Casual Dining Sales Soft, Fast-Casual Sales Still Strong, Lunch Traffic on Uptick and More

Knapp-Track reports casual dining sales remain soft. Technomic says fast-casual operations are still charging along with build-your-own concepts leading the way. The NPD Group finds lunch traffic around the world shows improvement. Hispanics are a great target audience for foodservice. These stories and a whole lot more This Week In Foodservice.

Knapp-Track reported the 50-plus casual dining chains it tracks saw a 1.3 percent increase in same-store sales in June. Same-store traffic counts declined 1.3 percent vs. June 2014. And check averages increased 2.6 percent. This represents the 11th consecutive month casual restaurant chain sales have shown “modestly positive comps” although with negative comparable store traffic.

Because the modest turnaround for comparable store sales began in August 2014, starting next month these casual dining chains will have to climb a little higher to post increased same-store sales.

On a positive note, Mr. Knapp reports full-service family dining sales continue to be stronger than casual dining chains. Brand-specific improvements and, possibly, lower gas pricing are helping drive sales increases for these restaurants.

Mr. Knapp reiterated his “allocation nation” thesis that states consumers are being very selective when choosing where to spend their money. He is concerned that rising residential rents and increasing healthcare insurance premiums may have a negative impact on restaurant sales.

Mr. Knapp’s information is courtesy of Bank of America Merrill Lynch.

Economic News This Week

  • The June Producer Price Index rose 0.4 percent for final demand goods and services on a seasonally adjusted basis. The primary driver of the increase was a 0.7 percent increase in final demand goods. Gasoline prices rose 4.3 percent, accounting for 30 percent of the increase in final demand goods. For the last 12 months total demand moved down 0.7 percent.
  • June’s Consumer Price Index rose 0.3 percent. The “core” index — that is without food and energy costs — was up 0.2 percent. Food prices rose 0.3 percent and energy prices rose 1.7 percent. It is interesting to note that while gasoline prices increased 3.4 percent in June, in the last 12 months gas prices are down 23.3 percent.
  • Initial jobless claims totaled 281,000, a decline of 15,000, for the week ending July 11. The 4-week moving average was 282,500, an increase of 3,250. The number of claims increased significantly the previous two weeks but it appears that this was not the start of a trend.
  • Industrial production increased 0.3 percent in June. Despite this increase, the Federal Reserve reports second quarter industrial production decreased 1.4 percent. Capacity utilization rose 0.2 percent in June to 78.4 percent. Capacity utilization remains 1.7 percentage points below its long run (1972-2014) average.
  • The Empire State Manufacturing Survey from the NY Federal Reserve hit 3.9, an increase of 6 points. Survey results that exceed 0 indicate expansion. The New Orders Index totaled 3.5 while the Shipments Index declined 4 points to 7.9. The NY Fed concluded that with the index having a “see-saw” pattern around zero for the last 4 months that business activity “remains subdued.”
  • The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey fell sharply to 5.7 in July from 15.2 in June. However any number over zero indicates expansion. The New Orders Index also fell but stayed positive, as did the Shipments Index. The Unfilled Orders Index was negative while the Employment Index was flat.
  • The National Association of Home Builders/Wells Fargo Housing Market Index hit 60 in July, its highest level since November 2005. Any number that exceeds 50 indicates more builders view conditions as good than see conditions as poor.
  • June housing starts were at an annual seasonally adjusted rate of 1,174,000, which is 9.8 percent more than May and 26.6 percent more than June 2014. However, single-family housing starts were at an annual seasonally adjusted rate of 647,000, down 0.9 percent from May. The big leap for housing starts was the result of condos and apartments building starts.
  • June building permits were at a seasonally adjusted annual rate of 1,343,000, an increase of 7.4 percent more than the May estimates and 30 percent above June 2014. Permits for single-family homes were at an annual seasonally adjusted rate of 687,000, an increase of 0.9 percent more than the May projection.
  • The Reuters/University of Michigan Consumer Sentiment Index fell to 93.3 in the preliminary July survey. This was down from a final reading of 96.1 in June. The Current Economic Conditions Index fell to 106 from June’s result of 108.9. The Consumer Expectations Index also retreated, dropping to 85.2 from 87.8 last month.

Foodservice News This Week

  • In examining the first half of 2015, Technomic Inc. found that the fast-causal segment continued its torrid expansion, growing at 11 percent, compared a 4 percent increase for fast food and 5.6 percent for casual dining. And, those fast-casual concepts utilizing customization techniques like “build your own” are growing twice as fast as those that do not. Technomic also said that tech has become necessary, referring to online ordering, mobile apps and table tablets, etc.
  • The price for food away from home increased by 0.2 percent in June, less than the increase for all items. The price for food at gome grew 0.4 percent. But in the last 12 months food at home prices increased 1 percent while prices for food away from home are up 3 percent.
  • Lunch traffic increased in foodservice outlets around the world after a long-term trend of declining visits. The NPD Group reported that in the first quarter of this year lunch visits grew in Australia, China, and Great Britain, were stable in France, Spain, and the U.S. but declined in Canada, Germany, Italy and Japan. Visits to foodservice chains were flat or down in the majority of global markets.
  • Hispanics represent an excellent market for restaurants according to a new report from Technnomic. “Hispanics prioritize eating meals with family and they feel strongly that restaurants are an ideal place to spend time with family.” Hispanics will make up 30 percent of the U.S. population by 2060 and 41 percent of them use foodservice twice a week or more.
  • McDonald’s franchisees remain gloomy. A survey by long-time stock analyst Mark Kolinowski that asked franchisees for a 6-month sales forecast, with 1 being poor and 5 being excellent scored a 1.69, the lowest result in the study’s 12-year history. It is important to note that there were just 29 franchisees responded to the survey and it is possible that dissatisfied operators are more likely to respond.
  • California Pizza Kitchen is remodeling 80 of its restaurants at a cost of $350,000 to $500,000 per location. The chain says they are “de-chaining” its restaurants by remodeling and changing food and cocktail menus so no two locations are identical.
  • UFood Grill, known for operating in non-traditional sites, has a new prototype aimed at “Main Street” locations. The chain hopes to add to their restaurants in airports, food courts and military bases by franchising across the U.S.
  • Starbucks has a youth jobs program that will teach tangible jobs skills to minority young people in order to combat unemployment. The goal is to enroll 10,000 teens and young adults. Other companies offering their own version of the program include Macy’s, CVS, JPMorgan Chase, and Microsoft. Starbucks plans to open 15 Locations in low income and predominantly minority neighborhoods including Ferguson, Mo. This is part of Starbucks initiative to hire 10,000 unemployed youths.
  • The QuickChek C-store chain is rolling out its Q Café concept, which offers nearly 40 varieties of hot and iced drinks, fresh brewed cappuccinos, lattes, espressos; blended to order fruit smoothies; and frozen chocolate treats. The company states the concept has met with “great success.”
  • US Foods opened a distribution center in Flowood, Miss. The 272,000-square-foot facility will service Mississippi and Louisiana. It replaces a smaller building destroyed by a tornado.
  • Corporate Stirrings: Trinity Services Group will begin transitioning into running the foodservice operations for the Michigan Correctional Department. Trinity replaces Aramark who had major differences with the state of Michigan resulting in the contract ending 14 months early. Tender Greens received a minority investment from Union Square Hospitality Group, which is owned by NY restauranteur Danny Meyer. California based Tender Greens plans use the investment to expand nationally.
  • Growth Chains: Dunkin’ Donuts will open shops in five Little General C-Stores in the next four years. Moe’s Southwest Grill has signed a franchise agreement for 66 restaurants in Arizona and Texas. The Kwik-Trip c-store chain plans to open at least 40 stores this year. Texas Chicken has a deal for 70 units in Thailand, marking the chain’s biggest international expansion in its history. In a separate announcement, Texas Chicken said the chain has an agreement for 20 stores in New Zealand. Blaze Pizza said it has commitments for 400 stores in 42 states in their development pipeline. Smoothie King will open 25 stores in New Orleans in the next 5 years. Russo’s New York Pizzeria will open a total of 30 locations domestically and internationally in the next 3 years. The Halal Guys have signed a 5-unit franchise deal for Toronto. Smoothie King will open 25 stores in the Orlando area over the next 5 years.
  • Comparable Store Sales Reports: Captain D’s up 5.2 percent and YUM (KFC up 1 percent, Pizza Hut up 1 percent and Taco Bell up 6 percent).

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

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