Patent Trolls Target Restaurants, Starbucks Tests Delivery and Much More

Casual-chain restaurant sales limped along in February. A new report shows overall restaurant comparable store sales were driven up in February by higher check averages. Patent trolls are targeting restaurants. Restaurants on or near highways are getting a boost as more road trips are taken. Starbucks tests delivery. These stories and a whole lot more in This Week In Foodservice. 

The Knapp-Track sales report covering 50-plus casual restaurant chains shows February same-store sales grew 0.3 percent despite a 2.6 percent decline in guest counts. As a result, check averages increased 2.9 percent. Weather was a factor but one observer calls February’s results “unimpressive.”

When compared to results 2 years ago the sales figures are even more disappointing with comparable store sales up 0.1 percent and guest counts down 5.6 percent.

Mr. Knapp’s report on upscale steak houses showed same-store sales increasing 1.5 percent. But, this is the smallest increase in comparable store sales since the high-end steakhouses turned things around in August 2014.

The Knapp-Track data is provided courtesy of Bank of America Merrill Lynch. 

Economic News This Week

  • First-time jobless claims hit 291,000, an increase of 1,000, for the week ending March 14. The 4-week moving average totaled 304,750, an increase of 2,250. After a big bounce up in February, the number of claims filed seems to have settled down to a reasonably low level.
  • Leading economic indicators increased 0.2 percent in February after increasing 0.2 percent in January and 0.4 percent in December. The Conference Board believes that there will be moderate expansion in the U.S. economy at least in the short run but also sees weakness in the industrial sector and in business investment that might hold back growth.
  • The National Association of Home Builders/Wells Fargo Housing Market Index fell 2 points for a reading of 53 in March. While any number in excess of 50 indicates more builders optimistic than pessimistic, the March reading is the lowest the index has been since last July.
  • February housing starts plunged to a seasonally adjusted 897,000, which is 17 percent less than January starts. Single-family home starts were declined 14 percent in February vs. January. Weather was at least partly to blame. The number of building permits issued in February rose 1.7 percent compared to January but single-family home permits fell 6.2 percent from January.
  • Existing home sales inched up 1.2 percent in February, per The National Association of Realtors. This equates to a seasonally adjusted annual rate of 4.88 million houses. Sales were 4.7 percent above February 2014. Median home prices were up 7.5 percent over February 2014. There is concern that rising prices and low inventories will limit sales in the coming months.
  • Industrial production faltered in February according to the latest study by the Federal Reserve. Production rose just 0.1 percent despite a 7.3 percent jump in output by utilities due to exceptionally cold weather. Manufacturing output fell 0.2 percent, the third straight month of decline. Capacity Utilization fell to 78.9 percent for the month. This rate is 1.2 percent below the long run (1972-2014) average.
  • The New York Federal Reserve’s Empire State Manufacturing Survey showed business continued to expand at a “modest pace.” The index for March was at 6.9, down from 7.7 in February. (Any number over zero indicates expansion. The new orders index fell to minus 2.4 while shipments declined 6 points to +7.9. Labor market indicators had employment levels up and the average work week lengthening.
  • The Philadelphia Federal Reserve Manufacturing Business Outlook Survey for March was 5.0, virtually unchanged from February, which was at 5.2. (Any number over 50 indicates expansion.) The new orders index stayed positive at 3.9 but this was down 2 points from last month. The shipments index plunged 16 points and ended in negative territory.
  • Gallup’s U.S. Economic Confidence Index was 1 in the week ending March 15. The index had been in negative territory the previous three weeks but before that it had been positive for almost two months. Generally, the study says about half of Americans think the economy is favorable and half don’t.

Foodservice News This Week

  • Restaurant same-store sales increased 3.5 percent in February over the same period in 2014, according to a new report from Applied Predictive Technologies. The report attributes the growth to a 4.4 percent increase in check size. APT’s Index for quick-serve restaurants increased 5.5 percent and the index for full-service restaurants grew by 2.2 percent.
  • Patent trolls are targeting restaurants. The National Restaurant Association reported that Culver’s recently paid “hundreds of thousands of dollars” for using common technology because it would have cost more to litigate the matter. Legislation to correct the abuse of patent violations is stalled in congress because patent holders claim that their protection would be reduced.
  • Consumers are hitting the road. The Federal Highway Administration said that cumulative miles driven in 2014 increased 1.7 percent to more than 3 trillion miles. This is the largest increase in more than a decade and approaches a historical high hit in 2007. More traveling tends to increase meals eaten away from home. More traveling especially benefits those restaurants situated along highways like fast feeders and family dining operations.
  • Starbucks plans to test delivery. One test will involve Postmate Inc., a San Francisco delivery startup, working in Seattle. The other test will utilize the company’s own employees in certain NYC office buildings with the program beginning in the Empire State Building. Starbucks will charge a flat fee for the service.
  • McDonald’s introduced a food truck in Austin, Texas, to serve SXSW attendees and it seemed to be well received by patrons. However, some other food truck operators were not impressed. One food truck went so far to say that McDonald’s ran counter to the whole spirit of the food truck concept.
  • Sonic has introduced an indoor dining concept aimed at increasing sales and penetration in cold weather markets like New England.
  • Joe’s Crab Shack will launch a new concept featuring a walk-up window in order to establish a “seaside clam shack feel.” The Ignite Restaurant Group will open the new concept in April in Houston.
  • RadioShack’s real estate is attracting the attention of numerous retailers, including fast-casual chains like Mooyah Burgers and Pita Pit. RadioShack will close 1,700 stores in the coming weeks, many of which are in high traffic locations. Given the large number of locations available they might be available on attractive terms.
  • Seattle’s treatment of franchise operations as large businesses was upheld by a U.S. district court judge. Baring a reversal by a higher court, franchise owners will be paying their employees $15 an hour in a couple of years.
  • Corporate Stirrings: American Restaurant Holdings announced the purchase of Fresca’s Mexican Grill and JoJo’s Pizza Kitchen. The two chains currently have 8 restaurants and 3 restaurants respectively. Ovation Brands has engaged a financial advisory firm to explore strategic alternatives including sale of the company. Ovation Brands owns Ryan’s Buffet, Old Country Buffet, Country Buffet, Fire Mountain and Tahoe Joe’s Famous Steakhouse. Long John Silver’s plans to buy 50 to 75 of their franchised restaurants in order to “fix what we got” before adding more stores in 2016. Fresh & Easy, the chain that was bought out of bankruptcy from the British giant retailer Tesco, announced they would be closing about 50 stores in California, Arizona and Nevada. The chain said they are selling the stores so they can invest in a new fresh food, convenience store strategy.
  • Growth Chains: Sonic Drive-Ins will grow from 4 locations to 40 in the Boston Area by 2020. McAlister’s Deli plans to open 30 restaurants in 2015. Papa Murphy’s will open 115 restaurants this year. Tropical Smoothie Café plans to open 50 stores in the Philadelphia and Northern New Jersey areas. Brewster’s Ice Cream has signed development agreements for 6 stores in Southern California. 7-Eleven has 430 stores open or under construction in the District of Columbia area and plans to open 15 to 20 more a year for the next 3 to 5 years.
  • Comparable Store Sales Reports: Arcos Dorados up 15.4 percent, Darden (Bahama Breeze up 3.2 percent, Capital Grille up 6.1 percent, Edie V’s up 9.6 percent, Olive Garden up 2.2 percent, Season’s 52 up 5.2 percent, and Yard House up 5.4 percent), Luby’s (all concepts up 2.5 percent, Luby’s Cafeteria up 2.5 percent, Fuddrucker’s up 2.1 percent, Cheeseburger in Paradise down 4.8 percent, and combo units up 2.4 percent) and Papa Murphy’s (all domestic up 8.4 percent, company-owned up 10.5 percent and franchised up 8.2 percent.)

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

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