The NRA says January was a good month. Restaurant wages are heading up. Family dining chains are coming on strong. These stories and a whole lot more in This Week In Foodservice.
The National Restaurant Association’s Restaurant Performance Index slipped a little in January but managed to stay above the 102 level at 102.1. The NRA points out that this is the 23rd consecutive month the Index has been above 100. Any figure over 100 indicates the industry is expanding.
The Current Situation Index fell 0.3 percent to 102.7. Same-store sales results were about even, with 70 percent of operators saying same-store sales were up in January as compared to 71 percent indicating they were up in December. Customer traffic rose in January over December with 66 percent indicating more traffic in January while 61 percent reporting an increase in December.
The Expectations Index was virtually unchanged coming in at 102.8 in January vs. 102.9 in December.
As far as operator willingness to spend, better than half (51 percent) of those surveyed said they had made a capital expenditure — expansion, remodeling or new equipment — in the past 3 months. This is down slightly from 54 percent in December. As for the future investment, 57 percent of operators plan to make a capital expenditure in the next 6 months. While still a large percentage, it is down from 62 percent in December.
While overall January appeared to be a weaker month than December, the results show a lot of positive factors for the industry.
Economic News This Week
- Average hourly earnings adjusted for inflation rose 1.2 percent in January based on the latest data from the U.S. Bureau of Labor Statistics. Perhaps the most troubling aspect of the recovery period from the Great Recession was a lack of growth in “real” wages. It now appears that wage growth may be starting to pick up. Please see “Restaurant Wages Rise” below.
- Initial jobless claims took a large jump up for the week ending February 21, increasing by 31,000 to 313,000. The 4-week moving average rose 11,500 to 294,500. We will have to see if there is a new trend starting or if the increase is an aberration.
- Gross domestic product in the fourth quarter grew 2.2 percent, according to the Department of Commerce’s second estimate. The revised estimate was down from the Department’s advance estimate of 2.6 percent. Consumer spending was strong but businesses were slow to build inventories. GDP in the third quarter last year increased at a hefty 5 percent.
- The Consumer Price Index fell 0.7 percent in January primarily due to a major decline in gasoline prices of 18.7 percent. If gas prices are excluded, the overall CPI would have risen 0.1 percent. The so-called core Consumer Price Index, which excludes the volatile food and energy prices, rose 0.2 percent. In the last 12 months the core CPI has risen 1.6 percent while the total Index has declined 0.1 percent for the same period.
- Consumers made more in January but spent less. According to the Bureau of Economic Analysis, Personal Income rose 0.3 percent while Personal Spending fell 0.2 percent.
- January new home sales fell slightly (0.2 percent) vs. December to a seasonally adjusted annual rate of 481,000. Compared to January 2014 new home sales grew by 5.3 percent.
- Pending home sales climbed in January with the National Association of Realtors’ Pending Home Sales Index rising 1.7 percent to 104.2. This is the highest the Index has been in 18 months and is now 8.4 percent above January 2014.
- January construction spending fell 1.1 percent from December but the Department of Commerce also said construction spending was up 1.8 percent over January 2014. Residential spending in January increased 1.8 percent from December.
- Manufactured durable goods orders rose 2.8 percent in the U.S. Census Bureau’s advance estimate for January. Excluding transportation, new orders rose 0.3 percent. Excluding defense, new orders rose 3.0 percent. New orders for capital goods – those goods used to manufacture other goods — rose 9.5 percent.
- The Chicago Business Barometer plunged in February dropping 13.6 points to 45.8. A number under 50 indicates business is contracting. New orders, order backlogs, and employment all suffered double-digit declines. The Chicago Institute For Supply Management attributed a least part of the decline to bitter weather and the West Coast port strike.
- The Institute For Supply Management’s Manufacturing Index fell slightly in February, dropping 0.6 percent to 52.9. New orders, production, and employment all retreated but stayed above 50, indicating that manufacturing continues to expand.
- The Conference Board Consumer Index Retreated In February after a big jump in January. The Index fell back to 96.4 from 103.8 in January. The Present Situation Index fell from 113.9 to 110.2 while the Expectations Index dropped sharply from 97.0 in January to 87.2. A spokeswoman for the Conference Board noted that the Index remains above the pre-recession level of 99.5.
- The Bloomberg/University Michigan Consumer Sentiment Index fell back in February to 95.4 from a 7-year high in January of 98.1. This is the first decline in the Index in 7 months.
Foodservice News This Week
- Restaurant wages rise – finally. Despite the fact that the restaurant employment increased significantly since the end of the Great Recession, Foodservice worker’s compensation just crept ahead. The Department of Labor reports that restaurants increased wages less than 1.5 percent in the first half of 2013 while wages in the private sector had increased about 2.0 percent in the last 5 years. But in the last half of 2014 restaurant employees saw their pay checks increase by over 3.0 percent. The Wall Street Journal pointed out in a recent article that some states and municipalities have mandated an increase in the minimum wage but the primary cause of the run up in wages is a much more competitive job market. If foodservice management wants to attract and hold qualified workers they are going to have to pay them accordingly. It is a simple supply and demand situation.
- Family dining chains are suddenly hot according a recent article in the Washington Post. For years the family-dining segment was hammered on one side by fast feeders and their ever broadening menus and other end by the trendy casual restaurant operations. Now chains like IHOP, Cracker Barrel and Denny’s are doing well helped in part by menu prices offering good value and falling gas prices, which not only put a few extra bucks in consumers wallets but also encourage more road trips bringing them to the highway locations a lot of family dining chains prefer. In addition, the broad menu choices offered by family dining makes them less vulnerable to high commodity prices. The success that the chains are enjoying shows in their comparable store sales with Cracker Barrel’s same store sales up 7.9 percent, Denny’s up 4.7 percent, and IHOP up 6.1 percent. (Please see the Green Sheet linked below for more details.)
- The price of food away from home grew 0.2 percent in January according to the Bureau of Labor Statistics’ Consumer Price Index. In the last 12 months Food Away From Home has grown 3.1 percent.
- The Quick Trip c-store chain gets into the fast-food business. The 700-store chain launched its QT Kitchens full service counter in the Des Moines area after rolling the concept out in Phoenix in January. QT Kitchens offers made to order sandwiches, pizzas, flatbreads, smoothies and coffee drinks. The company said the program has been a “10-year journey” and is now available in 8 of the 11 markets where they operate.
- Waffle House announced an unusual expansion. The chain will partner with a startup package delivery service, Roadie, that pays people to pick up and drop off packages as part of their normal travels. It’s sort of a delivery service based on the Uber model. Waffle House will serve as the meeting place for the drivers to pick up and drop off packages.
- Marco’s Pizza announced the opening of their 100th location with Family Video. The locations offer a “one-stop shop” for dinner and entertainment according to Marco’s, and Family Video is the pizza chain’s largest franchisee.
- McDonald’s will grow units in the U.S. slower this year. Big Mac will open about 125 new restaurants this year and remodel about 100 in the U.S. in 2015. In 2014 the hamburger giant opened 222 units and remodeled about 260 others in the U.S. Worldwide the chain will open about 600 to 700 new restaurants this year, down from about 800 in 2014.
- New York’s minimum wage for tipped employees will rise to $7.50 an hour by the end of the year. Restaurant operators had proposed a smaller increase phased in over a longer period of time.
- Corporate Stirrings: TravelCenters of America are being urged by an activist investor to arrange the sale and lease back of their locations in order to “unlock value” for shareholders. Ruby Tuesday will open a satellite office in Orlando but will not close the firm’s Marysville, TN offices.
- Growth Chains: Little Greek plans on opening 20 restaurants in Central Florida in the next few years. Pollo Tropical will open 28 to 36 restaurants this year. The Sheetz c-store chain will add at least 30 stores this year. The Tilted Kilt Pub will open 20 pubs in the Midwest in the next 3 years. Del Frisco’s will open one Del Frisco’s Double Eagle operation and 6 Del Frisco Grille locations this year. Costa Vide Fresh Mexican Grill has signed 5 franchise agreements that will result in the addition of 41 new locations. Jersey Mike’s announced the awarding of 10 restaurants to a New England franchisee.
- Comparable Store Sales Reports: Applebee’s up 2.8 percent, Bravo Brio Restaurant Group (system down 4.1 percent, Bravo down 3.9 percent, and Brio down 4.2 percent), Carrols Restaurant Group up 3.6 percent, Chuck E. Cheese down 1.4 percent. Cracker Barrel up 7.9 percent, Del Frisco up 2.4 percent, Domino’s Pizza (system up 11.1 percent, company-owned up 11.9 percent, and franchised up 11 percent), IHOP up 6.1 percent, Papa John’s (North America up 4.1 percent, company-owned up 5.9 percent, and franchised up 3.4 percent), Peter Piper Pizza up 3.4 percent, and Popeye’s Louisiana Kitchen up 6.3 percent.)
For details and same-store sales of other chains, please click here for the Green Sheet.