Published on Tuesday, 28 July 2015
Written by The Editors
McDonald’s could be buying a lot of new equipment. Existing home sales hit an 8-year high while first time jobless claims hit a 40-year low. Fast food employees in New York State may be earning $15 an hour. These stories and a whole lot more in This Week In Foodservice.
Could big orders for foodservice equipment be rolling out of McDonald’s next month? The Wall Street Journal reported that McDonald’s may be expanding their all-day breakfast program nationwide as early as October. However, the story says the rollout is by no means a done deal. Among hurdles to be faced is the approval of various franchise committees. This is far from automatic given the desire to reduce the complexity of the company’s menu. In addition, the franchisees must determine if their menu boards will feature biscuits or muffins.
And, all-day breakfast will require significant changes in the kitchen, according to the article. Units in San Diego and Nashville began adding to their food-prep areas earlier this year. While the WSJ didn’t go into any specific details, adding breakfast on an all-day basis will require the purchase of some new equipment.
If McD’s is to begin serving breakfast all-day in October, equipment must be ordered in August.
In related news, McDonald’s continues to struggle. The hamburger giant reported that global comparable store sales fell 0.7 percent in the first quarter of the year. U.S. comps fell 2 percent and the Asia Pacific Middle East Africa division saw a 4.5 percent decline in same-store sales. European comparable store sales, with strong performances in the UK and Germany, rose 1.2 percent. Total actual sales fell 10 percent for the quarter. However, if adjusted for currency fluctuations, sales were down 3 percent.
The Journal, quoting a franchise operator who heads a task force studying the all-day breakfast program, said the tests have been “encouraging.”
Economic News This Week
- Existing home sales rose 3.2 percent in June to a seasonally adjusted annually rate of 5.49 million. Sales were up 9.6 percent over June 2014 and at the highest pace since February 2007. The National Association of Realtors attributed the strong showing to steady job growth, an improving economy and rising mortgage interest rates, which prods some prospective homeowners to buy now rather than wait till later when rates might be higher. Median existing home prices were up 6.5 percent over June of last year. This is the 40th consecutive month when year-over-year increases advanced.
- New home sales in June were 482,000 at a seasonally adjusted annual rate. This rate is down 6.5 percent from May but up 18.1 percent from June 2014.
- Initial jobless claims fell sharply in the week ending July 18, dropping 23,000 to 255,000. This is the fewest number of claims filed in 41 years. The less volatile 4-week moving average dropped by 4,000 to 278,500.
- The Conference Board’s Leading Economic Indicators rose again, increasing 0.6 percent in June to 123.6. A spokesman for the Board stated that the index indicates the U.S. economy will continue to strengthen for the rest of the year.
- Durable goods orders increased 3.4 percent in June over May according to the U.S. Census Bureau’s advance estimate. An 8.9 percent increase in the volatile transportation segment’s orders led the increase. Without the transportation segment, durable goods orders rose 0.8 percent. Shipments and unfilled orders both edged up 0.1 percent. Non-defense orders for capital goods – equipment used to make durable goods – jumped 9.4 percent. Purchases of capital equipment is an indicator of businesses’ willingness to invest for the future.
- The National Retail Federation has lowered their sales forecast for this year, dropping their original forecast of from 4.1 percent down to 3.5 percent growth. The Federation estimates sales grew 2.9 percent in the first half of the year but predicts sales will increase 3.7 percent in the second half.
Foodservice News This Week
- New York State fast food operations appear to be headed for a $15 an hour minimum wage. In May New York Governor Cuomo set up a wage board to investigate fast food employees’ wages. New York State law allows the state Secretary of Labor to examine wages in any given industry and the state assembly does not have to pass a law. It was assumed from the beginning that the board would recommend a significant increase in fast food workers’ wages. Questions still remain, including the definition of what is a fast food restaurant. Relatedly: Fast food franchise owners in New York may sue the state over the $15 an hour minimum wage claiming that it discriminates against restaurants while leaving other low-paying industries to continue paying under $10 an hour.
- College students like having both on and off campus foodservice choices, according to a new study by Technomic, Inc. Students eating choices are driven by myriad factors including convenience, service and social and environmental responsibility. While off campus dining is a challenge for on campus operations, more students surveyed (74 percent) visit on campus locations than visit off campus locations (67 percent) weekly.
- Canadian restaurant sales vary by segment with fast food restaurant sales up 4.6 percent while full-service restaurant sales were flat. The NPD Group also reported that fast-casual dining is doing well in Canada particularly among consumers who wish to enjoy a sit down meal but don’t want to go to a full-service operation.
- Chipotle Mexican Grill will build two new prototype stores in Kansas City. They are described as “trimmed-down locations” designed to fit “unconventional” spaces.
- 7-Eleven Stores of Oklahoma is rolling out larger stores. The c-store chain will open as many as 15 of the new models, all of which have kitchens. The stores offer more breakfast items as well as pizza and chicken bites. In addition the stores offer an expanded selection of coffee, Icy Drinks, and frozen yogurt.
- Red Lobster has opened a culinary development in Orlando. The facility contains restaurant replica “tasting room,” a culinary kitchen that encourages staff collaboration, and a training wing that will host more than 700 managers a year and focus on everything from food safety to team building.
- Chick-fil-A is #1 in social media, according to RSMI’s social media index that tracks influence, sentiment, engagement, location-based actions and mobile across 17 social media platforms. Panera Bread, which was #1 in the first quarter, dropped to #4. Sonic Drive-in was #2 with Chipotle coming in at #3. The rest of the top 10 were Wendy’s at #5, Taco Bell at #6, Buffalo Wild Wings at #7, Firehouse Subs at #8, Shake Shack at #9 and In-N-Out Burger #10.
- Corporate Stirrings: GPS Hospitality, an Atlanta-based Burger King franchisee, announced the purchase of 60 Burger King Restaurants in Michigan from TEAM Schostak Family Restaurants. This will bring GPS Hospitality’s franchised Burger King Restaurants to 196 locations. Darden Restaurants Inc., which received heavy pressure from activist stockholders to spin off their real estate holdings, now has aroused the ire of Darden bondholders who are protesting the plan. Darden contends that the approval of the bondholders is not required to for the real estate activity.
- Growth Chains: Dunkin’ Donuts plans to open 275 restaurants in California in the next 5 years. Pie Five Pizza will open 15 locations in Indiana and 8 locations in Iowa in the next 5 years. Captain D’s will open 5 restaurants in the Atlanta area. Uncle Madio’s Pizza Joint is planning on opening 5 restaurants in the Pittsburgh area. Sloan’s Ice Cream has a 5-unit franchise deal for Kuwait and another 5-unit franchise deal for the United Arab Emirates. Grabagreen, which currently has 3 company-owned units, has signed multi-unit franchise contracts for Phoenix and Dallas as well a 34-location franchise deal to expand into the east with the first restaurant to open in Greensboro, N.C. Smashburger plans to open 4 restaurants in Minnesota.
- Comparable Store Sales: Baskin Robbins up 3.4 percent, B.J’s Restaurants up 0.5 percent, Cheesecake Factory up 2.8 percent, Chipotle Mexican Grill up 4.3 percent, COSI up 0.5 percent, Del Frisco (Del Frisco Grille down 6.3 percent, Double Eagle up 1.0 percent and Sullivan’s down 3.0 percent), Dunkin’ Donuts up 2.9 percent, McDonald’s down 2.0 percent, Ruby Tuesday down 1.7 percent, and Starbucks up 8.0 percent.
For details and same-store sales of other chains, please click here for the Green Sheet.