This Week in Foodservice: What Darden Restaurants Can Tell Us about the Economy

Job creation is the key to jump-starting the U.S. economy, so by closely examining the performance of one multi-concept restaurant operator we can get an idea of what's to come, writes Jerry Stiegler in his latest blog post.

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Looking at the financial results for Darden Restaurants' most recent fiscal quarter can provide insight into the future of the U.S. economy as a whole, or so the Washington Post tells us. The article points out that restaurant industry job creation has outpaced that of the overall economy in recent years and that restaurant jobs can't be exported. Further, the writer says that the weak economy has kept restaurant wages low and the industry has benefited by changing American lifestyles.

Economic News This Week

  • First time claims for jobless benefits fell by 3,000 to 382,000 in the week ending September 14. Claims for the previous week were revised up to 385,000.
  • The housing market continued to inch upwards. Housing starts rose 2.3 percent in August to an annualized total of 750,000, according to the Commerce Department. But, the number of building permits issued declined by 1 percent. The National Association of Realtors (NAR) reported existing home sales rose 7.8 percent in August to an annualized 482,000 marking the best month since May 2010 when the government tax incentive program ended. The NAR also said home prices rose 9.5 percent in August while the number of short sales and foreclosure sales fell.
  • The Philadelphia Federal Reserve's Business Outlook Survey for September scored a -1.9 percent, marking the fifth straight month the index was less than its break-even point of 50. The Fed believes this indicates slow growth for the rest of the year.
  • Leading economic indicators fell by 0.1 percent in August after rising by 0.5 percent the previous month and falling by 0.5 percent in June. The Conference Board notes that the monthly results have been clustering around the zero mark.

Foodservice News This Week

  • Restaurants are moving into malls, as we reported a few weeks back. The Wall Street Journal points to such restaurant chains as Buffalo Wild Wings and Chipotle, and multi-concept operator Darden, as some of the companies taking advantage of good lease rates in vacant mall spaces and big box stores. Darden, according to the story, is now building 30 percent to 35 percent of its restaurants in what real estate pros describe as "second generation space." Darden also has the ability to have two of its brands next to one another, which reduces construction cost and saves money by having one delivery truck service both restaurants. And Chipotle has been taking over sites vacated by Starbucks and Boston Market.
  • Pizza is now a $40 billion market, according to researcher Packaged Facts. The firm projects pizza restaurant sales to exceed $36 billion this year with retail pizza revenues to eclipse $4 billion. Pizza restaurants are losing share to other types of restaurants, but major pizza chains continue to grow sales.
  • The 2012 drought remains at a record level but recently there has been a slight decline in terms of the percentage of the country in severe drought conditions. Post-Hurricane Isaac rains presented some relief in many areas of the Midwest.
  • Dallas restaurant inspections are experiencing a double whammy, according to the Dallas Morning News. The city has a budget crisis and has reduced the number of inspectors. The difference was used in the city's general fund. The number of inspectors dropped to 15 in 2012 from 23 in 2007. And the city has not filled all of the 15 inspector jobs due to turnover. Some Dallas restaurants are not inspected even once a year. In 2010-2011 the city collected more than $2 million in inspection fees but spent just $1.56 million on inspections. Dallas consumers are not receiving the protection they expect and Dallas restaurants may have competitors who are cutting corners and getting away with it.
  • Growth Chains: Bonefish Grill plans on opening 19 restaurants this year. One will be near Disney World and another near Sea World. Muscle Maker Grill has signed a franchise agreement to open 10 restaurants in Chicago. Burger 21 has targeted Southern Florida for expansion and calculates the area can support a minimum of 20 restaurants. VooDoo BBQ & Grill plans to open 26 restaurants in Florida with the first to open in November. Buffalo Wild Wings expects to have 1,500 units in the United States and Canada in the next 5 to 7 years. Darden intends to open 100 restaurants in 2013.
  • Comparable store sales data this week includes CKE (Blended up 2.9 percent, Carl's Jr. up 4.0 percent and Hardee's up 1.6 percent), Captain D's (up 10.8 percent), Cracker Barrel (up 3.8 percent) and Darden (Bahama Breeze up 1.2 percent, Capital Grille up 4.0 percent, LongHorn up 3.6 percent, Olive Garden up 0.3 percent, Red Lobster down 2.6 percent and Seasons 52 up 1.3 percent).

For more info on comparable store sales, click here for the Green Sheet.

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