Chipotle’s Food Safety Woes, All-Day Breakfast Boom Continues and More

Government stats say restaurants continue to lead retail sales. All-day breakfast drives traffic and sales for McDonald’s. Chipotle encounters more food safety problems. The National Restaurant Association will challenge the New York minimum wage in court. These stories and a whole lot more This Week in Foodservice.

U.S. retail sales rose 0.2 percent in November over October according to the Census Bureau’s Advance Monthly Sales Report. Sales increased 1.4 percent compared to November 2014. Excluding motor vehicles and parts, retail sales were up 0.4 percent over October. For the first 11 months of this year, total retail sales are up just 2 percent

Overall, observers feel that the sales provide an indication of moderate economic growth.

Once again, restaurant and drinking place sales outperformed the overall retail market, rising 0.7 percent last month over October. So far this year, restaurant and bar sales are up 8.1 percent. On a percentage basis, restaurants and drinking places represent the best performing segment identified by the Census Bureau. This includes non-store retailers, which had a sales increase of 6 percent.

There are limitations and caveats regarding the data. The report is preliminary in nature since it is based on a limited sample. The Census Bureau can, and frequently does, revise the data. The survey covers only part of the foodservice business, namely restaurants and drinking places. Not included are hotels, resorts, clubs, schools, colleges, healthcare, employee feeding, and military. The data can be adjusted to accommodate a variety of other factors, too.

Economic News This Week

  • Initial unemployment claims totaled 282,000, an increase of 13,000 for the week ending December 5. The 4-week moving average was 270,750, an increase of 1,500. The report from the Department of Labor stated there were no special factors this week and the department adjusts for seasonal variations. However, seasonal layoffs do pop up this time of the year and do affect the findings.
  • The November Producer Price Index rose 0.3 percent for seasonally adjusted final demand. Final demand goods fell 0.1 percent and final demand services increased 0.5 percent. Final demand goods rose 0.3 percent while final demand energy fell 0.6 percent. Thus, “core” prices – not counting food and energy — were down 0.1 percent for the month. On an unadjusted basis, the PPI has fallen 1.1 percent in the last 12 months.
  • The Wells Fargo/Gallup Small Business Index dropped to 54 in November from its August reading of 58. In January it hit a 7-year high reading of 71. Pulling the index down was a decline in the number of business owners reporting increasing revenue.
  • Consumer credit increased 5.5 percent in October on a seasonally adjusted annual rate, according to the Federal Reserve. Non-revolving credit was up 7.4 percent. This would include borrowing for auto loans, student loans, etc. Revolving credit – mostly credit cards – was up a modest 0.25 percent indicating that consumers remain very cautious in their spending.
  • The Preliminary University of Michigan Consumer Sentiment Index for December was 91.8, up slightly from 91.3 in November. The Current Economic Conditions Index rose to 107.0 from November’s 104.3 while the Index of Consumer Expectations was 82.0, virtually identical to 82.9 in November.

Foodservice News This Week

  • Chipotle’s problems continue to mount as its food safety troubles grow. Just when the E.coli reports seemed over, dozens of people were sickened by a norovirus outbreak after eating at a Chipotle in Boston. And the Center for Disease Control and Prevention still has not officially declared the E.coli case resolved even though the last reported case was in early November. Chipotle announced last week it expects a significant impact on sales and profits. The company is changing both sourcing and procedures to prevent future food safety problems. Chipotle’s stock, once a major high flyer, has been down as much as 30 percent recently. The company may consider raising prices although they previously said they had no intention to increase menu prices until 2017.
  • McDonald’s all-day breakfast is driving traffic according to The NPD Group. Most of the consumers who ordered breakfast did so at lunch. Further, one third of the customers who ordered breakfast after 10:30 a.m. had not patronized a McDonald’s in the previous 30 days. NPD also noted that patrons ordering breakfast after 10:30 a.m. also frequently ordered non-breakfast items which tended to increase the check size.
  • The National Restaurant Association’s appeal of New York State’s $15 an hour wage law was rejected by the N.Y. State Review Board. The NRA plans to challenge the wage law in state court.
  • All-wood barbecue comes roaring back. According to National Public Radio, young pit masters from Seattle to New York are embracing all wood barbecue in place of gas.
  • Corporate Stirrings: Carrol’s Restaurant Group has acquired 46 Burger King locations in separate purchase deals. Carrol’s now operates 705 Burger Kings.
  • Growth Chains: Sonic Drive Ins, which according to the NPD Group is doing very well with millennials, will open 50 to 60 new locations next year. Mexico’s state-owned oil company Pemex will open 5 c-stores in the Houston area with an announced goal of having as many as 900 locations in Texas. Smashburger has signed 3 new franchise groups who will open a total of 15 restaurants in Alaska, California and Texas. Casey’s General Store will open 50 new stores this year and remodel another 100. Nepal’s Himalayan Java will open their first U.S. store in Oahu. Dave & Buster’s will increase their locations by about 10 percent a year with a goal of having 200 restaurants. Papa John’s has signed a 38-store development agreement for Northern France. Tropical Smoothie Café will open 25 locations in Maryland in the next 3 to 5 years. BurgerFi has opened its first international location in Mexico City with a plan for 40 more in that area. Texas Chicken plans to build 70 restaurants in Taiwan.
  • Comparable Store Sales Reports: Bad Daddy’s up 6.8 percent, Casey’s General Store up 9.4 percent, Dave & Buster’s up 8.8 percent, Good Times Burgers up 6.8 percent, and Krispy Kreme up 3.4 percent.

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

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