While business may not be booming, foodservice operators remain optimistic about the future. That’s the key takeaway after reviewing the data from the National Restaurant Association’s October Restaurant Performance Index.
The RPI increased 0.2 percent in October for a final reading of 100.9. Any reading that exceeds 100 indicates expansion. Unfortunately, the Current Situation Index, which includes same-store sales and customer traffic, dipped 0.3 percent to a final level of 99.5. October marks the fourth consecutive decline in the Current Situation Index.
A 0.8 percent increase in the Expectations Index drove the overall uptick in the RPI. The Expectations Index now stands at 102.4, its highest level in 8 months.
Operators continue to invest in their businesses. In the last 3 months, 67 percent of those surveyed said they had made a capital investment for new equipment, expansion and/or remodeling. This was up from the 61 percent who reported similarly for September. As for future plans, 64 percent of the operators plan to make a capital expenditure for equipment, expansion and/or remodeling in the next 6 months. This represents a 5 percent increase compared to September.
Economic News This Week
- Real Gross Domestic Product was revised upward to +3.3 percent for the third quarter. The U.S. Commerce Department’s advanced estimate projected a 3.0 percent increase. This revised reading represents the largest increase in GDP since January 2015. The report sighted business investment as the number one factor in the GDP growth. Economists, for the most part, believe the economic outlook remains bright with unemployment at a 17-year low, the overall employment picture looking rosy and consumer confidence high.
- Initial-jobless claims fell to 2,000 from 238,000 for the week ending Nov. 25. The 4-week moving average rose 2,250 for a final reading of 242,250.
- Real personal income increased 0.4 percent In October while real personal consumption expenditures increased 0.3 percent according to a report from the Bureau of Economic Analysis.
- The Institute for Supply Management’s Production Manufacturing Index declined slightly in November to 58.2 from 58.7 in October. (Any reading of more than 50 shows increasing activity.) November marks the 102nd consecutive month U.S. manufacturing activity increased. The New Orders Index edged up from 63.4 in October to a level of 64.0. The Production Index edged up from 61.0 in October to a level of 63.9. The Employment Index and the Order Backlog Index were both virtually flat. New Orders retreated in November but were still at a healthy level. The employment indicator exceeded 50.
- October construction spending rose 1.4 percent on a seasonally adjusted annual basis from September. On the same basis, construction spending was up 2.9 percent from October 2016. Private construction was up 0.6 percent on an annual seasonally adjusted rate from September. Residential construction spending in October increased 0.4 percent from September on an annual seasonally adjusted rate.
- The Conference Board’s Consumer Confidence Index rose again in November. The Index, which hit a 17-year high in October at 126.3, increased 3.2 percent for a final reading of 129.5. The Present Situation Index increased to 153.9 from 152 in October, while the Expectations Index increased to 113.3 from 109.0 in October. A spokesperson for the Conference Board said that consumers are approaching the Christmas season in high spirits and the economy should continue to expand through the first few months of 2018.
Foodservice News This Week
- Consumers continue to make changes in their eating habits according to research from The NPD Group. The study shows consumers patronize restaurants less often as part of an evolving stay-at-home culture. In turn, foodservice delivery continues to grow.
- A delivery-only concept doing business as Modern Organic Mexican made its debut in Los Angeles. Multiconcept operator Madera Group owns the business and said it falls somewhere in between its Tocaya Organic brand and Toca Madera chains.
- Cameron Mitchel’s latest concept is a New York-style deli. The Columbus, Ohio-based multiconcept operator describes the menu at Harvey & Ed’s as featuring plenty of comfort food.
- The Cheesecake Factory will open its second RockSugar Southeast Asian Kitchen at the Oakbrook Center in suburban Chicago. The first location opened in Century City, Calif., in 2008. The restaurant showcases dishes from various Asian cuisines.
- Restaurant spending on Thanksgiving and Black Friday increased 6.3 percent. Research company First Data reported fast food restaurants accounted for 57 percent of the growth from the 2 same days in 2016. First Data also found that overall retail spending for those days was up 11.9 percent with 29 percent via e-commerce vs. 25 percent last year. Despite less spending percentage wise at brick and mortar operations somehow restaurant spending rose significantly.
- Growth Chains: The Kwik Trip c-store chain will open 56 stores next year, of which 36 will be in Wisconsin. One Hospitality Group signed a licensing agreement for up to four restaurants in Mexico. Casey’s General Store opened its 2,000th store. Dickey’s Barbecue Pit opened restaurants in Arizona, California, Ohio and Texas. Newk’s Eatery will open four locations in Georgia. In-N-Out Burger plans to open as many as 50 restaurants in Colorado with the first scheduled for next year. The chain also will open a hamburger patty plant and distribution center in Colorado Springs.
- Comparable Store Sales Reports: FAT Brands (Fat Burger up 3.8 percent and Buffalo’s up 3.9 percent)
- Corporate Stirrings: Jack in the Box is negotiating with private equity firm Apollo Global Management for the sale of Qdoba Mexican Eats. Jack in the Box stated months ago that Qdoba was not a good fit for the company. Selling price for the chain could be over $300 million but there does not appear a final agreement yet. Apollo Global currently owns Chuck E. Cheese. Jack in the Box is owned by the Roark Capital Group. Arby’s announced an agreement to purchase Buffalo Wild Wings for $2.4 billion in cash. Activist investor Mick McGuire of Marcato Capital Management agreed to support the deal. Jamba Inc. reported that it received “a positive decision” from a Nasdaq Hearings Panel that will allow the chain to keep its stock listed on the Nasdaq. Jamba failed to meet requirements to file 10-Q form with the federal government. MTY Food Group Inc. announced that one of its subsidiaries has signed an agreement to acquire all of the limited liability company interests CB Franchise Systems LLC, Built Franchise systems and certain affiliates.
For details and same-store sales of other chains, please click here for the Green Sheet.