American Express reports an increase in consumer spending at restaurants, The NPD Group says high-check-average operators are doing well, a San Francisco restaurant owner takes on Yelp!, Jimmy John’s gets hacked and much more.
Americans are spending more on dining out, according to the American Express Spending and Saving Tracker. The study shows consumers have increased their spending across many categories, but on a percentage basis dining grew the most compared to 2013. Last year, 20 percent of consumers said they spent more on dining out. This year, that increased to 28 percent. Driving this growth in spending is the fact that Americans feel more secure about their jobs and finances, according to American Express.
Economic News This Week
- The U.S. Department of Commerce revised its second-quarter Gross Domestic Product estimate upward to +4.6 percent. The previous estimate projected a 4.2 percent increase. The gain in GDP matches the economy’s best performance since the end of the recession in 2009.. This bodes well for the economy in the balance of the year.
- Personal spending increased a relatively strong 0.5 percent in August after declining by 0.1 percent in July. The U.S. Commerce Department also reports a 0.3 percent increase in personal income for August. Both numbers indicate a decent, but not booming, U.S. economy.
- Initial jobless claims totaled 293,000, an increase of 12,000 for the week ending September 20. The 4-week moving average of claims totaled 298,500, a decline of 1,250. Claims totaling less than 300,000 show a positive job picture, according to many economists.
- Existing home sales retreated slightly in August, according to the National Association of Realtors. Existing home sales declined by 1.8 percent compared to July. That translates into a seasonally adjusted annual rate of 5.05 million sales. The association also reports prices for all types of existing homes increased 4.8 percent compared to August 2013.
- New home sales soared in August to a seasonally adjusted annual rate of 504,000. This is an 18 percent increase over the upwardly revised 407,000 in July and a 33.0 percent increase compared to August 2013. August sales are at a six-year high, but housing experts caution about reading too much into one month’s sales figures.
- Fewer home owners are “underwater”, as those with negative equity declined by 946,000 according to CoreLogic. Increasing equity in homes should result in more confident consumers and may lift the entire economy.
- The U.S. Manufacturing Purchasing Managers Index was unchanged in September at 57.9. Any reading that exceeds 50 indicates expansion in manufacturing activity. Markit, the financial data firm that produces the index, also reports the employment sub index totaled 56.6, a 2.0 point increase from August and the strongest reading of labor conditions in the manufacturing sector since March 2012.
- Durable goods orders declined by 18.2 percent in August according to the Bureau of Economic Analysis. A decline in orders for large commercial aircraft is the primary reason for the decline. Without the transportation segment, new orders for durable goods inched up 0.1 percent. And orders for core capital goods, the products needed to manufacture other durable goods, rose 0.1 percent after significant increases in June and July.
- The Reuters/University of Michigan Consumer Index posted a final reading of 84.6 in September, up from 82.5 in August. This marks the index’s highest point since July 2013.
- The Gallup Organization’s U.S. Economic Confidence Index declined 2 points to minus 18 for the week ending September 21. The index has stayed within an extremely narrow range this year. If nothing else, the study is consistent.
Foodservice News This Week
- Visits to restaurants with a $5 check average were flat but visits to restaurants with check averages of more than $40 increased 3.0 percent for the year ending June 30, 2014, according to The NPD Group. Further, fast-food places account for 80 percent of the restaurants while upscale restaurants are in single digits, according to NPD. As a result, there are not enough visits to upscale places to drive total sales.
- A San Francisco restaurant may have turned the tables on Yelp!. The owner of an Italian restaurant in San Francisco claims that his Yelp reviews suddenly got worse when he ended his advertising with the company. So, in a case of when you can’t beat ‘em, join ‘em, or perhaps reverse psychology, he now offers customers 25 percent off a purchase of one his pizzas for a negative Yelp review. The result has been a lot of very funny reviews and the owner says he is attracting “higher paying customers who are quite loyal.”
- Add Jimmy John’s Sandwich Shops to the list of companies that have had their customers’ credit card data stolen. The chain’s website did not indicate if any fraudulent use of customers’ credit cards has been reported.
- Smoothie King will equip 700 stores with iPads that accept payments and develop an app that will allow customers to order on line.
- Hooters and Starbucks are told employees’ obscene language is OK. The National Labor Relations Board ruled that two Hooters waitresses who cursed, in front of customers, at a fellow employee were simply engaged in “protected concerted activity” and overturned their firing. In the case of a Starbucks employee who gave a profanity-laced tirade against his boss, NLRB ruled he had actually been fired for pro-union views and ordered him reinstated.
- Corporate Stirrings: The Einstein Noah Restaurant Group has agreed to be acquired by JAB Holdings for $374 million. Frisch’s Restaurants may be in play. The Cincinnati-based chain may also be considered as a hostile takeover target. Starbucks will purchase the 60.5 percent of Starbucks Japan the company does not currently own. Darden has taken issue with Institutional Shareholder Services backing Starboard Value’s attempt to replace most of Darden’s current board of directors with the investment fund’s candidates. Bob Evans has supposedly attracted the attention of companies interested in buying the company’s food products group or possibly in purchasing the entire company.
- Growth Chains: Pie Five Pizza has awarded a franchise for 15 units in Indiana. Tropical Smoothie has franchise agreements for 4 stores in the Dallas-Fort Worth area and plans as many as 40 locations. Captain D’s has signed agreements for three restaurants in Atlanta and two in Tallahassee, Fla. Wahlburgers signed a franchise deal for three restaurants in Las Vegas.
- Comparable Store Sales Reports: Captain D’s (up 5.6 percent), Pie Five Pizza (12.9 percent) and Pizza Inn (up 1.5 percent).
For details and same-store sales for other chains, please click here for the Green Sheet.