Published on Tuesday, 11 October 2016
Written by Jerry Stiegler
News that’s worth a second look: Nielson examines eating out around the world; restaurants add 30,000 new workers in September; robots reshape – not replace – foodservice employees; and Red Robin cancels fast-casual concept.
Eating out is not just a U.S. phenomenon. Nielsen released some interesting global data showing that 48 percent of the population eats out at least once a week or more. The study shows people in North America and Asia/Pacific eat out the most. Another interesting finding was that more than 20 percent of the people in Hong Kong, Taiwan, Malaysia, and Morocco eat out once a day or more frequently.
Lunch and dinner are the meals most frequently eaten away from home, with breakfast a distant third. The U.S. leads in eating breakfast away from home at 21 percent; the global average is 16 percent. Nielsen sees this changing with coffee shops and fast-food restaurants expanding breakfast offerings to appeal to busy consumers.
North America differs from most of the rest of the world in patronizing fast-food operations at 69 percent vs. 57 percent globally.
As far as lunch goes, 53 percent of people globally eat away from home, with dinner the most preferred time to eat out. A major exception to this is Latin Americans, who lead the world in eating lunch out at 64 percent, while just 45 percent eat dinner outside their homes.
Nielsen states that eating out around the world is not just for special occasions but a way of life.
Economic News This Week
- The Institute for Supply Management’s (ISM) Production Manufacturing Index rose just 2.1 percentage points in September but that was enough to move the reading from contraction mode in August (49.4) to expansion at 51.5 (any number over 50 indicates expanding business activity). The New Orders Index rose from 49.1 in August to 55.1. The Production Index rose from 49.6 in August to 52.8 in September. The Employment Index rose as well, but stayed in negative territory at 49.7, up from 48.3 in August. One possible cause for concern: of the 18 manufacturing industries studied by ISM, only 7 reported expansion.
- The Institute for Supply Management’s (ISM) Non-Manufacturing Index increased for the 80th straight month. The index showed significant increases in activity from August, with a rise of 5.7 percentage points from August to reach 57.1 percent in September (any reading over 50 indicates increasing activity). The New Orders Index rose to 60 percent from 51.4 percent in August. The Employment Index also increased, rising from 50.7 percent in August to 57.2 percent. Of the 18 service industries included in ISM’s research, 14 reported growing last month, including the accommodation and foodservice sector.
- New orders for manufactured goods rose for the third consecutive month, rising 0.2 percent according to the U.S. Census Bureau’s full report for August. New orders for manufactured durable goods – those products that last 3 years or longer – rose 0.1 percent. Shipments of manufactured durable goods decreased 0.2 percent and unfilled orders for manufacturing durable goods decreased 0.1 percent.
- Car and light truck sales faltered in September with TrueCar Inc. reporting sales dropped 0.3 percent from September 2015. Despite heavy customer incentives, most major manufacturers experienced declining sales last month. Even including fleet sales, total volume fell below 1.5 million for the first time in the last 7 months. The auto industry has been on a roll for the last 6 years and is still selling at a historically high pace.
- Forecasts bullish for Christmas spending. The National Retail Federation expects holiday sales to rise 3.6 percent this year, up from 3.2 percent last year and a bit better than the 3.4 percent average sales rise since the end of the recession in 2009. The International Council of Shopping Centers forecasts a 3.3 percent increase in sales at physical stores compared to a 2.2 percent rise in last year’s Christmas season.
- August construction spending fell 0.7 percent below July and dropped 0.3 percent from August 2015. In the first 8 months of this year construction spending is up 4.9 percent over the same period in 2015. Residential construction spending declined 0.3 percent in August from July.
- ADP reported U.S. employment increased in September by 154,000 jobs over August on a seasonally adjusted basis. Small businesses (under 50 employees) added 34,000 new employees, medium-size businesses (50-999 employees) hired 56,000 employees, and large businesses (1,000+ employees) added 64,000 employees.
- Initial jobless claims decreased by 5,000 to 249,000 for the week ending Oct. 1. The 4-week moving average fell by 2,500 to 253,500. At the risk of being redundant, it appears that layoffs and firings remain at a historically low level.
- The U.S. had a moderate increase in employment in September. The Bureau of Labor Statistics estimated that non-farm employment rose by 156,000 last month with total private employment rising by 167,000; government employment fell by 11,000. This is slightly below forecasts and less than the average increase this year of 178,000. Some economists saw the September numbers as going sideways. Long-term unemployment and part-time workers desiring full-time work remained high by historical standards. Unemployment ticked up by a tenth of a point to 5.0 percent but this was actually a positive move caused by more people entering the job market. More good news was that wages were up by 0.2 percent in September and have risen by 2.6 percent this past year. One of the most troubling aspects of the recovery from the last recession was the lack of progress in wages.
Foodservice News This Week
- Foodservice hiring continued strong in September with the Bureau of Labor Statistics reporting the industry hired 29,700 new employees. Once again, foodservice is one of the most active segments adding workers and now employs over 11.4 million people.
- While some blame soft restaurant sales on cheaper grocery prices, Darden Restaurants’ CEO disagrees. Gene Lee said he is “having a hard time” with the idea that people are staying home to eat “because they can get their groceries a bit cheaper.” What Mr. Lee did not address was the rise in menu prices in conjunction with less expensive groceries.
- Robots are reshaping foodservice jobs, not replacing workers according to a recent Reuters article. The story quotes a study from the Federal Reserve Bank of Chicago and DePaul University that concluded minimum wage hikes between 2000 and 2008 didn’t cause any immediate displacement of workers. But there are different factors now, including technology that wasn’t available then and the hefty increase in the minimum wage. And, it is true that the complexity of many tasks in the kitchen makes them hard to automate. Still, technology has a way of moving ahead.
- Red Robin bails out of fast-casual concept. Red Robin has closed all five of their Red Robin Burger Works restaurants in the Chicago area, including two that were open just six months. Burger Works restaurants in Washington, D.C., Boulder, Colo., and Ft. Collins, Colo., were also closed. The other Burger Works units – two in Denver and one in Oregon – will remain open but rebranded as Red Robin Express. A Red Robin spokesman said the chain will continue to explore smaller units.
- The NPD Group says global foodservice traffic was “stable” in the second quarter. The CREST data shows increased traffic in the U.K., Australia, France, Japan, and Spain while traffic in Germany was flat. Canada, China, Italy, Russia, and the U.S. saw customer traffic decline with Brazil posting the steepest traffic drop as the country prepared for the Olympics.
- Corporate Stirrings: McDonald’s is reportedly signing a deal to sell 20-year franchise rights for Singapore and Malaysia to the Reza Foodservice Co. of Saudi Arabia. Reza owns and runs McDonald’s in areas of Saudi Arabia. The sale could be worth up to $400 million and involves about 120 McD’s in Singapore and 260 in Malaysia. Rita’s Restaurant Corp., owner of Don Pablo’s Mexican Kitchen, has filed for Chapter 11 Bankruptcy Protection, blaming the downturn in the casual dining business as well as competition from fast casual Mexican chains. The company operates 16 Don Pablo’s and one Hops Grill & Brewery in 10 states. Garden Fresh Restaurant Corp., operator of 125 restaurants under the names Souplantation and Sweet Tomatoes, has filed for Chapter 11 bankruptcy in order to restructure its debt. The company announced as part of the agreement with its lenders, 20 to 30 underperforming units will be closed. Reports are that one of the chain’s lenders will be buying them. Carrol’s Restaurant Group announced they have purchased 3 Burger King restaurants in the Raleigh, N.C., market, bringing their total restaurants purchased this year to 32 and giving the company a total of 737 restaurants. Buffalo Wild Wings is being urged to switch to a more franchised business by activist firm Marcato Capital Management. Marcato claims moving from BWW’s current 50-50 mix of franchised and company-owned units to a 90 percent franchised base would triple the chain’s value.
- Growth Chains: Denny’s will open its first restaurant in the Philippines with a total of 10 units planned over the next 10 years. Pies & Pints is building new restaurants in Cincinnati as well as Birmingham and Montgomery, Ala., and plans to have 14 locations operating by Spring of 2017. Papa John’s franchisee in Egypt, with 70 restaurants currently, has committed to adding 18 more. Darden plans to remodel about 60 Olive Garden restaurants as well as doing a smaller remodeling on the bars of 150 more. Plus, the company plans to build 24 new restaurants next year, including 8 Olive Gardens. Krispy Kreme will open 5 stores in Iceland in the next 5 years. Checkers plans on adding as many as 41 restaurants to its 14 existing locations in the Baltimore area. Newk’s Eatery has signed a franchise agreement for 10 restaurants in Palm Beach and Broward counties Florida. Dickey’s Barbeque Pit will open 3 restaurants in Southern California.
- Comparable Store Sales Reports: Bad Daddy Hamburgers up 1.9 percent, Darden (all brands up 1.3 percent, Bahama Breeze up 3.9 percent, Capital Grille down 1.2 percent, Eddie V’s down 1.7 percent, LongHorn up 0.6 percent, Olive Garden up 2.0 percent, Seasons 52 up 0.7 percent and Yard House flat), Good Times Burgers down 1.2 percent, and YUM Brands (KFC up 6.0 percent, Pizza Hut down 2.0 percent, and Taco Bell up 3.0 percent.)
For details and same-store sales of restaurant chains, see the Green Sheet.