Consumers are not pleased with full-service restaurants according to the latest survey by the American Customer Satisfaction Index. The full-serve sector saw satisfaction levels decline 3.7 percent to a reading of 78 — its lowest score in 10 years. The chairman of the ACSI calls the finding a “major threat to the restaurant business.” But, some individual chains — Cracker Barrel, Texas Roadhouse, Olive Garden and Red Lobster among others — still satisfy their customers.
Papa John’s scored highest among pizza chains while Panera Bread had the highest rating among sandwich operators. In the coffee category, Dunkin’ Donuts scored a 79 vs. Starbucks at 77.
Customer satisfaction with fast-food restaurants was stable with an overall score of 79. This is the first time in the history of the survey that the fast-food sector scored higher than the full-service group. Chick-fil-A was again number one in the fast-food sector with a score of 87. In the fast-food-burger category, Burger King edged ahead of Wendy’s for the first time, 77 to 76. McDonald’s was way back with a score of 69.
Another view of restaurants is by customer loyalty as determined by inMarket. This study measures repeat device visits from January 2017 to May 2017. Among full-service restaurants, Skyline Chili ranked number one followed in order by Le Pain Quitidien, Frisch’s Big Boy, Morton’s and Waffle House. The full-serve chain with the lowest loyalty ranking was Bucca di Beppo followed by Joe’s Crab Shack, Benihana, Famous Dave’s and The Cheesecake Factory. The fast-food chain with the most loyal customers was Subway, followed by Au Bon Pain, Noah’s, Pret A Manager and Chick-fil-A. The fast-food operation with the lowest loyalty ranking was Shake Shack, followed by Long John Silver’s, Charley’s Grilled Subs, Sbarro and A&W Restaurants.
Economic News This Week
- Existing home sales increased 1.1 percent in May to a seasonally adjusted annual rate of 5.62 million. The increase in existing home sales followed a decline in April but still represented a 2.7 percent increase from May 2016. The rise in sales came despite historically low inventory and increasing home prices. A spokesman for the National Association of Realtors characterized the price increases as “unsustainable.”
- New single family home sales increased 2.9 percent in May from April to a seasonally adjusted annual rate of 610,000. This is an increase of 8.9 percent compared to May 2016.
- Home builder confidence edged down in June. The National Home Builders Association/Wells Fargo Housing Market Index declined by 2 points for a reading of 67. The NAHB described these results as “solid” but added that builders remain frustrated over the shortage of skilled labor and building lots.
- Initial-jobless claims totaled 241,000, an increase of 3,000 in the week ending June 17. The 4-week moving average totaled 244,750, an increase of 1,500. There certainly is no cause for alarm in this Department of Labor data.
- New orders for manufactured durable goods declined 1.1 percent in May
- The Gallup organization’s U.S. Economic Confidence Index has been consistent throughout May and June, remaining in the +4 percent to +2 percent range. The Current Conditions Index has been running around +9 percent while the Economic Outlook Index has been hovering around -4.
Foodservice News This Week
- Consumers who download third-party delivery apps continue to visit restaurants. That’s the finding of a study that tracked 21 million anonymous restaurant visits for 90 days before and 90 days after they downloaded third-party delivery apps including UberEats, GrubHub and Postmates. According to research firm Sense360, there didn’t seem to be any impact on the number of visits, at least in the short run.
- Casey’s General Store launched a prepared foods delivery program from a number of its Omaha and Carter Lake, Iowa, stores. The program includes pizzas, subs, wraps and other food items. The c-store chain typically sees a 30 percent to 40 percent increase in pizza sales when it offers delivery and a 20 percent to 30 percent increase in total prepared food and fountain drink sales after customers have the option of delivery.
- Food halls remain on the rise. A foodservice consultant estimates there are 35 to 40 food halls in the U.S. now but there could be as many as 200 in 3 years. Consumers like food halls because they offer various options and carry an aura of excitement. Operators like them because food halls have lower startup costs and can have much higher sales per square foot. Food halls have been successful in major cities like New York, Chicago and Los Angeles.
- McDonald’s “new” Quarter Pounder raises a question. Made from a fresh, not frozen, beef patty, the new Quarter Pounder is put on the grill only when a customer orders it. McDonald’s says it will take only one minute longer to serve the customer but critics say that one minute is important. There are reports that drive-thru customers ordering the new item are being told to pull out of line and park. Further, some believe that the on-demand Quarter Pounder will put more stress on the kitchen, particularly during peak meal periods.
- Corporate Stirrings: Punch Bowl Social, sort of a low-tech version of Dave & Busters that offers a southern-style, made-from-scratch menu along with games like pool, skee-ball, bowling and pinball, has received a growth investment from the L. Catterton Growth Fund. Punch Bowl Social has nine units in operation and another dozen in development. Buffalo Wild Wings is proceeding with its previously announced plan to re-franchise some of its company-owned locations. BWW has hired he Cypress Group to manage the program and has identified 85 restaurants in Canada, Central and Eastern Pennsylvania, Northeast U.S., South Texas and Washington, D.C., that will be offered for sale. A Tim Hortons franchisee has filed a class action suit against the chain’s owner Restaurant Brands International. The franchisee operates two Tim Hortons but has invited other franchisees to join the suit. The suit claims that since RBI bought the chain expenses have risen but corporate management won’t allow price increases. The lawsuit also claims misuse of franchisees’ marketing funds. Jamba Juice’s franchisee in the Chicago market, SuSu Hospitality, has acquired 13 company-owned stores and will open an additional 10 stores. The U.S. trustee for the Ignite Restaurant Group’s bankruptcy petition has filed a position paper with the U.S. Bankruptcy Court stating the $50 million bid is too low to cover secured debt. Potbelly Corporation is under pressure from Ancora Advisers LLC, which owns 4.0 percent of the chain’s stock. The activist investor wants Potbelly to franchise more of the company’s stores or to sell to an existing chain that is good at franchising. Potbelly Corporation announced last month that their CEO/Chairman Aylwin Lewis will leave the company in August.
- Growth Chains: Fruta Bowl plans to open 100 stores this year. The Jamba Juice franchisee in the Chicago market has signed a 10-unit development agreement. A Church’s Chicken Toronto franchisee opened the first of 25 locations the company will add in the next 8 years. Sonic Drive-ins expects franchisees to open 65 to 75 restaurants this current fiscal year. Chick-fil-A will open 2 locations in the Columbus, Ohio, area. Little Caesar’s plans to open 30 restaurants in Chile.
- Comparable Store Sales Reports: Sonic-Drive Ins (system down 1.2 percent, company owned down 3.2 percent and franchised down 1.1 percent.)
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