Published on Tuesday, 07 October 2014
Written by Jerry Stiegler
The NRA says the industry had a “solid gain” in August, employment news for September was mostly positive including foodservice hiring, Technomic found that there is heavy support for a minimum wage increase, and a whole lot more.
The National Restaurant Association’s Restaurant Performance Index rose 1 percent in August over July to 101.9. This was the first gain in 3 months and the 18th consecutive month the index was above 100. Any number over 100 indicates industry expansion.
The Current Situation Index rose 1.1 percent to 101.8. Most encouraging was an increase in the number of operators reporting an increase same-store sales in August over the same month last year. Sixty-two percent of those in the survey said they had higher same-store sales in August compared to 54 percent in July. And, 45 percent of the operators said traffic was higher in August over the same month last year. This is up from 41 percent in July.
The Expectations component of the index was also up, rising 0.9 percent over July, standing at 102.1 and marking the 22nd straight month the Expectations Index was above 100. Of special interest was that just 5 percent of operators expect their sales to be lower in 46 months while 13 percent said they expected lower sales in six months in the July survey.
Operators’ willingness to spend appears to be strong, too. Capital expenditures for equipment, expansion, and/or remodeling in the past 3 months were reported by 59 percent of operators. This is up from 50 percent in July. As for the future, 59 percent of those surveyed planning on making a capital expenditure in the next 6 months. This is up from 54 percent in July.
While the overall index does not indicate an aggressive growth pattern, it is certainly encouraging that virtually every facet of the RPI is moving up.
Economic News This Week
- ADP says U.S. added 213,000 new jobs in September. The payroll processing company reported that this is the 6th straight month that the economy has added over 200,000 new jobs. Small businesses were responsible for 88,000 of the new hires.
- The Gallup Poll’s Payroll To Population Rate was stable in September at 44.8 percent. The study, which measures the percentage of the U.S. adult population employed at a job working 30 hours or more a week, has ranged from 41.7 percent in 2011 to 45.1 percent in 2012.
- The economy added 248,000 new jobs in September and the unemployment rate fell to 5.9 percent, according to the latest U.S. Bureau of Labor Statistics data. The unemployment rate is the lowest it has been since July 2008. The Bureau also revised new jobs data up to 180,000 from 142,000 in August while July’s new jobs were revised up to 243,000 from 212,000. On the negative side, the number of long-term unemployed stayed high as did those part-time workers who wanted full time work. Hourly wages are up just 2 percent in the past 12 months or flat in terms of real growth. Perhaps most troubling, labor force participation in September was 62.7 percent vs. 66 percent before the recession.
- Initial jobless claims continue to trend downwards with the claims for the week ending September 27 falling 8,000 to 287,000. The 4-week moving average fell by 4,250 to 297,250. First-time jobless claims below 300,000 is a positive factor for the employment picture.
- Housing prices fell in the top 20 markets with the S&P/Case-Shiller study reporting home prices declined 0.5 percent in July on a seasonally adjusted basis. But, home prices were up 6.7 percent over July 2013.
- U.S. car and light truck sales rose 9 percent in September compared to the same month last year with a lot of the volume coming from SUV and pickup sales. These vehicles are highly profitable to manufacturers. With the exception of Ford, the major car firms all saw sales increases.
- The Institute for Supply Management’s Manufacturing Index fell 2.4 points in September to 56.6. Any number over 50 shows increasing manufacturing activity. September was the 16th consecutive month that manufacturing activity expanded. Production increased 0.1 percent over August while new orders and employment fell while staying well above the 50 level.
- The Institute For Supply Management’s Non-Manufacturing Index fell by one point in September to 58.6. The New Orders Index fell 2.8 points but stayed well within the expansion mode at 61 percent. The Employment Index increased 1.4 points to 58.5. Any figure over 50 indicates expanding activity so service industries are continuing to do well.
- The Chicago Business Barometer Fell In September but the Institute for Supply Management’s Chicago chapter said that the 3.8-point drop to 60.5 still has the index at a “robust” level of activity. Any number over 50 shows activity expansion and the 10-year average for the study is 55.
- The Census Bureau’s Full Report On Manufacturing For August stated that new orders dropped 10.1 percent, shipments decreased 1.6 percent, and unfilled orders declined 0.6 percent. Orders and shipments had risen significantly in June and July.
- Gallup finds U.S. small business owners are satisfied being a small business owner but fewer feel successful. Gallup said 56 percent of those surveyed were satisfied being a small business owner, up from 45 percent in 2010. But just 37 percent felt they were successful, the lowest percentage in a decade.
- Deloitte forecasts Christmas Sales will be up 4 percent to 4.5 percent this year. Further, internet sales are predicted to rise 13 percent.
- Consumer confidence took a major hit in September. The Conference Board reported that their consumer index dropped 6.2 points from August to 86.0. The decline was after 4 straight months of increases but the current situation and expectations indices both declined.
Foodservice News This Week
- Foodservice employment growth continued in September with the Bureau of Labor Statistics reporting that the industry added 20,400 new jobs. This is 8.6 percent of the total 236,000 private sector jobs created last month.
- Restaurant customers “strongly” support increasing the minimum wage according to a survey of 1,000 restaurant goers by Technomic, Inc. The widely respected research firm found 83 percent of those surveyed backed an increase, with even 70 percent of conservatives stating that the minimum wage should be increased. How patrons will actually respond to a jump in menu prices is undetermined. In the same study Technomic found consumers are against “tax inversion” where firms relocate to another country to avoid U.S. corporate taxes.
- Global foodservice sales were mixed in the second quarter. The NPD Group reported that higher checks drove overall consumer spending. Spain and Italy were exceptions with both countries experiencing check declines. Canada, Germany and France saw traffic decline while check averages rose.
- Will restaurants follow the airlines’ pricing model? A few New York restaurants are now charging for water. One is now charging for chips and salsa while stories of charging for bread are making the rounds. One writer calls these “restaurants’ baggage fees.”
- Corporate Stirrings: T.G.I. Fridays announced they will franchise most of the company’s 247 company owned units in the US. The Southeast Restaurant Group, a TGI Friday’s franchisee, has purchased 20 TGI Friday’s restaurants in the south. Dave & Buster’s has set the price of their initial public stock offering at $16 to $18 a share.
- Growth Chains: Pizza Hut will expand their pizza by the slice “Slices Bar” to another 15 to 20 locations this year. McAlister’s Deli has signed an agreement of 10 locations in middle Tennessee. Dunkin Donuts has signed a master franchise agreement for 25 restaurants in Austria in the next 5 years. Black Bear Diner has signed a master franchise agreement that includes 5 locations in Northern California to be built by 2017. Jamba Juice has a master franchise development agreement for 35 stores in Taiwan over the next 10 years. Noble Roman Pizza and Tuscano’s Italian Style Subs have signed agreements for 225 locations in grocery stores.
- Comparable Store Sales Reports: Good Times Burgers (up 11.9 percent) and Smoothie King (up 8.4 percent).
For details and the same store sales of other chains, please click here for the Green Sheet.
Equipment Supplier Financial Data: This week there is new quarterly results for Cintas. For details and the latest financial information on other suppliers, please click here.