Technomic looks at foodservice growth this year. Merrill Lynch reports on findings from chain restaurant conference. Zoe’s Kitchen unveils a new restaurant design. The Bento chain is growing and plans a new headquarters. These stories and more This Week in Foodservice.

Technomic projects foodservice sales this year will fall below the industry’s 2017 performance. The Chicago-based market research firm forecasts 3.7 percent nominal growth and 1.2 percent real growth.

Both numbers represent reductions from 2017, with Technomic estimating nominal growth was +3.7 and real growth was +1.4 percent. The original forecast for 2017 called 4.2 percent nominal growth and 1.7 percent real growth.

Restaurants and bars, which account for two thirds of foodservice sales according to Technomic, will see sales grow at a rate of 3.6 percent on a nominal basis and 1.0 percent in real terms. Foodservice sales among noncommercial operators will increase 2.6 percent on a nominal basis and +0.9 percent in real terms.

Retailers (c-stores, supermarkets, etc.) represent the one sector Technomic feels will do well, forecasting sales increases of 5.0 percent nominally and 2.1 percent in real terms.

If Technomic provides a more detailed breakdown, we will pass on the data.

We also look forward to the National Restaurant Association’s forecast due out later this year.

Economic News This Week

  • Initial-jobless claims declined 41,900 to a final level of 220,000 for the week ending Jan. 13. The 4-week moving average fell 6,250 to a level of 244,500. The low number of claims provides continuing evidence that the U.S. labor market remains strong.
  • U.S. industrial production rose 0.9 percent in December, per the Federal Reserve. The increase came about even though manufacturing output increased just 0.1 percent. Mining output rose 1.6 percent while utilities output increased 5.6 percent for the month. The jump in utilities output was due to severe weather. Capacity utilization for the industrial sector was 77.9 percent, 2.0 percentage points less than its long-run (1972-2016) average.
  • The Empire State Manufacturing Survey showed growth at “a solid clip”, according to the study’s author, the Federal Reserve Bank of NY. The January index stood at 17.7, down slightly from 19.6 in December. (Any reading exceeding zero indicates expansion.) The New Orders Index fell by 7.1 to a final level of 11.9 while the Shipments Index fell by 9.1 to a reading of 14.4. The Unfilled Orders Index rose from minus 8.7 in December to a level of +4.3 in January. In summary, the study shows significant growth but at a slower rate in December.
  • The Philadelphia Federal Reserve Manufacturing Business Outlook Survey for January fell 5.7 percentage points while still staying strong at 22.2. (Any reading of more than zero shows expansion.) The New Orders Index declined sharply from 28.2 in December to 10.1. The Shipments Index, though, increased to 30.3 from 23.9 in December. The Unfilled Orders Index slid to negative 1.8 from 12.8 last month. The Number of Employees Index declined to 16.8 from 19.7 in December but the Average Employee Workweek Index rose to 16.7 from 12.6.
  • Building permits for privately owned housing units fell 0.1 percent in December compared to November. Permits issued in December, though, were up 2.8 percent from December 2016. Building permits for single-family homes rose 1.8 percent in December from November. Privately owned housing starts in December declined 8.2 percent from November and 6.0 percent from December 2016. Single-family housing starts for December were down 11.8 percent from November. Severe weather in parts of the country was probably responsible for at least part of the fall in housing starts.
  • The University of Michigan’s preliminary January Index of Consumer Sentiment showed a slight drop of 1.5 percent to 94.4. The Index of Current Economic Conditions declined to 109.2 from 113.8 in January. The Index of Consumer Expectations was virtually unchanged at 84.8 after reading 84.3 in December.

Foodservice News This Week

  • Three takeaways from Bank of America Merrill Lynch’s Restaurant Conference. Labor problems, namely rising wage inflation, high employee turnover, and a tough hiring environment, remain a key challenge for restaurant chains. Some chains expect low single-digit commodity price increases, a significant jump compared to food prices the past two years. Finally, restaurant chains feel they will benefit from the tax reform.
  • Zoe’s Kitchen tests a new prototype. Open in Raleigh, N.C., the new design features an open kitchen, a new beverage program and what the chain calls “enhanced Mediterranean cues.” The new revised kitchen is said to offer more efficiencies.
  • Fast-casual chain Bento plans to build a new headquarters in Orlando. The Panasian-family-owned chain has nine units but plans to add six locations this year.
  • Red Lobster’s three-part strategy. The former Darden chain will rely on online ordering, snack-sized new menu items and delivery to grow its business. On the topic of delivery, Red Lobster offers this service at 95 percent of its locations and will have delivery at all of its restaurants by the end of this month. High-volume delivery business may require additional kitchen equipment.
  • Growth Chains: Fazoli’s will open a total of 11 locations across Alabama, Georgia, Michigan and Ohio. Shake Shack will open at least four restaurants in New Jersey. Pizza Press plans to open 60 restaurants this year and to have 300 franchised locations by 2020. R Taco’s development agreements with two new franchisees will result in the addition of seven restaurants in Arizona, Indiana, Michigan and Ohio. Maui Wowi will open units in Alabama, California, Florida and Texas. Mom’s Touch, a 1,000-unit restaurant chain based in South Korea, has opened its first U.S. location in California. Teriyaka Madness plans to open 20 to 25 locations in the Dallas – Ft. Worth area in the next 5 years and to open a total of 100 restaurants across the U.S. in the next 2 years. Dublin, Ireland-based Rockets Restaurants plans to open 15 locations a year in Europe.

For the latest same-store sales reports, please click here for the Green Sheet.