- Published on Tuesday, 29 January 2013
- Written by Jerry Stiegler
Real growth in the restaurant industry will top out at 1.0 percent, according to the revised forecast released by Chicago-based Technomic. While the industry overall will continue to trudge along, Technomic does project a handful of segments will pick up the pace a little in the coming months.
Foodservice research firm Technomic has revised its initial industry forecast down significantly from the Chicago-based company's first effort released in August of last year. Specifically, Technomic reduced its projection of real growth, which discounts menu price inflation, for 2013 to 1.0 percent from 1.8 percent. The restaurant segment, which accounts for roughly two thirds of foodservice industry sales, has been reduced to 1.0 percent real growth from 2.1 percent. This is not the only segment where Technomic pulled back. For example, the lodging forecast was lowered to 2.5 percent from 3.9 percent.
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Technomic did raise its estimate for some segments. The real growth for caterers was increased from to 3.9 percent from 1.5 percent and healthcare foodservice sales are now predicted to rise 1.5 percent in real terms vs. just 0.8 percent growth in the original forecast. And, some segment projections have remained the same.
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Technomic also reduced nominal growth to 3.9 percent for this year, a 1.4 percent decrease from its original projection. As for 2012, Technomic reports nominal growth reached 4.2 percent, up from its initial projection of 3.9 percent. Real growth increased to 1.5 percent, according to Technomic.
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It is interesting that that the NRA's 2013 forecast is looking for 0.8 percent real growth this year so Technomic's projection of 1.0 percent leaves the two prognosticators just two tenths of a percentage point apart.
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Economic News This Week:
- As we prepare to close the book on 2012, here are a few year-ending economic statistics: Consumer prices increased 1.8 percent for food (vs. 4.7 percent in 2011), 0.5 percent for energy (vs. 6.6 percent in 2011), and 1.7 percent for gasoline (vs. 13.8 percent in 2011.) Despite predictions to the contrary, the Labor Department said core prices, which are calculated without food and energy, rose just 1.9 percent last year indicating inflation is under control. But, real earnings rose just 0.3 percent, meaning that Americans are barely keeping ahead of inflation. New home sales increased nearly 20 percent in 2012 to 367,000 units. That is the highest rate since 2009 but far below the 700,000 level that economists consider healthy.
- For the week ending Jan. 18, initial jobless claims fell by 5,000 to 330,000. Claims for the last two weeks have been considerably less than the 350,000 level that labor experts consider to be acceptable. Since the period when the numbers are buffeted by seasonal glitches should be drawing to a close this news should have been met warmly but three states, including California, did not report their claims number leaving the Bureau of Labor Statistics to rely on estimates. And, economists point out that a decline in layoffs does not automatically translate into an increase in hiring.
- New home sales fell 7.3 percent in December according to the U.S. Department of Commerce. While not the best news, this still represents an 8.8 percent increased when compared to December 2011.
- Existing home sales fell 1.0 percent in December according to the National Association of Realtors. The number of existing homes available for sale was just a 4.4 month supply, down 8.2 percent from November. Since last spring some realtors have complained that the limited inventory was impeding sales. Sales of distressed homes (short sales, foreclosures, etc.) last month was 24 percent of total sales. In December 2011 distressed home sales represented 32 percent of the total.
- The Conference Board's collection of leading economic indicators increased 0.5 percent in December, which an organization spokesman indicated was a positive step in the economic recovery process.
- The Gallup Organization's U.S. Economic Confidence Index improved in the week ending Jan. 20 but remained in negative territory at minus 13.
- Gallup's survey of Consumers' Most Important Problems, which is done on an unaided basis, found the economy in general got the most mentions (21 percent) followed by the Federal Budget Deficit (20 percent), dissatisfaction with government (18 percent) and unemployment (16 percent).
- December retail sales climbed 3.0 percent per the National Retail Federation. While still in positive territory, this fell short of the 4.1 percent growth rate the NRF predicted. Clothing stores, health and personal care stores, and furniture and home furnishing store sales increased while general merchandise store sales were flat and electronics and appliance store sales were down.
- Durable goods orders rose an impressive 4.6 percent in December but were driven by major increases in commercial air craft orders (read Boeing) and military orders. Without transportation, durable goods orders were up 1.3 percent. "Core" capital goods orders, those products used in manufacturing other goods, rose just 0.2 percent.
Foodservice News This Week:
- Food away from home prices increased 0.2 percent in December compared to November's levels. For 2012 food away from home prices were up a total of 2.8 percent.
- The number of restaurants in the U.S. grew by more than 4,000 according to The NPD Group's ReCount study. Chain restaurants grew by +1.1 percent or 2,979 units while independent restaurant were up 0.4 percent for 1,469 for a grand total of 4,442 locations added.
- The Number of C-stores increased 0.7 percent, or by 1,094 stores, for a total of 149,220 in the U.S. at the end of 2012, according to Convenience Store News. The field is dominated by stores selling fuel (82.6 percent) and single-store operators (62.9 percent).
- McDonald's sales, while slow, still beat projections for December. U.S. comparable store sales were up 0.9 percent in part thanks to the McRib offering and more units open Christmas Day. World wide comps were virtually flat, up just 0.1 percent, but the financial analysts had estimated negative comp store sales in the minus 1 percent to 2 percent range. The company had expected negative comp store sales. For the quarter, total corporate sales were up 1.9 percent and profits rose 1.4 percent.
- The hot trend for pizza operations, at least in New Jersey, is coal-fired pizza ovens, according to NorthJersey.com. The article states that in the beginning pizza was cooked with coal and "now, everything old is new again."
- As a follow up to last weeks "24/7 Hunger" we note a Wall Street Journal article on kiosks and other scaled down outlets. As the story pointed out not only do smaller venues save costs and attract more franchisees but they are able to reach more consumers. Mentioned in the article are Burger King, Pizza Hut ("Delco Lite"), Famous Dave's and Checker's Drive-In, some of which we have previously mentioned.
- Chicken wings will be in short supply and pricey for this Sunday's Super Bowl according to the LA Times. It is predicted that there will be 1.23 billion wings eaten Sunday, down 1.0 percent from last year which isn't too bad considering prices are up 12 percent due to the drought and higher feed prices for chicken. Domino's believes they will sell 2.5 million wings (along with 11 million slices of pizza) on Sunday or about 80 percent more than the average Sunday.
- A missing inch from Subway's "Footlong" has generated a lawsuit from two gentlemen in New Jersey claiming they were gypped out of 41 to 54 cents per sandwich. We can only hope that if the jury finds in their favor they will grant them half a buck in compensation for every Subway Footlong for which they can provide a receipt. No, really, this is a good use of the judicial system.
- Growth Chains: Darden's area developer in Puerto Rico will open eight Olive Garden, three Red Lobster and three Long Horn restaurants. Pizza restaurant Project Pie will open in seven new markets this year. Tijuana Flats just opened its 90th restaurant with 3 more to come in Boca Rotan, and Jacksonville, Fla. and Holly Springs, NC. The Twin Peaks franchisee in Orlando plans to add four to seven more locations. Auntie's Anne's Pretzels will open 118 international locations this year and another 100 in the U.S. Quizno's has singed an agreement with their Mexico franchisee to open 1,500 restaurants in the next 10 years.
- Comparable Store Sales Reports: AFC Enterprises – Popeye's (company owned up 7.8 percent and franchised up 6.3 percent), Brinker (Chili's up 1.0 percent and Maggiano's up 0.6 percent), McDonald's (up 0.9 percent), and Starbucks (up 7.0 percent).
For details and reports on other chain comparable store sales, please click here for the Green Sheet.
Equipment Supplier Financial Data has the recent report for Illinois Tool Works. Click here for the complete report.