Fast-Casual Juggernaut Might Be Stuttering, Problems Face Single-Item Restaurants and More

New data from Technomic suggests fast-casual restaurants may face some challenges, July housing stats are mostly positive, some observers have a negative view of one-item restaurants, and a whole lot more.

Is the fast-casual juggernaut slowing down? There is no doubt that fast-casual restaurants have filled a niche in the minds of American consumers. Neatly positioned between fast food and casual full-serve restaurants, the fast-casual firms have been a standout even during the last recession.

But a new study from Technomic indicates there might be a few cracks developing in the fast-casual segment. The latest research seems to say that that people see fewer differences between fast-casual and fast food operations. In 2012, 37 percent of the respondents said fast-casual restaurants had more friendly service than fast food. This year that had dropped to 32 percent.

Two years ago 65 percent of customers felt fast-casual offered better menu variety than fast feeders but now just 41 percent feel the same.

Fast-casual certainly does maintain some important advantages over fast food in the minds of consumers. For example, 63 percent of those surveyed said food quality is better at fast-casual restaurants and the segment is also preferred for offering more healthful menu items.

One of the major advantages fast feeders have is in overall value with 34 percent of those surveyed this year indicating fast food has a lead in the area. But, Technomic also pointed out that in 2012 53 percent said that fast food offered a better value.

Finally, while it is generally believed that fast-casual restaurants are taking market share from the fast feeders — including in a recent Wall Street Journal article on McDonald’s — Technomic’s study found that the biggest alternative to fast-casual restaurants is casual full-serve places (at 47 percent) with fast food places second (at 43 percent).

The fact is that foodservice is an incredibly dynamic business and change is the only constant. Probably lurking around the corner there is some new concept that will be “the next big thing.”

Economic News This Week

  • The Consumer Price Index For July rose 0.1 percent with the “core” price index — without food and energy prices — also up 0.1 percent. Food prices increased 0.4 percent but energy prices fell 0.3 percent. The CPI for the last 12 months is up 2 percent with food prices up 2.5 percent and energy prices up 2.6 percent.
  • Federal Reserve Chairman Janet Yellen gave no indication that interest rate hikes were imminent but did warn that raising interest rates could happen if there are discernable improvements in the labor market.
  • Initial jobless claims fell by 14,000 to 298,000 in the week ending August 16. The Department of Labor noted that the 4-week moving average rose 4.750 to 300,750. Through much of last year the number of claims were running near 350,000 per week.
  • Housing statistics for July were all positive according to the U.S. Department of Commerce. Building Permits issued were up 8.1 percent to a seasonally adjusted annual rate of 1,052,000 over June and up 7.7 percent over July 2013. Single-family authorizations were up 0.9 percent vs. June. Housing Starts in July were 1,093,000, 15.7 percent over June starts and 21.7 percent over July last year. Single family starts rose 8.3 percent over June.
  • Homebuilders’ confidence was up 2 points in August, rising to 55 on the National Association of Home Builders/Wells Fargo Index. Any number over 50 means more builders view conditions as good vs. poor.
  • Existing home sales rose 2.4 percent in July to a seasonally adjusted annual rate of 5.15 million according to the National Association of Realtors. Sales have risen for 4 consecutive months but were 4.3 percent below the 5.38 million level from last July. The report also noted home prices were up 4.9 percent over July 2013 and distressed home sales were down 9 percent from 15 percent last July.
  • New home sales in July fell 2.4 percent to a seasonally adjusted annual rate of 412,000, down from a revised 422,000 in June. But new home sales were up 12.3 percent from July 2013.
  • The August Business Outlook Survey from the Philadelphia Federal Reserve indicated that manufacturing activity remained strong even though new orders, shipments and employment declined from their July readings back to roughly where they were in June.
  • Labor Day travel is predicted to be the highest it has been since 2008, which should increase restaurant sales as Americans hit the road for the end of summer holiday.
  • Gallup reports Americans satisfied with the way things are going has been very consistent this year, coming in at a narrow range of 22 percent to 25 percent. The all-time low for this study was 7 percent in October 2008. The last time a majority Americans were satisfied with the way things were in the U.S. was January 2008. Gallup states that the lower the level of satisfaction, the more seats in the House of Representatives the president’s party will lose in mid-term elections.
  • Leading economic indicators rose nicely in July by 0.9 percent after increasing 0.6 percent in both of the 2 previous months. A spokesperson for the Conference Board said that the economy is “gaining traction.”
  • Gallup’s U.S. Economic Confidence Index remains “stable” for the week ending August 17 at minus 16. Minus 16 is very close to the average the index has been for all of this year. 

Foodservice News This Week

  • Are single-item restaurants a losing proposition? The demise of Crumbs cupcake operation raises questions about the new concepts that just offer potatoes, biscuits, mussels, pudding, mac and cheese, or chicken nuggets. One consultant called single-item restaurants “a very tricky proposition” while another consultant pointed out the failure of French fry restaurants and popcorn shops, saying such places are fun to try but said “fun to try” is not exactly a long-term business plan.
  • Prices for food away from home in July increased 0.3 percent, according to the Bureau of Labor Statistics Consumer Price Index. In the last 12 months prices for food away from home have risen 2.4 percent while prices for food at home have gone up 2.5 percent and the price for all items rose 2 percent.
  • An internal memo from Darden Management painted Red Lobster’s situation as “temporary in nature, correctable” and seems to contradict the situation as presented by top management that sold the chain. This is according to CNBC quoting a “Confidential Information Memorandum.”
  • McDonald’s has had four locations closed in Moscow by government safety inspectors. A spokesman from the Council on Foreign Relations stated that food inspectors have been an instrument of Russian foreign policy for years. Retaliation against McDonald’s for Western sanctions against Russian actions in the Ukraine was predicted weeks ago.
  • Proposed legislation In San Francisco would require any retail stores and restaurants with 11 or more locations in the U.S. to give the city access to payroll and employment records, to offer more hours to current employees before hiring new workers, pay workers for any shift that is canceled less than 24 hours in advance, retain any employee who worked for the business for at least 6 months for a minimum of 90 days if the business is sold, and maintain records of written offers of more hours, offers of employment for existing employees following the sale of the business, and a list of employees who worked there when the business was sold. The proposal is being backed by the Service Employees International Union and opposed by the California Restaurant Association and the Golden Gate Restaurant Association.
  • Corporate Stirrings: Bob Evans has announced they believe the company’s nominees will make up the majority of the 12-member board of directors. However, Sandell Asset Management, the private investment firm that has been highly critical of Bob Evans management, said at least 5 of the 8 nominees Sandell had running for board seats have been elected. GRILLiT will change the name of the company to Healthy & Tasty Brands Corp. The 92-unit Hot Dog on a Stick chain has been purchased in bankruptcy by the Global Franchise Group, which is owned by private equity firm Levine Leichtman Capital Partners. Carrols Restaurant Group, Inc. has agreed to purchase 64 Burger King restaurants in Illinois, Indiana and Tennessee from Heartland Foods.
  • United Airlines has announced they will be upgrading their food offerings in their premium cabins over the next year or more. For about a decade airlines have been downgrading and in some cases all but eliminating their foodservice operations, so this seems to be major turnaround.
  • Growth Chains: CKE now has 3,501 restaurants with the opening of a Hardee’s in Egypt and a Carl’s Jr. in Texas. Uno Restaurants has opened a fast-casual concept called Uno Fresco and plans to open 7 more by the end of 2015. GRILLiT has signed a master franchise agreement for Colorado. FreshBerry Yogurt has signed a master franchise agreement for 100 stores in Panama, Columbia, Peru and Ecuador. Dunkin’ Donuts has a multi-store agreement with 3 franchisees for a total of 14 stores in Wichita and Topeka. El Pollo Loco has signed a 20-unit franchise expansion agreement in Texas.
  • Comparable Store Sales Reports: Just one this week – Popeye’s Louisiana Kitchen (up 3.8 percent)

For details and the same-store sales of other chains, please click here for the latest Green Sheet.

 

Related Articles