Published on Tuesday, January 15, 2013
Written by Jerry Stiegler
Despite traveling a rocky road, it appears as if restaurants actually achieved real revenue growth in 2012. Unfortunately, it appears as if the 2013 credit market for restaurants will be as tight as it was in 2012.
Advanced data released by The U.S. Commerce Department on Tuesday shows total retail sales in December rose 0.5 percent compared to November and increased 4.7 percent over December 2011. Restaurant and bar sales outperformed the retail market as a whole. Foodservice sales were up 1.2 percent over November and increase 7.6 percent over December last year. For the year, restaurant and bar sales increased 7.3 percent.
There are caveats to the data. These "advance estimates" are subject to revision. The government surveys only eating and drinking places, which means the study excludes hotels, resorts, clubs, airlines, cruise ships and foodservice's institutional segments. The U.S. Commerce Department adjusts the numbers for seasonal differences such as holidays, weekends, and number of days in the month but not for menu price increases.
Regarding menu price inflation, the experts agree that the increase last year was probably less than 4 percent, meaning that restaurants should definitely have had a couple percentage points of real growth. Given all the problems and uncertainty in the overall economy, restaurants chalked up a pretty decent year.
Economic News This Week:
- First-time jobless claims barely budged. Claims for the week ending January 4 were 371,000. The number of claims from the previous week were revised downward from 372,000 to 367,000 so the statistics have remained relatively consistent. We are getting to the point when the impact of Hurricane Sandy as well as the holiday layoffs should be behind us, so in a week or two the labor numbers should provide a clearer look at the employment picture.
- The number of job seekers per opening in November was 3.28. This is the lowest the number has been in four years but it remains double the number before the recession, according to the U.S. Labor Department.
- The long-term jobless are beginning to find jobs, according to the Wall Street Journal. Those long-term unemployed have dropped to 39.1 percent of total job seekers. For more than 3 years they had accounted for more than 40 percent of the unemployed. In 2010, there were 6.5 million people out of work more than 6 months but that has dropped to almost 4.8 million. The WSJ article points out this is a level of long-term unemployment that hasn't been seen since World War II. Long-term unemployment may be dropping as overall employment slowly improves. A number of the long-term unemployed are construction workers so the bounce back in the housing market will undoubtedly help. And extended unemployment benefits have been reduced, which encourages laid off workers to return to work.
- Wholesale inventories rose 0.6 percent overall but the ratio of inventories to sales dropped as November sales by wholesalers increased, according to the U.S. Commerce Department.
- The Federal Reserve reported that consumer credit grew $16 billion in November, which is far beyond the forecast of $10 billion. Credit card debt increased by $1 billion while non-revolving debt, such as auto and student loans, jumped $15 billion. This indicates that consumers feel confident enough to increase their borrowing.
- The Gallup Organization's U.S. Economic Confidence Index was minus 21 for the week ending January 6. The Index hit a four-year high in November at minus ten. Americans' view of both current conditions and the outlook for the future have both fallen since November.
- Small business sentiment inched up 0.5 point to 88.0 in December. The National Federation of Independent Business says this is the second lowest reading since March of 2010 and is, in fact, in recession territory.
- The U.S. Congress has a dismal approval rating of just 9 percent, according to Public Policy Polling. Moreover, the study showed root canals, colonoscopies, NFL replacement officials, cockroaches, and Brussels sprouts were more popular than our congress. Some of things that did score lower than congress were telemarketers, North Korea, the ebola virus, meth labs, communism, and gonorrhea. And yet, the incumbents keep getting re-elected to U.S. House and Senate.
Foodservice News This Week:
- Restaurants' ability to obtain credit this year will probably be similar to the situation they faced in 2012, according to Fitch Ratings. While acknowledging the weak economy, tough competition, rising food costs and healthcare all present challenges, Fitch believes that the industry will adjust strategies to meet these problems.
- Consumers are returning to pizza restaurants, according to Pizzamarketplace.com. The sale of grocery frozen pizzas have dropped the last two years at least in part due to the heavy use of promotion pricing by pizza chains.
- Pakistan is attracting investments from U.S.-based restaurant chains including KFC, Pizza Hut, McDonald's, Mrs. Field's and Johnny Rockets. Fatburger just recently opened its first store in the country. While the image of Pakistan in the U.S. is that of a "wild west" country overrun with terrorist groups and religious fanatics, Pakistan has a fast-growing middle class who seem to crave U.S. restaurant food regardless of political and religious differences reports Business Week.
- Jamba Juice announced a store format and design initiative including smoothie stations, drive thru's, and expanded juice bars. The chain will also refresh 75 to 100 stores with an open layout, use of more natural and environmentally friendly building materials, brighter lighting, updated graphics, vivid and bold colors, and a variety of seating options.
- Do you have to be nuts to operate a restaurant? According to best selling book entitled "The Wisdom of Psychopaths: What Saints, Spies, and Serial Killers Can Teach Us About Success," certain jobs attract people with higher rates of psychopathy. Chefs were in the top ten.
- Growth chains: KFC plans 40 units in Pakistan in the next 5 years. Burger 21 has signed agreements with 6 groups in 6 states for a total of 11 restaurants. Papa John's has an agreement with a partner to open 11 outlets along the United Kingdom's motorway network. The WaWa's C-store chain has opened their first store in New Jersey with an additional 10 units planned to open by 2015. Voo Doo Barbeque has opened their first restaurant in Florida with 25 more planned. Jamba Juice says they will open 75 to 100 stores globally this year.
- Comparable store sales reports: BJ's Brewhouse (up 2.3 percent) and Ruby Tuesday (company owned up 0.3 percent & Franchised up 0.2 percent)
For details and comparable store sales of other chains, see The Green Sheet.