E&S Suppliers Report Mixed Results, Wages of Waitstaff, Acquisition News and More

Foodservice industry suppliers have mixed financial results. Freshii wants to partner with Subway. Waiters and waitresses make more in Western states. Cheddar's, Shophouse and Checkers acquisition news. These stories and a whole lot more This Week In Foodservice.

This blog regularly presents data on the performance of restaurants by providing the Census Bureau retail sales reports. We also monitor other sources, such as the NPD Group’s surveys on customer traffic and the NRA’s Restaurant Performance Index. In addition we look at chain restaurant’s comparable store sales.

We occasionally examine industry suppliers to see how they are doing. Many of the people selling equipment and supplies to the foodservice industry are privately held and do not report their financial results. But there are a dozen publicly held firms that may provide a look at what is happening.

However, there is a major limitation in that virtually all of these companies sell into other industries as well. In some cases, foodservice is only a tiny part of their business.  An excellent example would be the International Paper Company.

For what it’s worth, an examination of these dozen companies most recent quarterly financial statements does show some trends.

First, 11 of the 12 companies were profitable. As for sales, they split down the middle with 6 reporting their sales increased over the corresponding quarter a year ago and 6 reporting sales had declined. The profit picture was a little better with 8 of the companies reporting profits vs. 4 who reported a decline in profits over the corresponding quarter last year. Check out the data here.

Economic News This Week

  • Initial jobless claims rose by 15,000 to 258,000 in the week ending March 18. The 4-week moving average increased by 1,000 to 240,000. Most labor experts feel that any number of claims below 300,000 is acceptable.
  • Existing home sales weakened in February. The National Association of Realtors reported that existing home sales declined 3.7 percent to a seasonally adjusted annual rate of 5.48 million from 5.69 million in January. However, February sales were up 5.4 percent from February 2016. The median existing home price was up 7.7 percent from February last year while the number of homes for sale continues to fall on a year-over-year basis. A spokesman for the National Association of Realtors stated these two factors — higher prices and limited inventory — will continue to constrain existing home sales.
  • New single-family home sales rose in February with the Census Bureau reporting houses sold at a seasonally adjusted annual rate of 592,000. This a 6.1 percent increase from January and a 12.8 percent rise over February 2016.
  • Durable goods orders increased 1.7 percent in February according to the US Census Bureau’s advance report. Transportation equipment orders were up 4.3 percent. Without transportation, durable goods orders were up 0.4 percent. Shipments of manufactured durable goods were up 0.3 percent while unfilled orders were virtually flat for the month.
  • The Nielson Consumer Confidence Index ticked up slightly last year. The Index rose just 3 points between the first and fourth quarters of 2016. The Index found India the most confident nation with a reading of 136 followed by the Philippines at 132 and the U.S. at 123. The bottom of the list was South Korea at 43, the Ukraine next at 52 and Greece at 53.
  • The Gallup Poll Economic Confidence Index remains “strong” but below the recent high. In the week ending March 19 the Index stood at +11, which is 5 points below the Index’s 9-year-high 2 weeks ago. Americans see Current Conditions very positively with this component of the Index hitting +17, the highest it has been in the 9-year history of the study. Consumers are less certain about the future with the Economic Outlook component dropping to +4, down significantly from the +15 reading two weeks ago.

Foodservice News This Week

  • Darden Restaurants agreed to buy Cheddar’s Scratch Kitchen. The announced price is $780 million for the 165-unit chain. Cheddar’s CEO, Ian Baines, will stay on reporting to Darden CEO Gene Lee. Mr. Baines was president of Smoky Bones, which Darden sold in 2008. Cheddar’s current owners, the private equity firms of L. Catterton and Oak Investment Partners, were reported to have paid $180 million for the chain in 2006.
  • Freshii wants to partner with Subway. In an open letter, the Canada-based chain suggests converting “select” Subway operations to Freshii restaurants “in a quick, low cost way.” Freshii’s CEO stated that his company has received “dozens and dozens” of inquires from Subway franchisees interested in opening Freshii units. While both companies base their marketing appeal on healthy eating, Freshii currently has  286 units while Subway has 44,000.
  • The Bureau of Labor Statistics reports there are 2.5 million waiters and waitresses in the U.S. They average about $11 an hour or $23,000 a year. But in some cities, wait staff can earn significantly higher wages. The Bureau identified 10 cities with the best earnings. Half of those cities are in California with another 3 in the state of Washington. Anchorage, Alaska, makes the top 10 but in the #1 position is on the island of Maui with waitresses and waiters in the Kahului-Wailuku-Lahaina area earning $36,000 a year.
  • Panera Bread company will expand their delivery service to Houston. As the chain has done in other markets, they will run the delivery operation themselves. Panera will be hiring 350 workers in the Houston area to support the program.
  • Corporate Stirrings: McDonald’s franchisees won a round in their attempt to get a seat on McDonald’s board of directors when the Security Exchange Commission ruled that the restaurant chain must allow stockholders to vote on matter at the company’s annual meeting. The proposal is for each McDonald’s franchisee to get one share of a special preferred stock for each McDonald’s unit they own. The franchisees could then elect a board member. The stock would not entail any economic interest in the company. Bibibop Asian Grille, a 12-unit chain headquartered in Columbus, Ohio, has agreed to buy Chipotle’s ShopHouse Asian concept. Chipotle announced the closing of the 15 location chain 2 weeks ago. The plan is to rebrand the ShopHouse units as Bibibop’s to take advantage of their excellent locations. Terms of the sale were not revealed. Checkers is being sold to Oak Hill Capital Partners by the current owners, Sentinel Capital Partners. The purchase price is $525 million and includes equity, debt and an investment by Checkers management. Jamba, Inc. says they have received a letter from the NASDAQ stating the company is not in compliance with NASDAQ exchange rules. Specifically, Jamba has not filled the 10-K form for the chain’s year ending January 3. Jamba blames the delay on the company’s relocation of their headquarters from California to Texas and said the form will be filed in the next 60 days.
  • Growth chains: Starbucks plans to open 12,000 units, 3,400 of them in the U.S., in the next 5 years. Marco’s Pizza will open 3 restaurants in Billings, Montana. Bojangles will open 4 restaurants in Virginia in the next 4 years. Anthony’s Coal Fired Pizza will open at least 4 locations in the Chicago area. Quaker Steak & Lube will open 5 to 10 restaurants in the Philadelphia area. Krispy Kreme has signed an agreement to open 25 locations in Peru. Capriotti’s will open 15 new restaurants this year.
  • Comparable store sales reports: Famous Dave’s (company-owned down 5.0 percent and franchised down 5.5 percent), Steak N Shake down 0.4 percent, and Wingstop up 1.0 percent.

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

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