Restaurant Sales Up, Menu Prices Still Increasing More Than Grocery Prices, and Subway’s Issues

Restaurant sales increased in November. Menu prices continue to increase faster than grocery store prices. The National Labor Relations Board dropped the Joint Employer Rule. Subway has some serious problems. These stories and a whole lot more This Week in Foodservice.

The U.S. Census Bureau reports retail sales increased 0.8 percent in November compared to October. Looking back to November 2016, retail sales were up 5.8 percent. In the first 11 months of this year the Bureau says that retail sales rose 4.2 percent. The advance report also revised the October sales figure from +0.2 percent to an increase of +0.5 percent.

November foodservice and drinking place sales increased 0.7 percent from October. The advance sales estimate is up 2.2 percent compared to November of last year. In the first 11 months of 2017 the Census Bureau reports a 2.7 percent increase in restaurants and bars sales. But, restaurant and bar sales in November were revised downward from the advance estimate of +0.8 percent to +0.4 percent.

It should also be noted that the Bureau of Labor Statistics reported that food away from home prices rose 2.4 percent in the first 11 months of this year. Thus, it appears that taking menu price increases into account, the 11-month sales increase of 2.7 percent shown above means there is precious “real” sales growth.

The Census Bureau’s advance report is based on a limited sample and may be revised with the receipt of a broader sample. The survey covers only restaurants and bars. Not included are hotels, resorts, clubs, employee feeding, schools, colleges, healthcare and military. Finally, some but not all of the statistics are adjusted for seasonal variations, holidays, and weekends but not for menu price changes.

Economic News This Week

Foodservice News This Week

  • November food prices were flat, according to the Consumer Price Index from the Burau of Labor Statistics. Food prices have risen 2.2 percent in the last 12 months. November food at home prices fell 0.1 percent while food away from home prices rose 0.2 percent. In the past 12 months food at home prices increased 0.6 percent and food away from home prices increased 2.4 percent. Some foodservice industry observers believe this disparity negatively affects restaurant sales.
  • The National Labor Relations Board cancelled the Joint Employment Rule. The board had set a standard in 2015 that held a company responsible even though the direct employer was a contractor, staffing agency or franchisee. In effect the ruling said restaurant franchisors like McDonald’s could be held responsible for anything related to employment. Previously, employers could be held responsible only if they had “direct and immediate” control over employees. This latest ruling returns the situation to this standard. Thus, franchising chains in most situations will not be held responsible for working conditions, wages and/or hiring practices. It will also make it more difficult to unionize employees since unions will have to unionize each individual franchise organization.
  • Subway is struggling, according to the New York Post. The sandwich chain’s traffic is down 25 percent over the past 5 years, according to a story in the Post. Subway has promised to boost marketing by $25 million this coming spring and to bring back the $4.99-foot-long promotion. But allegedly more than 400 Subway franchisees have written to company headquarters protesting the move, saying the promotion has left franchisees unprofitable or even insolvent. The foot-long effort takes aim at McDonald’s discount program but Subway franchisees claim it doesn’t work.
  • Chicago to get a large food hall. Time Out entertainment magazines will open a 3-level, nearly 50,000 square foot building in the Fulton Market district in 2019. The facility will have 16 food stations for local operators and will do business as Time Out Market Chicago. The Time Out Group plans to open a food hall in Miami in 2018 and another in Boston in 2019.
  • One restaurant’s failed space is another restaurant’s opportunity. Restaurant locations closing in the Mile-High City don’t stay dark for long these days as operators move quickly to scoop up these sites. Some might interpret this as a softening market while others view this trend as a shakeout of operations that are good but “not good enough” due to the tough competition in Denver. One restaurant owner says he knows of 80 to 100 new restaurants that are coming.
  • Circle K opens a gourmet food-themed c-store. Located in Lexington, S.C., the store will offer an array of fresh foods prepared on site. Menu items include pizzas, sandwiches, burgers, wraps, salads, baked pastries, burritos and biscuits. In addition to offering food for takeout, the store also includes both indoor and outdoor seating.
  • A new fast-casual pizza operation will debut in New York. Simo Pizza will open at two locations offering Neapolitan style pies that will sell for $10 or less. The concept is owned by Rossopomodoro chef and owner Simone Falco who grew up in Naples, Italy. He’s so confident this concept will be a success that Falco is already looking for a third location.
  • Corporate Stirrings: Bruegger’s Bagels has closed 30 locations across the U.S. due to “financial performance.”
  • Growth Chains: Sbarro has a deal to bring 20 restaurants to Argentina and another arrangement to open 20 of the Sbarro’s fast-casual concept Pizza Cucinova to Japan. Applebee’s will open five restaurants in Panama over the next five years. Arby’s will open 50 locations in Egypt. A&W restaurants opened 15 units this year and plans on opening 18 in 2018. Checker’s plans to open 24 locations in Pittsburgh over the next 5 years. Newk’s Eatery will open 17 restaurants across Florida, Georgia and Tennessee. #getfried, the french-fry-only chain, will be opening in four Texas cities — Austin, Dallas, Houston and San Antonio; as well as Santa Clara, California; plus 20 units in Egypt.
  • Comparable Store Sales Reports: Casey’s General Store up 2.1 percent.

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

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