Q3 Restaurant Traffic Flat, Pizza Hut and Arby's Revamping

Third quarter customer traffic was flat, sales up, according to The NPD Group. Technomic looks for the Top 500 Chains to have a healthy increase in units. Sysco is planning on divesting assets to gain government approval for its US Foods acquisition. This and a whole lot more in This Week In Foodservice.

Restaurant traffic was flat in the third quarter this year with The NPD Group reporting that the number of visits varied significantly by restaurant concept. Somewhat surprisingly visits to hamburger, sandwich and Asian fell by 3 percent compared to the same quarter last year. Meanwhile visits to fast-casual operations rose 8 percent and visits to Mexican quick-service and coffee/donut/bagel concepts were up 5 percent.

Spending rose 3 percent in the quarter driven by higher check averages. At least in part, higher checks were due to higher menu prices.

Deals drove traffic with number of visits on some sort of promotion up 4 percent and non-deal visits declining.

Economic News This Week

  • The Producer Price Index rose 0.2 percent in October on the strength of a 0.5 percent increase in prices of services. The price of goods fell 0.4 percent. Food prices rose 1.0 percent while energy prices fell 3.0 percent. “Core prices” – the price of goods without food and energy – rose 0.1 percent. In the past 12 months the PPI is up 1.5 percent indicating that inflation is not a problem for the US economy.
  • The Consumer Price Index was unchanged in October even with gasoline prices falling 3 percent. Food prices rose 0.1 percent, the smallest increase since June. Without food and energy prices the CPI was up 2 percent. The 2 percent increase is the Federal Reserve’s inflation target. In the past 12 months the Index for all items is up 1.7 percent.
  • Initial jobless claims fell by 2,000 to 291,000 for the week ending November 15. The less volatile 4-week moving average increased 1,750 to 287,500. The number of claims has stayed relatively steady and at a historically moderate level, showing no major disruption in the labor market.
  • Industrial production and capacity utilization both fell in October according to the Federal Reserve. Industrial production unexpectedly dropped by 0.1 percent after rising 0.8 percent in September while Capacity Utilization declined to 78.9 percent from September’s estimate of 79.3 percent.
  • The November Empire State Manufacturing Survey advanced nicely, rising 4 points to 10.2. Any figure over zero indicates expansion. The NY York Federal Reserve reported that new orders and shipments also grew. The employees’ index fell from October but stayed strong at 8.5.
  • The Philadelphia Federal Reserve’s Manufacturing Survey rose steeply in November to 40.8 from 20.7 in September. Any number over zero indicates increasing manufacturing activity. This marks the ninth straight month of improving manufacturing activity in the Philadelphia Fed’s region. New orders and shipment rose sharply and the current employment index hit a three-and-a-half-year high.
  • Existing home sales rose 1.5 percent in October to a seasonally adjusted annual rate of 5.8 million. The National Association of Realtors said this is the highest rate since September 2013. Home prices rose 5.5 percent over October last year while distressed home sales (foreclosures and short sales) fell to single digits – 9 percent. In October 2013 distressed sales represented 14 percent of total existing home sales.
  • The National Association of Homebuilders/Wells Fargo Housing Market Index increased by 4 points in November to 58. Any number over 50 indicates that more builders are positive than negative about the home market.
  • Christmas sales will rise 3.9 percent according to a forecast by Wells Fargo. This is very close to the National Retail Federation’s prediction that sales will be up 4.1 percent this season.
  • October housing starts were projected to be 1,009,000 on an annual seasonally adjusted basis, which was down 2.8 percent from September and up 7.8 percent from October 2013. Single-family housing starts were 696,000, up 4.2 percent over September.
  • Building permits issued in October were 1,080,000 on a seasonally adjusted annual rate. This is 4.8 percent over September and 1.2 percent above October last year. Single-family authorizations were at a rate of 640,000, up 1.4 percent from September.

Foodservice News This Week

  • The Top 500 Chains will add 2.3 percent more units this year predicted Technomic, Inc. This is slightly better than the 2.1 percent unit growth the Top 500 experienced in 2013 but considerably superior to the 0.5 percent increase in 2009. As far as dollar sales, Technomic looks for limited-service restaurants to grow 3.5 percent while full-serve chains will see full sales rise 2.5 percent.
  • Sysco “close to asset sale” to win approval from antitrust regulators for US Foods acquisition. Reuters reported that Sysco is in “advanced talks” with the Performance Food, Reinhart Foodservice, and Gordon Foodservice to buy Sysco assets. Sysco said earlier this month they do not expect the US Foods deal to close this year.
  • Consumers are still reluctant to spend, according to the National Restaurant Association. The organization just released their report on the State of the American Consumer and found that 5 years after the end of the great recession, 70 percent of consumers are cautious about spending. Even better than half of high-income households report they are holding back significantly or holding back somewhat.
  • Prices for food away from home increased 0.2 percent in October over September. The Bureau of Labor Statistics also estimates that food away from prices have risen 2.8 percent in the past year, which is significantly higher than the CPI for all items, which is at 1.7 percent.
  • Pizza Hut’s major menu innovations and other changes will be supported by the largest marketing and advertising budget in the chain’s history, according to the company. At least one source has speculated that Pizza Hut was influenced by the successful repositioning that Domino’s did several years ago.
  • Arby’s has committed to a variety of new restaurant formats “that will allow it to enter new markets and geographies.” The new plans are for smaller footprint restaurants that stand alone as well as “in line” formats for convenience stores and shopping centers. The company said the new designs will not only improve the guest experience but “will incorporate innovative efficiencies with a revamped production line.”
  • Corporate Stirrings: Ruth’s Hospitality Group will sell Mitchell’s Fish Market to concentrate on the Ruth’s Chris Steak House brand. McDonald’s stock was purchased by an activist investor firm, Jana Partners. The investment company purchased about 0.1 percent of McDonald’s outstanding shares but declined to comment on the matter. Darden has announced major cost cutting initiatives including eliminating jobs and selling the company airplane. Darden hopes to save $20 million. The Habit Burger Grill’s initial public stock offering of 5 million shares was successful last week with the issue price of $18 a share rising to $35.40.
  • Growth Chains: Wings & Rings, which currently has 45 U.S. locations and 12 overseas, plans on opening 20 new restaurants in the U.S. and 35 outside the country in the next 2 years. Dunkin’ Donuts has signed an agreement with existing franchisees for 7 new restaurants in Phoenix. Sunny Start Café will open 2 new restaurants in the Columbus, Ohio, area. Luna Grill, which currently has 15 locations, plans on expanding to 30 by the end on 2015. Gigi’s Cupcakes has signed an agreement for 100 locations in South Korea. TGI Friday’s has an agreement with the Americana Group to open 35 restaurants in the Middle East and North Africa by 2019. McDonald’s franchisees in India will open 75 to 150 McCafe’s in the next 3 to 5 years.
  • Comparable Store Sales Reports: Jack in the Box (system up 3.1 percent, company-owned up 3.1 percent and franchised up 3.1 percent), Logan’s Roadhouse (down 2.6 percent), Qdoba (system up 7.7 percent, company-owned up 7.1 percent, and franchised up 8.4 percent) and Zoe’s Kitchen (up 5.9 percent).

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

Related Articles