Operational challenges continue to mount for the restaurant industry in the form of higher food and gasoline prices, low-paying job growth and more. All of this will make it more challenging for chain restaurant and other operators to exceed same-store sales numbers in the early part of the year.

Malcolm Knapp's survey of 57 casual restaurant chains indicated that comp store sales fell 1.3 percent in December. Traffic was down 3.3 percent while check averages were up 2 percent.

Results in the coming months may not get any better. Mr. Knapp points out that same store sales in both January and February last year increased a strong 3.3 percent, which will likely be difficult for chains to exceed. Sales in last year's winter months were assisted, at least in part, by unusually mild weather.

Mr. Knapp also states that higher taxes, which will impact 77 percent of all U.S. households, do not bode well for full-service restaurants. Further, he believes that job growth is skewed toward lower paying jobs, which does not improve sales at full-serve restaurants but can help sales at limited service restaurants.

Mr. Knapp's information is courtesy of B of A Merrill-Lynch.

Economic News This Week:

  • Preliminary results from the Reuters/University of Michigan Consumer Sentiment Index declined to 71.3 for January from December's final result of 72.9. Consumers' views of both the current situation and future expectations declined this month. In the year before the last recession, the Index averaged a score of 87.
  • The Gallup Organization's U.S. Economic Confidence Index registered a minus 18 for the week ending Jan. 13. Oddly enough, that represents a slight improvement from the minus 21 recorded the previous week. Gallup determines this index by taking the difference between those surveyed who think the economy is improving and those who think it is getting worse. Perhaps the most interesting thing about this measurement is that the index has been negative since its inception in 2008.
  • Led by food and gasoline prices, December's Producer Price Index fell 0.2 percent. Food prices fell 0.9 percent, the biggest drop in a year. Core prices, which exclude food and energy, increased by 0.1 percent.
  • The Consumer Price Index was unchanged in December but food prices paid by consumers increased 0.2 percent over November while gasoline prices fell 2.3 percent. Core prices, which exclude food and energy, rose 0.1 percent.
  • Industrial production rose 0.3 percent in December after a 0.1 percent increase in November. Automobiles, auto parts and construction supplies posted major gains.
  • The New York Federal Reserve's Manufacturing Index fell to minus 7.8 in January and the December index was revised to minus 7.3 after an initial report of minus 8.1. New orders and shipments both fell. Any figure of less than 50 means negative growth.
  • The Philadelphia Federal Reserve's Business Outlook Survey turned negative in January, posting a score of minus 5.8. The Index was plus 4.6 in December.
  • The housing market continued to show improvement with the U.S. Commerce Department reporting December housing starts up 12.1 percent, including an 8.1 percent increase for single family housing starts. At an annualized rate, this represents 954,000 homes, the best rate since June 2008. December also saw an increase of 0.3 percent in building permits issued, which translates into 903,000 homes on an annualized basis. Given the rate of new permits being issued the number housing starts may decline from the December number.
  • Initial jobless claims fell by 37,000 to 335,000 for the week ending Jan. 11. This is the lowest number of claims filed since January 2008, which would be a cause for rejoicing except labor experts once again see a "quirk" caused by seasonal variations.
  • The U.S. payroll to population employment rate deteriorated in January to 43.7 percent on Jan. 15. Very simply, the Gallup Organization measures the percent of the population that is employed. The index is now below the 44.2 percent P2P from last year.

Foodservice News This Week:

  • Food away from home prices rose 0.2 percent in December over November, per the U.S. Bureau of Labor Statistics.
  • Technomic Inc. has presented its first Chain Restaurant Consumers' Choice Awards covering quick service, fast casual and full service restaurants.
  • Food is now 7-Eleven's future. The c-store chain made it official, announcing that it expects tobacco sales to continue to decline over the next 10 to 20 years as more restrictions are placed on how tobacco products can be displayed and sold. Emphasizing food is not without its challenges including finding suppliers who will deal with the "little guy."
  • A Walmart On Campus will open at the Georgia Institute of Technology's Atlanta campus marking the giant retailer's second college store. Modeled on their Walmart Express concept, the 2,500-square-foot location is smaller than their first college store at the University of Arkansas.
  • Solving consumers' "24/7 Hunger" is one of the major foodservice trends for 2013 according to researcher Mintel. Roaming food trucks, self-serve coffee kiosks and fancier vending machines will all play a role in helping restaurants stay nimble and provide "all-access" eating.
  • Baby Boomers are eating out more often while Millennials have decreased their visits to restaurants by 6 percent according a new study from The NPD Group. Boomers and older consumers have increased their number of visits by 6 percent since 2008.
  • Chipotle Mexican Grill has announced a major catering initiative. The chain is targeting groups of 20 to 200 and will allow patrons to customize their own individual meal. The company offers small catering orders with a "Burritos by the Box" option.
  • Growth chains: Lyfe Kitchen which menus pizza, burgers and tacos with locally grown ingredients and calorie counts under 600, plans to open 250 restaurants in the next 5 years. Noble Roman's Take N Bake concept has 9 stores now with 6 more under development. Jamba Juice has signed agreements that will open 15 units in Kansas and Missouri in the next 9 years. Wendy's plans to open 25 new restaurants and remodel 200 more this year. Dunkin' Donuts opened 291 stores in 2012 and will open 330 to 360 this year.
  • Comparable store sales report: Chipotle (up 3.8 percent), Ignite Restaurant Group (up 0.8 percent), and Wendy's (company-owned down 0.2 percent and franchised down 0.6 percent). Please note that Wendy's comps are preliminary estimates by the company and are subject to change.

For details and comparable store sales data on other chains, please click here for the GreenSheet.