May same-store sales edged up 0.9 percent according to Malcom Knapp’s Knapp-Track, which is based on the actual sales of 50-plus casual restaurant chains that participate in Mr. Knapp’s program. The survey also showed a 2 percent decline in guest counts, which would indicate a 2.9 percent increase in check averages. This in turn would mean that sales growth is being driven in large part by higher menu prices.
While 4 of the 5 weeks studied had positive comparable store sales, they were pulled down by the first week of the month. There is a possibility that the championship boxing match depressed sales on Saturday that week, which is the busiest night of the week.
While same-store sales have been up since last August, the constant decline in traffic is troubling.
Malcolm Knapp’s information is courtesy of Bank of America Merrill Lynch.
Economic News This Week
- Initial jobless claims fell 12,000 to 267,000 for the week ending June 13. The less volatile 4-week moving average fell 2,000 to 276,750. Thus, jobless claims consistently remain at a historically low level and are a good sign of an improving employment situation.
- The May Consumer Price Index rose 0.4 percent in large part due to a 10.4 percent increase in gasoline prices. Overall food prices were flat. Thus, the “core” consumer price index (without energy and food prices) was up 0.1 percent. For the last 12 months the CPI has been flat, which is far from the Federal Reserve’s inflation target of 2 percent.
- The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey rose to 15.2 in June, up from 6.7 in May. Any number over zero indicates increased business activity. Both new orders and shipments increased sharply, rising by 11 points and 13 points respectively. But, the current employment index fell by almost 3 points to 3.8.
- New residential construction data was mixed for May with the Census Bureau reporting that housing starts were 1,036,000 on a seasonally adjusted annual rate. This is an 11.1 percent drop from April. Single-family housing starts were down 5.4 percent from April. Some builders blamed wet weather for the decline. However, starts were up 5.1 percent over May 2014. The really good news came from the number building permits issued, which were projected to be at a seasonally adjusted annual rate of 1,275,000. This is 11.8 percent over April permits issued and the highest number of permits since August 2007.
- Existing home sales were up in May. The National Association of Realtors reported that existing home sales rose 5.1 percent over April to a seasonally adjusted annual rate of 5.35 million. This is a 9.2 percent increase over May 2014 and the highest rate since November 2009. The association also noted that sales were boosted by first-time buyers. Median existing home prices were up 7.9 percent over May last year.
- The Conference Board’s Index of Leading Economic Indicators increased “sharply” in May by 0.7 percent to 123 after increasing by 0.7 percent in April and 0.4 percent in March. A Conference Board spokesman said that this indicates a strong second half of 2015.
Foodservice News This Week
- Restaurant same-store sales rose 4 percent in the first quarter, according to Technomic’s Financial Dashboard, marking a big increase from the first quarter of 2014, which was up 0.8 percent. Surprisingly, the biggest increase was at midscale restaurants, which showed a strong increase of 5.8 percent. Fast-casual restaurants were close with comps rising 5.3 percent. However, in the first quarter of last year the fast-casual segment saw an 8.2 percent comp store sales growth. Quick service same-store sales were up 3.8 percent and casual dining comps rose 3.5 percent.
- We have 9,000 more choices where we dine out. The National Restaurant Association, using data from the Bureau of Labor Statistics, says the number of restaurants increased by 9,022 in 2014. This is the fifth consecutive year the industry has grown by 7,000 or more locations. The segment growing the most was quick service, which added 4,691 establishments. Full-service restaurants increased by 2,645 units, which was significantly less than the numbers added in 2012 (4,330) or in 2013 (3,240) but up considerably from 2009 when there was just a net increase of 753 full-service places.
- A “Save NY Restaurants” coalition of restaurants and retailers has been formed to fight Governor Cuomo’s move to raise wages by appointing a wage board. The group says they have been “left voiceless” by the Governor’s decision to bypass the state legislature.
- Food trucks generate $670 million in annual revenue, and a recent study shows the trucks may be a $2.7 billion market by 2017. This would be a 3 percent to 4 percent share of all restaurant sales. A spokesman for Saint Leo University, which ran the study, said 48 percent of those surveyed have never patronized a food truck. But, movies and TV shows have made food trucks trendy and “sexy.”
- Olive Garden is using food trucks to introduce new menu items. The Italian chain is introducing their new breadstick sandwiches with 4 trucks doing a 20-city tour.
- The price of food away from home in May rose 2 percent. In the past 12 months the price of food away from home has risen 3 percent while the price of food at home has gone up 0.6 percent.
- The number of McDonald’s U.S. restaurants is declining. The hamburger giant is going to close more restaurants than they open this year. This is the first time this has happened in 40 years. If McDonald’s turnaround plan is successful the company will probably begin to grow again sometime in the future. As for now, McD’s will have a net gain in restaurants overseas.
- The use of tablets at restaurants seems to be fulfilling their promise. One system manufacturer claims that orders for appetizers rise 20 percent and desert orders rise 30 percent when guests use tablets as opposed to ordering from wait staff. Check paying is simplified and more secure since customers don’t have to give the staff their credit cards. Guest reaction appears to be mostly positive. And while restaurants vehemently deny that they will be cutting staff, questions still remain about the effect of tablet ordering on employment.
- Cheese Burger Bobby’s announced a new “millennial-focused design prototype” that includes elements of dark wood, black and stainless steel. The new design also has large, trapezoid community tables and prominent photos of juicy burgers and large images of freshly cut vegetables.
- The most expensive steak house in the U.S. is Cut in Beverly Hills, CA., which has a per person check average of $106. Using Zagat data turned up 10 more steak restaurants with a check average over $90.
- Corporate Stirrings: The Saladworks chain has been acquired by an affiliate of Center Lane Partners LLC. Saladworks filed for Chapter 11 bankruptcy reorganization in February. Bob Evans, which has closed 18 restaurants, announced a reduction of 60 positions at the company’s corporate headquarters. Starbucks will close all 23 of their La Boulange bakery cafes in the next 3 months saying the stores “Weren’t sustainable for the company’s long-term growth.” The Brazilian steak house chain Fogo de Chao Inc. had their initial public offer on Friday at $20 per share putting the company’s implied valuation at $545 million. The stock closed above $26 per share on Monday.
- Growth Chains: KFC will open 550 restaurants in Russia and nearby countries by 2017 after a 30-year absence from the region. Cheeseburger Bobby’s with 10 units open now and 3 more in development, plans on growing to 75 locations in 5 years. Arooga’s Grille House has signed a multi-unit franchise agreement for a minimum of 10 restaurants in the Long Island and Queens areas of NY. Brazil-based Spoleto plans on opening 15 to 20 restaurants in the Orlando area. Jamba, Inc. has signed a master franchise development agreement for 70 stores in Indonesia in the next 10 years. “The Oringinal” Kono Pizza is growing through mobile carts and kiosks as well as brick and mortar stores. Cold Stone Creamery has signed a master franchise agreement for 30 stores in Vietnam in the next 5 years. Rita’s Italian Ice plans on opening 30 stores in the Boston area by 2023. Bad Daddy’s Burger Bar will be adding 4 new locations in Colorado. Uncle Maddio’s Pizza Joint will open 3 locations in Huntington, Ala., in the next 4 years.
- Comparable Store Sales Reports: Bob Evans up 2.1 percent and Logan’s Roadhouse down 4.3 percent.
For details and the same-store sales of other chains, please click here for the Green Sheet.