1 while the Production Index rose 1.5 points for a final reading of 62.9. But, the Employment Index declined 1.9 points for a final reading of 54.2.
  • The Institute for Supply Management’s Non-Manufacturing Index hit 57.6 in January, an increase of 1.1 points. (Any reading that exceeds 50 indicates expanding activity.) The New Orders Index totaled 61.2, up 2.6 points. The Employment Index read 55.2, a 0.5 point increase. Of the 18 non-manufacturing industries studied by the institute, 16 reported growth in February, including Accommodations & Foodservices.
  • The Chicago Production Manufacturing Index totaled 57.4 in February, an increase of 7.1 points. (Any reading that exceeds 50 indicates expanding activity.) The New Orders Index rose by 10.1 points while the Production Index rose 4.3 points.
  • January construction spending increased 1.0 percent from December on an annual seasonally adjusted rate. Private construction spending increased 0.2 percent and residential construction spending increased 0.5 percent.
  • Initial-jobless claims totaled 223,000, a decline of 19,000 for the week ending Feb. 25. The 4-week moving average was 234,250, a decline of 6,250 claims. The last time both of these totals were this low was in 1973, at which time the number of people in the labor force was much lower.
  • Consumer confidence is on the rise, reports the Conference Board. The organization’s index totaled 114.8 in February, an increase of 3.2 points. The Present Situation Index increased from 130 in January to 133.4 in February. The Expectations Index increased from 99.3 in January to 102.4 in February.
  • The Deloitte Consumer Tracker says consumers were “buoyant” in the fourth quarter of last year. The report shows five of the six measures which make up the confidence index rose in the last year. Further, consumer spending on both essentials and discretionary items rose.

Foodservice News This Week

  • Sales of prepared food in grocery stores surges ahead. Technomic reports prepared food sales at supermarkets grew an average of 10 percent a year from 2005 to 2015.
  • Domino’s pizza sales keep rolling. Domino’s has done an excellent job of using technology to reach consumers and now 60 percent of its sales come from internet buyers.
  • McDonald’s will replace its current ice cream machines. There were numerous complaints that the current models took too long to clean and broke down frequently. This led to customers being told that the ice cream was not available. The new equipment is said to take less time to clean.
  • Wendy’s will install ordering kiosks in 1,000 stores this year. A Wendy’s spokesman said the kiosks appeal to younger consumers who like the ordering process and they also save franchisees money. The cost for 3 kiosks is approximately $15,000 and the payback can be less than 2 years given cost savings and increased sales.
  • Corporate Stirrings: Brinker International will relocate its headquarters to Cypress Lake, Texas. The chain said its current location is outdated and it is not using all the space. The Cypress Lake facility will be customized for Brinker’s needs and the move is expected to occur next year.
  • Growth Chains: Dairy Queen will open 15 locations in Houston over the next 5 years. Russo’s Pizza has an agreement with its franchisee in Saudi Arabia to open up to 60 restaurants in the next 10 years. Fazoli’s will open a restaurant in Tampa and two in Atlanta. Muscle Maker Grill will open two restaurants in Chicago. Wetzel’s Pretzels will open five locations in Texas.
  • Comparable Store Sales Reports: Applebee’s down 7.2 percent, BJ’s Restaurants Inc. down 2.2 percent, Bravo Brio Restaurant Group (Total down 5.5 percent, Bravo 7.5 percent, & Brio down 4.3 percent), Carrol’s Restaurant Group up 3.2 percent, Chuy’s up 1.1 percent, Del Frisco (Del Frisco Grille up 2.1 percent, Double Eagle up 0.1 percent, & Sullivan’s up 0.9 percent), Domino’s (U.S. system up 12.2 percent, company owned up 12.7 percent & franchised up 13.1 percent), Fiesta Restaurant Group (Pollo Tropical down 4.0 percent & Taco Cabana down 3.5 percent), IHOP down 2.1 percent, J.Alexander’s Holdings (J.Alexander’s / Redland’s up 1.8 percent & Stony River Steakhouse down 1.7 percent), Kona Grill down 4.1 percent, Noodles & Company (system down 0.8 percent, company down 0.9 percent, and franchised up 0.1 percent) and Shake Shack up 1.6 percent.
    For details and same-store sales of other chains, refer to the Green Sheet.
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