Published on Tuesday, 14 March 2017
Written by Jerry Stiegler
A new food consulting firm, Pentallect Inc., has weighed in on what it believes will happen in the foodservice industry this year. Its survey of consumers revealed that 35 percent make food at home more frequently since the election. In contrast, only 13 percent of the respondents reported using restaurants more often.
Also, 46 percent of those surveyed said that they have very little or virtually no discretionary income, which Pentallect describes as a “huge drag” on restaurant spending.
Pentallect also sees the alternatives consumers have, such as meal kits, home delivered groceries, supermarket prepared foods, farmers markets, and specialty stores as “neutralizing” major advantages restaurants offer.
Despite what Pentallect calls the restaurant industry’s “current inertia,” the firm foresees foodservice sales growing 3 percent to 4 percent in 2017, which should outperform the total U.S. retail market.
Economic News This Week
- Consumer credit increased by 2.8 percent in January but the Federal Reserve also reported that the increase was the result of non-revolving credit (auto loans, student loans, etc.) growing by 5.5 percent. Revolving credit – mostly credit cards – fell by 4.6 percent. This would indicate that consumers are nervous about the future of the economy.
- Case Schiller reports home prices increased 5.8 percent in 2016. This was the largest annual increase since 2013.
- The U.S. Census Bureau’s Advance Report on factory orders reported a 1.8 percent increase in January durable goods sales. Excluding transportation equipment, new orders declined 0.2 percent. Excluding defense orders, new orders rose 1.5 percent. Durable goods shipments fell 0.1 percent and unfilled orders fell 0.4 percent.
- Labor productivity increased 1.3 percent on an annual basis in the fourth quarter of 2016. The Bureau of Labor Statistics reported output increased 2.4 percent while hours worked rose 1.0 percent.
- ADP’s National Employment Report estimated 298,000 new jobs were added in February, the largest increase the payroll processing company has reported since 2015. Firms with less than 50 employees added 104,000 workers, firms with 50 to 499 employees added 122,000 new jobs, and firms that employ more than 500 people added 72,000 new employees.
- Initial-jobless claims increased by 20,000 for a reading of 243,000 for the week ending March 4. The 4-week moving average was 236,500, an increase of 2,250. The number of claims continue to run at historical low levels.
- The Bureau of Labor Statistics reported employment increased by 235,000 In February. Unemployment dropped to 4.7 percent, a decline of .1 percent. Wages increased 2.8 percent compared to last year and the number of jobs created in December and January were revised upward by a total of 9,000. Another positive factor was labor force participation among prime age workers climbed to 81.7 percent, its highest rate since 2011. This would indicate that more people are entering the workforce. Foodservice News This Week
Foodservice News This Week
- Foodservice operators increased their employment levels by 16,700 in February. This is not a stellar number but the industry still accounted for more than 7.0 percent of private sector hiring last month.
- Pizza from a 3D printer? The founder of Donato’s made a $1 million investment in a company named BeeHex LLC that is developing a commercial 3D printer that extrudes fresh dough, sauce and cheese. BeeHex is also developing a conveyor that will have robots add toppings and then place the pizza into the oven. The company hopes to begin shipping the equipment by the end of this year.
- Restaurants add fees to offset wage increases. The Wall Street Journal reports that “many independent and regional chain restaurants” now add surcharges of 3 percent to 4 percent to offset rising minimum wages. Operators are betting that these fees will be more acceptable to their customers than increases in menu prices. Surcharges are illegal in New York City but the New York State Restaurant Association is lobbying the city to change the law. The minimum wage in N.Y. will rise to $15 an hour by 2019.
- Digital foodservice ordering now accounts for 1.9 billion visits. The NPD Group reported that the use of mobile apps, text messages, and the internet to place food orders grew by 18 percent last year. Websites are first in ordering among digital tools but mobile apps usage is growing faster. Consumers under the age of 35 and those with higher incomes are the biggest users of digital ordering.
- Starbucks’ market share dropped in February according to xAd. The coffee chain saw its share decline to 11 percent from 12 percent in January. Aggressive promotions by competitors played a role in the loss but the company also acknowledged its mobile ordering system hurt sales by causing long lines.
- A Federal judge dismissed a lawsuit against Chipotle Mexican Grill. The suit claimed the chain had mislead stockholders about its food safety practices and that company executives had committed fraud by selling shares before the outbreak.
- Darden is testing an upscale burger concept. Located in Washington, D.C., the restaurant will be a casual “brand extension” of the company’s Capital Grille restaurant chain.
- Subway denies a Canadian Broadcast Company report that its chicken products are not all chicken. Tests by CBC’s Marketplace program showed that Subway’s roast chicken and chicken strips were roughly 50 percent chicken and the rest plant protein. Subway called the tests “stunningly flawed” and presented their own tests showing the products were 99 percent chicken.
- The top-ranked fast-food chains are In-N-Out Burger, Chipotle, Marco’s Pizza, and Chick-fil-A, per a study from Market Force International. Each was first in their category based on research data from 11,000 consumers
- Imo’s pizza plans to expand its production and storage facility. The 100-store chain based in St. Louis expanded the facility in 2015 only to find the company still needs more space. Imo’s has been unable to add new restaurants due to its limited production and distribution capabilities.
- Corporate Stirrings: Applebee’s, which closed 46 restaurants in 2016, plans to close 40 to 60 more this year. Chipotle will close all 15 of its ShopHouse restaurants, thus ending the chain’s attempt to create the success in the Asian segment that they enjoyed with Mexican cuisine. All ShopHouse employees will be offered jobs at Chipotle restaurants. NPC International has agreed to purchase 62 Wendy’s restaurants from Wendy’s franchisee Valenti Mid-Atlantic Management LLC for $52.6 million. NPC will also purchase 6 property locations from Valenti for $3.6 million. The units are in South Central Pennsylvania and around Harrisburg and Allentown, Penn.
- Growth Chains: Dairy Queen will open up to 86 restaurants in California, including 10 in Orange County. Dunkin’ Donuts will open 17 units in Alabama and Mississippi. BruBurger will open three to four restaurants in Central Ohio in the next few years. Del Taco will open 10 locations in Palm Beach County, Fla., and 6 in Georgia. Taco John’s has signed a 10-unit development agreement with Love’s Travel Plaza. Krispy Kreme will open 20 stores in Nigeria over the next 5 years. Burger 21, with 22 units in operation, has 15 more locations in various stages of development. Smoothie King opened 100 stores in 2016 and plans to open 150 this year.
- Comparable Store Sales Reports: Ark Restaurants up 2.7 percent. Bob Evans down 2.6 percent, Bojangles up 2.4 percent, Casey’s General Store up 5.8 percent, Diversified Restaurant Holdings down 3.0 percent. El Pollo Loco (system down 1.3 percent, company owned down 0.6 percent and franchised down 1.9 percent), Habit Burger up 1.7 percent, and Smoothie King up 9.1 percent.
For details and same-store sales of other chains, refer to the Green Sheet.