Published on Tuesday, 02 December 2014
Written by Jerry Stiegler
The Restaurant Performance Index bounced back in October. Global fast food charges ahead. McDonald’s and KFC are doing a great job with social media. These stories and a whole lot more in This Week In Foodservice.
The National Restaurant Association reported that their Restaurant Performance Index came back strongly in October rising 1.8 percent to 102.8. This marks the 20th consecutive month the index has been above 100, indicating industry expansion. Virtually all of the Index’s measurements were up in October.
The Current Situation Index took a major jump, rising 2.1 percent to 103.1. Operators reported a nice increase in same-store sales with 71 percent saying they saw improvement over October 2013. Likewise traffic also advanced with 55 percent of respondents saying they served more customers this October than in the same month last year.
Operators also were more optimistic about the future with the Expectations Index rising 1.6 percent to 102.5.
These positive results were reflected in foodservice operators’ purchasing actions with 57 percent reporting that they had made a capital investment (expansion, remodeling and/or major equipment purchase) in the past 3 months. This is up from 49 percent in September. Solid sales and traffic also translated into future purchase plans with 59 percent of operators saying they expect to make a capital expenditure in the next 6 months. In September the corresponding number was 53 percent.
Overall, a lot of the findings are near or above historical highs. It is possible that the decline in the September RPI was an anomaly or just a statistical fluke.
Economic News This Week
- Third quarter gross domestic product was revised up to 3.9 percent from the Bureau of Economic Analysis’s advance estimate of 3.5 percent growth. This was a pleasant surprise as many economists were expecting a third quarter GDP to be revised down to 3.3 percent. The Bureau said that that their second estimate was increased because of more complete data for personal consumption expenditures, private inventory investment, residential and non-residential fixed investment along with state and government spending. The Bureau also stated that real Gross Domestic Product was 4.6 percent in the second quarter this year. Assuming the latest estimate holds up, the second and third quarters will be the best 6 months of economic performance since 2003.
- Spending over the 4-day Thanksgiving holiday weekend fell by 11.3 percent, according to the National Retail Federation causing speculation that the “Black Friday” Christmas shopping frenzy may have lost its impact. Sales at both brick and mortar stores and websites declined. Part of the reason was the move by some merchants to offer “Black Friday” prices as early as 2 weeks before Thanksgiving. Cyber Monday sales increased 15.6 percent over last year and the National Retail Federation is sticking to its forecast of a 4.1 percent increase in Christmas sales this year.
- Personal income increased 0.2 percent in October while the Bureau of Economic Analysis also reported that personal spending rose 0.2 percent in October after falling by 0.2 percent in September. Both results were below forecasts.
- Initial jobless claims rose 21,000 to 313,000 in the week ending November 22. This was the first time in almost 2 months claims were above 300,000. The more stable 4-week moving average rose 6,250 to 294,000.
- Durable goods orders increased 0.4 percent in October after falling 0.9 percent in September. The increase was drive by a 3.4 percent jump in orders for volatile transportation orders. Durable goods shipments rose 0.1 percent. Orders for capital goods — those goods used to make other goods — rose 0.1 percent.
- The Chicago Business Barometer fell 5.4 points in November to 60.8. (Any reading over 50 indicates expansion in manufacturing activity.) The major reason for the decline was a 11.7-point drop in new orders to 61.9 after orders hit a one-year high in October.
- The Institute For Supply Management Manufacturing Index stayed fairly level In November retreating just 0.3 percent to 58.7. November is the 18th straight month of increasing manufacturing activity in the U.S. (Any reading over 50 means expanding manufacturing activity.) New orders also remained strong, rising 0.2 percent to 66 while production fell just 0.4 percent to 64.4. The Employment Index declined 0.6 percent to 54.9 marking the 17th straight month of employment expansion. Of the 18 manufacturing segments the institute studies, 14 were up, 3 flat and just 1 declined.
- The Conference Board Consumer Confidence Index took a hit in November falling to 88.7, down from 94.1 in October. The Present Situation Index fell from 94.4 in October to 91.3 while the Expectations Index dropped even more, falling from October’s 93.8 to 87.0 in November.
- The Reuters/University of Michigan Consumer Index neatly contradicted the Conference Board Consumer Confidence Index by rising to 88.8 in November. This is the highest the Index has been since July 2007. The Current Economic Conditions Index rose to 102.7 from 98.3 in October and the Expectations Index crept up to 79.9 from 79.6 in October.
Foodservice News This Week
- The global fast food market will grow to $617.6 billion by 2019, according to a study just released by Transparency Market Research. The company estimates the global fast food market was $447.1 billion in 2013.
- McDonald’s and KFC are the top performers in social media according to the Social Business Audit from Sprinklr’s Social Business Index.
- The minimum wage battle continues with union-backed groups insisting on a minimum $15 an hour pay scale and employers saying they simply cannot afford it. And while the restaurant industry — particularly McDonald’s — have taken most of the heat in the media a lot of small businesses are concerned. The International Franchise Association states that while 6 percent of their members have 100 or more units, nearly half of the association’s members have just one.
- The impact of the foodservice industry on the economy is often forgotten but one recent example shows how restaurants can drive business. With more breakfast-only places being a hot market and more consumers focusing on breakfast out, egg production has zoomed as producers struggle to keep up with demand.
- Ricker’s, a 50-unit c-store chain in Indiana, has opened a new flagship location featuring extensive beverage and food offerings. These include Ricker’s own brand of fast and fresh Mexican cuisine, AhhBurritos!
- KFC in the UK is introducing a new look that will drop the red and white design and become trendier along the lines of Chipotle or Starbucks. The company is hoping the remodel will lift sales by 10 percent or more.
- Dunkin’ Donuts had to change the chain’s business model to succeed in India when it found most Indians don’t particularly like donuts and those that do don’t eat them in the morning or buy them by the dozen. The chain now offers a wide selection of non-beef hamburgers and serves donuts as desert.
- Corporate Stirrings: DineEquity, Inc. may be looking to buy an up-and-coming concept that offers strong growth potential and needs a strong backer. DineEquity, parent of Applebee’s and IHOP, just finished refinancing their debt and is in a much stronger position to make an acquisition. Z&H Foods, LLC, operator of 90-plus Popeye units, has received financing from General Electric Franchise Finance to develop more than 29 Popeye restaurants. Papa John’s and two partners have purchased the Pizza Corner stores in India and announced they will begin converting the Pizza Corner operations to Papa John’s stores. This will add a minimum of 40 locations to Papa John’s current 15 units in southern India.
- Growth Chains: Boston Market’s CEO stated that he believes that the company’s current 460 locations can realistically expand to 1,500 units and that the chain is currently negotiating to open 50 restaurants in the Middle East. Café Yumm! announced the opening of 3 locations recently in Oregon. Dunkin’ Donuts plans on opening 63 restaurants in the San Francisco and
- Bakersfield areas in partnership with 5 franchisees. Lazy Dog Café will be opening 9 or 10 new restaurants in California, Texas and Nevada in the next 2 years.
- Comparable Store Sales Reports: Cracker Barrel (up 3.3 percent) and Pie Five (up 17.0 percent).
For details and the same-store sales of other chains, please click here for the Green Sheet.