The NRA reports their index is down again but operators keep spending. Buffalo Wild Wings will curtail expansion in areas with a high minimum wage. The NRA challenges New York State’s increase in minimum wage at fast food operations. McDonald’s chops menu choices to accommodate its all-day breakfast program. A dozen major chains report comparable-store sales. These stories and a whole lot more This Week in Foodservice.
The National Restaurant Association reported that the Restaurant Performance Index slid for the second month in a row in September. But the Index was down just 0.1 percent and stayed in expansion territory at 101.4. The NRA pointed out that this is the 31st consecutive month that the foodservice industry has expanded.
The Current Situation Index was down 0.1 percent to 101.3 primarily due to a decline in same-store sales. Traffic was actually up a point.
Operators’ outlook for the future remained soft with the Expectations Index dropping by 0.2 percent to 101.4. Only 35 percent of operators expect their sales to be higher in the next 6 months, which is the lowest number in 2 years.
Even with the major numbers falling operators keep spending. Sixty-six percent of those surveyed stated they had made a major expenditure for expansion, remodeling and/or equipment in the last 3 months. This is an increase over the 63 percent of operators who reported in August they had made such an investment. It is also the 12th straight month the majority of operators report they had made a capital expenditure.
As for future spending, 62 percent said they are planning expenditures for equipment, expansion or remodeling in the next 6 months. This is an increase over the August report when 60 percent were planning an investment.
While everyone in foodservice would like to see more robust growth, operators appear to remain confident enough to spend their hard earned funds to improve their businesses.
Economic News This Week
- Gross domestic product grew by 1.5 percent in the third quarter according to the Commerce Department’s advance estimate. This is a significant drop from the 3.9 percent increase in the second quarter of this year. The report shows once again how mediocre the economy is and how slow the recovery has been from the recession.
- Personal income increased 0.1 percent in September, the smallest increase since March. The Bureau of Economic Analysis also reported that personal spending increased 0.1 percent while the personal savings rate rose to 4.8 percent, up from 4.9 percent in August.
- Initial jobless claims rose just 1,000 to 260,000 in the week ending October 24 according to the Department of Labor. The 4-week moving average of claims fell by 4,000 to 259,250. This is the smallest number of claims filed since December 15, 1973.
- Durable goods orders fell 1.2 percent according to the Census Bureau’s Advance Report for September. Durable goods orders were pulled down significantly by a decline in the transportation segment. Without transportation orders, durable goods orders would have been down 0.4 percent. Without defense orders, durable goods orders would have been down 2 percent. Durable goods shipments were up 0.2 percent while unfilled orders were down 0.6 percent. New orders for capital goods – goods that are used to manufacture other goods – were down 7.6 percent excluding orders in the defense segment.
- The Chicago Business Barometer was up sharply in October rising 7.5 points to 56.2. (Any reading over 50 indicates increasing business activity.) Driving the index was an almost 20 point jump in the production index to 63.4. New orders also rose significantly.
- The Conference Board’s Consumer Confidence Index declined 5.0 points in October and now stands at 97.6. The Present Situation Index fell sharply to 112.1 from 120.3 in September while the Expectations Index edged down from 90.8 in September to 88.0 in October.
- The University of Michigan Index of Consumer Sentiment rose 2.8 Points to 90.0 in October. The index has averaged 93.1 so far this year, which is higher than any year since 2005 when the average for the year was 95.2. The Current Economic Conditions Index rose to 102.3, up from 101.2 in September while the Index of Consumer Expectations increased to 82.1 from October’s reading of 78.2. The report stated September’s rise was the result of increasing confidence among lower income households.
Foodservice News This Week
- BWW CEO says no expansion in areas with high minimum wages. Sally Smith, CEO of Buffalo Wild Wings, told the Wall Street Journal that the chain will not add locations in Seattle, San Francisco or Los Angeles, all areas that have raised their minimum wage to $15 an hour or are in the process of doing so. Ms. Smith raised the question of youth unemployment, noting that they are taking a chance on hiring a 17-year-old who has never had a job and they have to pay $15 an hour.
- The National Restaurant Association joins fight against New York State $15 an hour wage for fast food employees. In their appeal to the Industrial Board of Appeals, the NRA called the decision by the acting labor commissioner “blatant executive overreach” and pointed out that the board that passed the rule did not include a representative from the foodservice industry. Regardless of what happens with the appeal, there is a high probability that the matter will end up in court.
- McDonald’s all-day breakfast changed the company’s entire menu. McD’s dropped seven menu items to make room for all-day breakfast and is in the process of phasing out seven more. McDonald’s CEO said that other slow-moving items will probably be removed as well.
- TGI Fridays sold 49 restaurants to Gold Coast Holdings. The restaurants are in the Boston, Philadelphia, New Jersey, and Upstate New York. Fridays’ management announced that their refranchising effort is ahead of schedule and the chain is now 90 percent franchised.
- Newk’s Eatery unveiled a new design featuring neutral materials, floor details, pendant lighting, and plush upholstery. The first restaurant with the new design will be in Lafayette, Louisiana, with a second set to open in Cary, N.C., later this year.
- Del Taco will close 12 Texas locations for “financial reasons” but did not explain why the chain will leave one location open in Ft. Worth.
- The Manitowoc Company reported foodservice equipment sales rose 2.0 percent in the firm’s last quarter.
- Corporate Stirrings: Darden Restaurants has sold its corporate headquarters for $133 million, which will go toward paying down the company’s debt. While the building originally cost $152 million, the deal includes leasing the property back to Darden. Peet’s Coffee & Tea has acquired a majority stake in Intelligentsia Coffee, which operates 10 coffee bars across the US.
- Growth Chains: Johnny Rockets, driving to increase the chain’s international business, announced agreements for a total of 49 restaurants in Italy, Paraguay and Canada. Wayback Burger has signed an agreement for 6 locations in Brunei and possibly more in that country and surrounding countries. Chick-fil-A will open a restaurant in Washington D.C. with 3 to 5 more to open in the next 5 years. Dunkin’ Donut announced a multi-unit development agreement for 13 stores in North and South Carolina over the next few years. Culver’s will open 24 new units in Georgia and North Carolina.
- Comparable-store sales reports: Applebee’s down 0.5 percent, Arby’s up 9.6 percent, Buffalo Wild Wings (company-owned up 3.9 percent and franchised up 1.2 percent), Burger King up 5.3 percent, CEC Entertainment up 0.7 percent, Fiesta Restaurant Group (Pollo Tropical up 4.1 percent and Taco Cabana up 4.8 percent), IHOP up 5.8 percent, Luby’s (all concepts up 0.7 percent, Luby’s Cafeteria up 0.2 percent, Fuddrucker’s up 1.7 percent, Cheeseburger in Paradise up 2.8 percent and combo units up 2.4 percent), Panera Bread (system 2. percent, company-owned up 3.8 percent, and franchised up 1.8 percent), Ruth’s Chris Steakhouse up 3.3 percent, Starbucks up 9.0 percent, and Tim Horton’s up 4.3 percent.
For details and same-store sales of other chains, please click here for the Green Sheet.