Published on Tuesday, 07 April 2015
Written by Jerry Stiegler
The National Restaurant Association says that despite slower sales for the month, foodservice operators continued to spend in February. The jobs picture and other government reports suddenly cloud the economic outlook. Labor action planned for next week. These stories and a whole lot more in This Week In Foodservice.
The National Restaurant Association’s Restaurant Performance Index in February was virtually identical to the previous month – 102.6 vs. 102.7 in January. The association notes that this is the 24th consecutive month the Index has exceeded 100, indicating continuing expansion.
However, the major components of the overall index moved in opposite directions. The Current Situation Index fell 0.6 percent to 102.0 as operators reported that same-store sales and traffic were down from February a year ago. Both remained in positive territory with 60 percent of operators saying same-store sales increased and 24 percent saying they declined. As for traffic, 47 percent of the respondents said traffic was up compared to 32 percent who said it declined. Rotten weather in many parts of the country gets at least part of the blame.
As for their thoughts about the future, the Expectations Index rose 0.5 percent to 103.3 with 59 percent of operators who expect higher sales in 6 months vs. just 4 percent who expect lower sales volume.
Summary: Not a great month but looking like a good future.
Economic News This Week
- The Obama Administration’s proposed stiffening of the regulations on overtime pay predictably brought howls from restaurant management as well as other retailers. Now a survey of retail managers themselves by the National Retail Federation found that many of the managers who would benefit from the new rules are opposed to it. Roughly 8 in 10 mangers said that customers would be negatively affected if managers could not perform non-managerial tasks. Further, 85 percent of the respondents felt managers’ morale would suffer if they were moved from salaried to hourly status while 41 percent thought managers would end up making less money.
- The ADP National Employment Report stated that the U.S. created 189,000 new jobs in March. Labor experts expected the number of people hired to exceed the 200,000 mark. ADP also said that small businesses (those with fewer than 50 employees) accounted for 57 percent of the new hires.
- First-time jobless claims fell to 268,000 the week of March 28. This represents a decline of 20,000 from the previous week. The 4-week moving average was 285,500, a decline of 14,000.
- March’s job creation levels were disappointing with the Bureau of Labor Statistics reporting the economy adding just 126,000 new jobs for the month. The private sector added 129,000 new jobs but government employment declined by 3,000. Most labor experts expected to see employment up over 200,000 in March. Unemployment stayed at 5.5 percent with the number of long-term unemployed and the number of part time workers who desired full time work both remaining high.
- Sales of cars and light trucks inched up in March by 0.6 percent led by a strong sales growth by Toyota.
- Home prices rose again in January but at a slower rate, according to the S&P/Case-Shiller Report. The 20-city analysis showed a 4.4 percent increase on a year-over-year basis. The report raised concerns about affordability with home prices continuing to rise faster than consumers’ income.
- February construction spending was relatively flat, declining 0.1 percent from January’s levels. Residential construction spending fell 0.2 percent from January.
- The Institute for Supply Management’s Manufacturing Index showed slower growth in the manufacturing sector in March, dropping to 51.5 percent from 52.9 percent in February. While any reading of more than 50 indicates expansion, components of the index also retreated from February with new orders at 51.8 percent and employment at an even 50 percent. The Production Index rose to 53.8 percent up 0.1 percent from February. Overall, it did not appear to be a good month for manufacturing.
- New factory orders for manufactured goods rose 0.2 percent in February according to the Census Bureau’s Full Report. The increase was driven by increases in non-durable goods, specifically petroleum and coal products. New orders for durable goods dropped 1.4 percent. Shipments rose 0.7 percent but unfilled orders declined 0.5 percent.
- The Chicago Production Manufacturing Index For March brought a nasty surprise. The Index had fallen into negative territory (any number below 50) in February to 45.8 but economists believed this was a onetime phenomenon due to weather and the west coast port closings. But, March results were hardly any better coming in at 46.3. It’s true that Chicago weather was rotten in March as well as in February but it appears there may be some weakness in the underlying economy.
- The Conference Board’s March Consumer Confidence Index rose to 101.3 from 98.8 in February. The increase was driven by a substantial rise in the Expectations Index from 90.0 in February to 96.0 in March. However, the Current Situation index fell from 112.1 in February to 109.1 in March.
- The Gallup Organization’s U.S. Economic Confidence Index remained slightly negative last week dropping to minus 4 from minus 3 the week before. The number simply means that slightly more people view the economy negatively than think it is positive.
Foodservice News This Week
- Pressure to increase wages continues to mount on foodservice operators. The New York Times reported those behind the movement for increased wages are broadening their tactics to include lobbying government entities for higher minimum wages, charging violations of health and safety laws, and claiming labor law transgressions. The Service Employees International Union, which has spent $15 million on the Fight for $15 push, will back a protest on April 15 which “organizers say more than 60,000 people will join strikes and protests in 200 cities nationwide.”
- McDonald’s announced plans to raise pay by $1.00 an hour above the local minimum wage on July 1. The move only applies to 1,500 company-owned units. The company denied the move was the result of recent protests.
- Foodservice hiring crept up in March with the Bureau of Labor Statistics reporting that industry employment rose 8,700. Compared to previous months, this is not a robust number. And, even in a slow hiring month, which March certainly was, foodservice accounted for 6.7 percent of employment growth.
- Corporate Stirrings: Jamba, Inc. will refranchise 100 company-owned stores to Vitaligent, LLC. The purchase price is $36 million for the Jamba Juice locations which are located in the San Francisco, Sacramento, and San Diego markets. Giordano’s, a pizza chain that operates 16 restaurants and franchises 31 more, has received a $51 million credit facility from GE Capital Franchise in order to refinance existing debt and fund the development of new stores.
- Dave Anderson, founder of Famous Dave’s, plans to open a new restaurant named Jimmie’s Old Southern Smokehouse BBQ. The restaurant is named for his father and will be located In Hayward, Wis. Anderson seemed to indicate he might expand the concept to other locations. He is no longer affiliated with the chain that bears his name.
- Super Chix will open a second restaurant, which seems to indicate that the owner, YUM! Brands, believes that the chicken sandwich concept can compete with Chick-fil-A. In 2012 Chick-fil-A became the number one chicken chain in the U.S., displacing the YUM!-owned KFC chain.
- Growth Chains: Tropical Smoothie Café plans on opening 20 locations in the Charlotte, N.C., area in the next 5 years. Steak N Shake has signed an agreement to open 15 restaurants in Pakistan. Dunkin’ Donuts will open five locations in Danish train stations in the next five years. Captain D’s, which inked deals for 35 new restaurants last year, has signed agreements to add 14 restaurants so far in 2015. Wok Box Fresh Asian Kitchen signed a development agreement for 35 restaurants in Northern California. BURGERFi has opened a restaurant in the Charlotte, N.C., area and plans on opening nine more. Pie Five Pizza Company opened the first of 15 locations in the Chicago area. Quizno’s has signed a deal for 1,500 restaurants in China.
- Comparable Store Sales Reports: Good Times Burgers up 8.2 percent and ONE Group Hospitality (owned and managed up 2.6 percent and owned up 5.1 percent).
For details and same-store sales of other chains, please click here for the Green Sheet.