July Restaurant Performance Weak, August Foodservice Hiring Slowed, New KFC Concept in China, and More

The National Restaurant Association reports restaurant performance was weaker in July. Foodservice hiring slowed in August. Waffle House takes on Hurricane Harvey. Domino’s has formed an alliance with Ford to develop a self-driving delivery car. YUM! China introduces a new KFC concept. These stories and a whole lot more This Week in Foodservice.

The National Restaurant Association’s Restaurant Performance Index slipped in July to 100.6, down from 101.0 in June. Both major components of the RPI declined.

The Current Situation Index fell 0.3 percent for a final reading of 100.4 in July. More operators (46 percent) reported an increase in same-store sales in July than reported a decrease (42 percent). In June, however, 54 percent of operators reported an increase and 34 percent reported a decrease. Customer traffic had a net decline in July with 48 percent reporting a decline vs. July 2016, while 37 percent of operators say their traffic increased over that same period.

The Expectations Index declined 0.5 percent for a final reading of 100.8 in July. Thirty two percent of those surveyed believe sales will be up in the next six months, down 10 percent from June and the lowest level since December 2016. While 28 percent of operators think the economy will improve in the next 6 months, an improvement from just 16 percent last month, 20 percent of the operators think the economy will be worse, which is the highest level since October 2016.

The purchasing picture was mixed with 62 percent of the operators stating they had made a capital expenditure for equipment, expansion and/or remodeling in the last 3 months. This is up a bit from 59 percent last month. The National Restaurant Association pointed out this level has essentially been unchanged for 6 months.

As for future investments, the news was not as good with 50 percent of the survey respondents planning capital investments. In the last 12 months, the average for this question was 59 percent with the low being 55 percent. It may be just a statistical variation or it could be a change in operators’ view of the economy. It will probably take a couple of more months to determine which.

Economic News This Week

  • Gross Domestic Product improved in the second estimate, rising to +3.0 percent from the U.S. Bureau of Economic Analysis’ preliminary estimate of 2.6 percent. The 3 percent increase is the largest in 3 years. The annual rate of +3.0 percent is considered by many economists to be a good rate. It is also a growth target set by the current administration.
  • Initial-jobless claims hit 236,000, an increase of 1,000 for the week ending August 26. The 4-week moving average was 236,750, a decline of 1,250. The number of claims continues to hover in a historically low range.
  • ADP reported the U.S. added a hefty 237,000 jobs in August with large firms (those with 500 or more employees) creating almost half of the new positions. The payroll processing company noted that the leisure and hospitality sector added 51,000 new jobs.
  • The Bureau of Labor Statistics reported the U.S. added 156,000 new jobs in August. The private sector added 165,000 jobs while government employment fell by 9,000. The Bureau also revised downward June and July employment by total of 41,000. The unemployment rate was 4.4 percent, up .1 percent from July.
  • Personal income increased 0.4 percent in July after being flat in June. Personal consumption expenditures increased 0.3 percent in July, up from 0.2 percent in June.
  • The August Chicago Production Manufacturing Index remained unchanged from July with a reading of 58.9. This breaks five straight months of increases. (Any number exceeding 50 indicates increasing activity.) The Production Index and the New Orders Index both rose slightly while the Back Order Index and the Employment Index both declined, with the latter dropping to less than 50.
  • The Institute for Supply Management’s Production Manufacturing Index hit 58.8 in August. This was a 2.5 percentage point increase and the highest the index has been since April 2011. (Any reading that exceeds 50 indicates an increase.) The Production Index increased by 0.4 percentage points to 61.0. The New Orders Index fell by 0.1 percentage points to 60.3. The Order Backlog Index rose 2.5 percentage points to 57.5. The Employment Index rose 4.7 percentage points to 59.9. Of the 18 industries studied by the Institute, 14 experienced growth. Overall, the August report show a strong manufacturing picture.
  • U.S. car and light truck sales were soft in August. Industry watchers project sales will decline roughly 2.0 percent this year. August sales varied significantly by manufacturer with some brands making heavy use of incentives.
  • The Conference Board’s Consumer Confidence Index increased 2.9 points in August for a final reading of 122.9 (1985 = 100.) The Present Situation Index increased to 151.2 from 145.4 in July while the Expectations Index moved up slightly from 103.0 in July to 104. The Present Situation Index is virtually matching a 16-year high of 151.3. The Conference Board categorizes consumers’ present attitude as “buoyant.”
  • The University of Michigan’s Index of Consumer Sentiment increased in August. The Index reading was 96.8 vs. 93.4 in July. But the results were mixed with the Current Economic Conditions falling to 110.9 from 113.4 in July and the Index of Consumer Expectations increasing to 87.7 from 80.5 in July. A university spokesman stated that “Consumer confidence remained at a very favorable level…” but speculated that the impact of Hurricane Harvey, including higher gasoline prices, “…are more likely to increase precautionary motives and to slightly temper spending trends.”

Foodservice News This Week

  • Foodservice hiring slowed significantly in August with the industry adding 9,200 employees. This is still good enough to be better than 5.0 percent of all the new jobs last month.
  • Waffle House maintains its reputation for staying open during natural disasters. Eight locations in the area hit by Hurricane Harvey were closed for a while but by mid-week just two remained closed — one that was flooded and another where surrounding streets were closed. The chain has an instruction manual for operating during these types of emergencies. Waffle House also maintains what the company calls “jump teams” made up of employees from outside the damaged area who can replace employees unable to get to work. Waffle house can operate without electricity but does need to have gas for the grills to offer a limited menu.
  • Domino’s Pizza has formed a partnership with Ford Motor Car Company to research pizza delivery using self-driving cars. The vehicle in test in Ann Arbor, Mich., is a four-door sedan. The system requires the customer to enter a code on a keypad on the right rear fender which will open a door to a holding cabinet in what would be the back seat. The customer can then remove their order. It appears that the actual commercial usage of the system is still several years off.
  • YUM China Holdings launched a new concept called KPRO by KFC in Hangzhou, China. Offering a fresh, seasonal, made to order menu, the restaurant is said to appeal to young, tech savvy customers and has the latest technology, including mobile ordering and face recognition payment. The press release made no mention of the concept coming to the U.S.
  • Growth Chains: Hy-Vee, the Iowa-based grocery store chain, has signed an agreement to own and operate 26 Wahlburger’s restaurants in 7 midwestern states. Chick-fil-A will open two restaurants in the Cincinnati area. Dunkin’ Brands will open six restaurants, including two Dunkin’ Donuts and Baskin Robbins multibrand locations and four Dunkin Donuts locations, in the Atlanta and Macon, Ga., markets. Wetzel’s Pretzels plans to open eight stores in Canada.
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