Published on Tuesday, 22 November 2016
Written by Jerry Stiegler
Stories worth another look: U.S. retail sales were up in October but restaurant sales fell. Initial jobless claims hit a 40-year low. Home delivery could drive millions in restaurant sales. McDonald’s newly designed operations are up and running.
The Census Bureau’s Advance Sales Report for October shows 0.8 percent in retail sales compared to September and up 4.3 percent over October 2015. In the 10 months so far of this year, retail sales have increased 2.9 percent.
Restaurant and drinking place sales moved in the opposite direction, falling 0.7 percent compared to September. This provides support for those who believe in a pending restaurant recession. Compared to October of 2015, restaurants and bar sales increased 4.3 percent. Restaurant sales are up 6.0 percent for the first 10 months of 2016.
Restaurant sales have been erratic this year. For example, sales were down 0.2 percent in August, up 0.7 percent in September and down 0.7 percent In October. It will be interesting to see what happens the remainder of November with the election behind us.
Government data comes with some limitations and cautions. The report is categorized as “advance” given the fact that it is based on a small initial sampling and always subject to revision. (The advance report for September had restaurant and bar sales up 0.8 percent but this was revised to a 0.7 percent increase in the final report.)
The Census Bureau research covers only restaurants and drinking places. Excluded from the study are foodservice operations that make up roughly one-third of the industry, including hotels, resorts, clubs, employee feeding, schools and colleges, healthcare and military feeding.
Finally, some of the sales data is adjusted for seasonal variations, holidays and weekends, but not for menu price changes.
Economic News This Week
- Initial jobless claims hit a 40-year low. The Department of Labor reported that first-time jobless claims for the week ending Nov. 12 fell 19,000 for a total of 235,000. That makes the smallest number of weekly claims since Nov. 24, 1973. The 4-week moving average fell 6,500 for a total of 253,500.
- The Producer Price Index for total final demand was flat in October while the index for final demand goods rose 0.4 percent and the final demand for services fell 0.3 percent. In the past 12 months, the final demand index rose 0.8 percent, the largest increase since December 2014. The “core” Index — total goods prices without food and energy prices — rose 0.1 percent.
- The Consumer Price Index increased 0.4 percent in October on a seasonally adjusted basis. In the last 12 months the CPI for all items rose 1.6 percent unadjusted. The core index — without food and energy prices — rose 0.1 percent in October and is up 2.1 percent for the last 12 months. (For the report on food prices, please see the Foodservice News This Week section below.)
- The Empire State Manufacturing Survey improved in November with the index rising 8 points to a positive 1.5. This is the first time in 4 months the index was in positive territory. (Any reading that is greater than zero shows expanding manufacturing activity.) The New Orders Index rose 9 points to 3.1 and the Shipments Index rose 9 points to 8.5. But the Unfilled Orders Index inched down and stayed well negative at minus 12.7. Both labor indexes stayed negative as well.
- The Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey stayed positive for the fourth straight month in November, although the index fell to 7.6 from 9.7 in October. The New Orders index rose 2 points and the Shipments Index rose 4 points. The Employment Index stayed in negative territory for the eleventh straight month, though it did rise 1 point to minus 2.6.
- Industrial production was unchanged in October after falling 0.2 percent in September according to the U.S. Federal Reserve. Industrial production now stands at 0.9 percentage points lower than it was in October 2015. Capacity utilization declined 0.2 percent to 75.3 in October, a rate that is 4.7 percentage points below its long run (1972-2015) average.
Foodservice News This Week
- How important cfdelivery be trestaurants in the future? Morgan Stanley estimates that food delivery will be a $210 billion market in a few years. Some heavy hitters like UberEats and Amazon continue to bet delivery of restaurant prepared food will become big business. Many operators also see delivery as an important part of their businesses. Obviously, some of the delivery sales volume will come at the expense of on-premise dining, but some experts project that delivery business will result in a major increase in foodservice sales.
- The McDonald’s f the future is here now, featuring ordering kiosks, table service, bakery display cases, and an entirely new appearance inside and out. McD’s continues to test it prototype restaurant of the in Chicago, New York, New Jersey, Florida and other areas and it appears as if these locations are seeing sales increase.
- Food prices were flat in October and down 0.4 percent in the last 12 months according to the Consumer Price Index. Food-at-home prices dropped 0.2 percent in October while food-away-from-home prices increased 0.1 percent. In the last 12 months, food-at-home prices fell 2.3 percent but food-away-from-home prices increased 2.4 percent.
- Knapp-Track shows casual restaurant chain sales in October were the weakest so far this year. Knapp’s program, which monitors the sales of 50-plus casual restaurant chains, revealed same-store sales were down 1.5 percent and guest counts declined 3.7 percent. The data would imply that check averages rose 2.2 percent. There is speculation that the presidential election was a distraction causing consumers to give up eating out. If so, we can expect to see an improvement in November data.
- Famous Dave’s has anew restaurant design, but the chain’s management is reluctant to expand the remodeling program from the two renovated restaurants until they are sure the results will justify the expense.
- Packaging is key fhamburger delivery according to Deliveroo, a U.K. app that arranges delivery for restaurants that don’t have their own delivery system. The packages are small and strong to keep the burger’s shape, made of corrugated cardboard to hold in heat, vented to prevent sogginess, and have a toothpick-like skewer to keep tall, stacked burgers upright.
- Shoney’s introducesanew restaurant design in Donnelson, Tenn., featuring reclaimed wood and stone exterior and a large outdoor patio that can be enclosed with sliding and garage-style glass doors for multi-season use.
- Morgan Spurlock, best known for the documentary Supersize Me, was nominated for an Academy Award in 2004 while making McDonald’s terribly unhappy. (Spurlock dined on nothing but McDonald’s fare for 30 straight days and implied that all kinds of serious health problems arose as aresult.) Spurlock inserted himself back in the food world after announcing he will open a chicken restaurant in a suburb of Columbus, Ohio, called Holy Chicken. Promoted as food with integrity and an alternative to fast food, the operation opened as a pop-up site over the weekend of Nov. 19-22 and now looks like the whole thing may have been Spurlock’s latest movie stunt.
- Corporate Stirrings: The Cheesecake Factory has made an initial minority equity investment in two restaurant brands, North Italia and Flower Child, both owned by Fox Restaurant Concepts. The agreement calls for The Cheesecake Factory to provide ongoing growth capital for the concepts. North Italia has 9 units and Flower Child has 5. &pizza, a fast-casual chain headquartered in the Washington, D.C., area has received a $25 million capital investment from the family-owned investment firm of Avalt. The chain will use the funds to expand &pizza operations in D.C., Northern Virginia, Philadelphia, and Baltimore. The Performance Food Group announced a secondary offering of stock. The distributor says that 10 million shares will be offered at $22.85 a share. The stock is being offered by certain shareholders and the company will not receive any proceeds from the sale. Carrols Restaurant Group bought 17 Burger King units in Western, Penn., making a total of 49 restaurants Carrols has purchased so far this year. Chipotle may have reached an agreement with activist investor William Ackman, who took a 9.9 percent stake in the burrito chain several months ago. The Wall Street Journal reports that the accommodation will include some arrangement that involves Ackman with Chipotle’s board of directors.
- Growth Chains: Wienerschnitzel has signed a development agreement for 32 restaurants in Houston and surrounding counties. MOD Pizza will use a $42 million investment to expand from its current 92 restaurants to 195 units. Dairy Queen will add 5 restaurants in central California and has plans to add 10 to 12 more down the road. Fuzzy Taco Shops opened its second location in Nebraska with six more planned. Blaze Fast Fire’d Pizza will open restaurants in New Orleans and Shreveport, La. Wingstop will open four locations in Dayton, Ohio. Chick-fil-A will open three restaurants in Henderson, Nev., Shoney’s goal is to open 10 restaurants in 2017.
- Comparable Store Sales Reports: Famous Dave’s down 10 percent and Zoe’s Kitchen up 2.4 percent.
For details and same-store sales of other chains, see the Green Sheet.