Published on Tuesday, 09 September 2014
Written by Jerry Stiegler
This Week In Foodservice reviews the fast food workers labor action last Thursday, reveals that foodservice is the most respected industry in the U.S., reports on advances in foodservice hiring and a whole lot more.
Foodservice workers’ drive for a $15 an hour wage and unionization continued last week with organizers stating “thousands” walked off the job in 150 cities with nearly 500 people being arrested for “acts of civil disobedience.” What seemed to be missing from the reports was any news that the actions caused any loss of business. An article in the NY Daily News said that the McDonald’s on 42nd St. continued to serve customers despite the workers’ protest. None of the organizers’ websites or numerous news reports indicated that the strike closed any restaurants. It was not clear if the demonstrators had walked off their jobs or had not been scheduled to work at the time of the protests.
A statement on McDonald’s website seemed to accept that a minimum wage increase is coming but said the matter “goes well beyond McDonald’s” and that the increase should be “implemented over time to minimize the impact on small and medium size businesses.” The company added that it does not determine wages; its 3,000 franchisees do so in accordance with local and federal laws. McDonald’s also said the chain had received reports that some participants were paid up to $500 to protest and get arrested.
The labor organization activities have been going on for almost two years and it doesn’t appear that the workers have gained much ground. At least one observer said last year that the organizers might have set the bar too high by demanding $15 an hour. Even if unionization is successful it is unlikely employees will make this kind of wage.
Economic News This Week
- The Institute for Supply Management’s Manufacturing Index hit 59 in August, an increase of 1.9 points. New orders, production and employment all grew and 17 of the 18 manufacturing segments studied by the ISM experienced growth.
- The Institute for Supply Management’s Non-Manufacturing (Service) Index hit 59.6 in August, an increase of 0.9 percent. This represents the index’s highest level since its inception in January 2008. Despite declining 1.1 percentage points the New Orders Index stayed highly positive at 63.8. The employment index hit 57.1, an increase of 1.1. Of the 17 service sectors ISM monitors, 15 reported growth in August.
- U.S. job creation remained at a six-year high in August. The Gallup Organization reported 41 percent of workers said their employer was hiring. In contrast, just 13 percent of employees said their employers were reducing their work force for an index of +28.
- Initial jobless claims hit 302,000, a slight increase of 4,000, for the week ending August 30. The less volatile 4-week moving average totaled 302,750, an increase of 3,000. Most economists view the rate of first-time jobless claims as acceptable.
- The ADP National Employment Report projected the U.S. added 204,000 new jobs in August. Small businesses led the way with 78,000 new jobs while medium-size businesses added 75,000 and large businesses added 52,000, according to the payroll processor.
- The government released disappointing employment numbers as the Bureau of Labor Statistics projected the economy added just 142,000 new jobs for the month of August. Historical data, however, shows the Department of Labor’s August jobs numbers tend to be frequently revised upwards. The Bureau reports a drop in unemployment to 6.1 percent from 6.2 percent in July. Perhaps the best news was that the number of long-term unemployed declined by 192,000.
- Gallup’s Payroll to Population Ratio declined to 44.9 percent in August from 45.2 percent in July. Gallup measures the U.S. population aged 18 and over who work 30 hours or more a week.
- U.S. productivity was revised down to +2.3 percent from +2.5 percent for the second quarter by the Bureau of Labor Statistics. The Bureau also reported unit labor costs declined 0.1 percent for the same period.
- The Gallup Organization’s study of Self-Reported Consumer Daily Spending was essentially flat in August at $94 per day vs. $95 in July. The monthly averages in 2014 have consistently exceeded the figures for same months each year from 2009 thru 2012. But Gallup says spending remains below the $100 averages seen in 2008 before the start of the recession.
- New car sales chalked up another strong month in August with annualized vehicle sales hitting 17.5 million, an 8-year high.
- Construction spending increased 1.8 percent in July compared to June. Residential construction rose 0.7 percent on a seasonally adjusted annual rate.
- U.S. home prices increased 1.2 percent in July. CoreLogic also reported that so far this year prices increased 7.4 percent and that in many areas of the country prices are approaching the level they were in the boom year of 2006.
- The Gallup Organization’s U.S. Economic Confidence Index once again remained remarkably consistent, coming in at minus 16 for the month of August. The index so far this year has stayed in a range of minus 14 to minus 17.
Foodservice News This Week
- And the industry with the most positive image is…the restaurant industry. During the Gallup Organization’s annual poll on work and education, consumers rated 24 business sectors on scale from “very positive” to “very negative.” The restaurant industry topped the list with 67 percent of the respondents having a positive image of it. Only 26 percent of the participants rated their view of the restaurant industry as being neutral and just 7 percent had a negative impression. The computer industry and farming were the only other sectors with positive score of 60 or above. At the bottom of the list were healthcare, the legal field, the oil and gas industry and the federal government.
- Foodservice employment continues to expand. The Bureau of Labor Statistics reported foodservice added 21,500 new workers or 16 percent of the total 134,000 private sector new jobs for August. The only sector adding more workers was ambulatory healthcare (doctors’ offices, etc.), which added 22,800 positions.
- Customer traffic in restaurants was flat in the second quarter, according to The NPD Group.
- Arby’s turnaround efforts seem to be working. The chain’s comparable store sales were up 2.3 percent last year. Designed to look more like fast-casual operations, Arby’s remodeled locations now average a 20 percent sales increase, according to a company release. Arby’s plans to remodel 30 units this year and about 100 in 2015.
- McDonald’s reported weak sales in August. The burger giant reported a 2.8 percent decline in same-store sales for its U.S. locations and a 0.7 percent decline in Europe. The chain’s Africa-Asia group is down a whopping 14.6 percent. And, unlike in previous financial periods, actual sales were down as well, falling 2.9 percent or down 1.9 percent factoring in currency differences.
- Corporate Stirrings: Golden Krust, a six restaurant West Indian food chain in New York filed suit against another West Indian chain called Silver Krust. BRIX Holdings LLC, a multi-concept franchising company, has acquired two salad restaurants, Souper Salad and Greenz. Dave & Buster’s, after an aborted attempt to sell itself, is now considering an initial public stock offering.
- Starbucks is going to add “express” stores. The smaller operations will have reduced beverage and food menus and will offer digital payment and mobile ordering systems to speed up service.
- Growth Chains: Peet’s Coffee & Tea will open 16 stores in the Chicago area in the next few months. Blaze Fast Fire’d Pizza will open its 40th restaurant in the next month and has commitments to open a total of 315 units. Cold Stone Creamery announced a multi-unit agreement for Central America but did not give the number of locations involved in the contract. The Tom + Chee fast-casual restaurant chain will double the number of restaurants to 26 by mid-2015. Domino’s Pizza franchisee for Norway has opened their first unit and has plans to add 3 more.
- Comparable Store Sales Reports: El Pollo Loco (system up 5.4 percent, company-owned up 5.0 percent and franchised up 5.9 percent), Good Times Burgers (up 12.0 percent) and McDonald’s (down 2.8 percent).
For details and same-store sales of other chains, please click here for the Green Sheet.