The Polar Vortex Put a Deep Freeze on Restaurant Sales but Hiring Remains Strong in Foodservice

This Week In Foodservice reports on the effect winter weather might have on restaurant sales, reviews all the employment news from “jobs Friday”, finds restaurants remain in a hiring mode and much more.

Technomic, Inc. feels strongly that the brutal weather this year has pummeled restaurant sales. The research firm has gone so far as to state “January and February have to be considered lost dining occasions for foodservice operators.”

Technomic went on to say that the bad weather has continued into March and expresses concern that higher heating expenses will also hurt restaurant sales even as late as May of this year.

As a result of these negative conditions. Technomic thinks that 2014 sales growth might fall from a projected 3.5 percent to 4 percent down to 2.5 percent to 3 percent, knocking a full percentage point off dollar volume this year.

Economic News This Week

  • Private industries added 139,000 jobs in February, according to the National Employment Report published by ADP, the payroll processing company. ADP’s CEO noted February job growth is significantly below most previous months. Small firms (less than 50 employees) accounted for 59,000 jobs, medium-sized companies (50-499 employees) for 35,000 and large firms (+500 employees) for 44,000.
  • Gallup’s U.S. Job Creation Index Rose to +21 in February. The index is calculated by taking the difference between those companies who are hiring vs. those who are letting employees go.
  • First-time jobless claims fell by 26,000 to 323,000, which is a 3-month low. The less volatile 4-week moving average fell 2,000 to 336,500. Continuing claims remain at a relatively high level and unemployment claims continue to be higher than before the recession.
  • The Department of Labor reported 175,000 new jobs in February. The private sector accounted for 162,000 with state and local government hiring responsible for the balance. Various observers termed the increase “measured”, “decent”, or “adequate.” The Bureau of Labor Statistics revised upwards the number of new jobs in January to 129,000 from the originally reported 113,000 and December’s new job creation to 84,000 vs. 75,000 as first reported. On the down side, the unemployment rate ticked up to 6.7 percent from January’s 6.5 percent. The primary reason was more people entering the job market.
  • Personal income rose 0.3 percent in January while personal spending rose a stronger than expected 0.4 percent, according to the Commerce Department.
  • The Gallup Poll’s Consumer Spending Study reported that self-reported daily spending was $87 in February. Spending was up from $78 in January and up from $83 in February 2013. It was also the highest reported amount since February 2008 at the start of the recession.
  • Factory orders fell 0.7 percent in January after declining a full 2 percent (revised) in December, according to the Commerce Department. The always-volatile transportation segment fell 5.7 percent. Without transportation factory orders were up 0.2 percent.
  • The Markit U.S. Manufacturing Index accelerated to 57.1 in February up from the “flash” or initial reading of 56.7.
  • The Institute For Supply Management’s Manufacturing Index increased by 1.9 percent in February to 53.2. This is the 9th straight month the index has been above 50, indicating continuing growth in the manufacturing area. The Institute said that while production fell new orders grew and 14 of the 18 manufacturing industries in the study experienced growth last month.
  • The Institute For Supply Management’s Non-Manufacturing Indexfell to 51.6 in February, down from 54 in January. New orders increased slightly but the employment index slid 8.9 percentage points to below the 50 breakeven point at 47.5. This indicates a contraction in employment for the first time in 25 months.
  • U.S. productivity slowed in the 4th quarter to 1.8 percent, which was down from the Labor Department’s previous estimate of 3.2 percent. For all of 2012 productivity rose just 0.5 percent. Economists look at productivity as an important factor in the health of the economy since increased productivity allows employers to pay higher wages without increasing prices.
  • U.S. car and light truck sales were flat in February at 15.34 million on a seasonally adjusted, annualized basis. Chrysler and Nissan were the only two major manufacturers to experience sales growth. Automakers and dealers are optimistic that buyers will return as soon as the weather improves.
  • Gallup’s Economic Confidence Index stood at minus 16 in February, which was identical to the January reading.

Foodservice News This Week

  • February job growth may have been modest to some but the foodservice industry continued to hire. According to last Friday’s Bureau of Labor Statistics employment report, foodservice jobs rose by 21,200 in February. Thus, out of the 162,000 private sector jobs the economy added, foodservice accounted for 13 percent of them. The Bureau stated on page 3 of the report that the foodservice industry has grown by an average of 27,000 new jobs per month over the past 12 months.
  • ObamaCare was in the news this week with the primary story being a delay in the requirement that all health insurance plans must meet certain coverage requirements. Insurance programs can in some instances continue to offer such coverage to 2016. It is not clear if insurance companies will go back and reinstate these policies or not. Some observers question whether the administration has the legal right to modify the Affordable Healthcare Act without congress amending the law. Receiving less attention this week was the release by the Internal Revenue Service of the rules covering reporting requirements for employers under the law. (The IRS is charged with enforcing some provisions of the law.) The response from the National Restaurant Association was swift and definitive. An NRA spokesperson said the rules “would create a morass of confusion” for restaurant operators with more than 50 or more employees. The NRA called the requirements “burdensome, confusing and costly” and predicted operators will have to hire administrative help and invest in new IT systems to keep track of the required data.
  • Corporate Stirrings: TGI Fridays is in “advanced talks” to sell itself to TriArtisan Capital Partners. TGIF’s is currently owned by privately owned Carlson. Sbarro filled for Chapter 11.
  • Starbucks has teamed with Disney to open a company-owned unit in Downtown Disney in Anaheim, Calif. Three more stores will be operated by Starbucks across Disney properties in the U.S. The two “iconic brands” have partnered in various concepts on Disney locations since 2009.
  • Buffalo Wild Wings announced they will be equipping their restaurants with tablet devices to let customers order their food and drinks, play games, request songs, change TV channels and pay their bills. The chain said that currently 150 company-owned units have the equipment now and that all locations should be offering it by the end of 2015.  Last year Chili’s Restaurants announced they would invest in a similar system.
  • McDonald’s had a tough February but managed to beat estimates. World wide comparable store sales fell 0.3 percent. U.S. comparable store sales fell by 1.4 percent due to “challenging industry dynamics and severe winter weather.” Comp store sales rose 0.6 percent in Europe but declined 2.6 percent in Africa, Asia, and the Pacific. Actual sales dropped 0.6 percent but rose 2.2 percent in constant currencies.
  • McDonald’s will launch 300 new restaurants in Europe and revamp 400 others in the next year. The chain will also install self service kiosks to speed service.
  • IHOP exploring fast-casual concept within their current locations. The concept will be “alpha tested” in Applebee’s as well. No other information was provided in the story.
  • Growth Chains: Checkers plans on opening as many as 50 company-owned units in Southern Florida in the next 5 years. McDonald’s plans on adding 90 stores in the Philippines which will give the chain 500 locations in the country. The Corner Bakery Café has opened their first restaurant in Indianapolis with “several more” to come in the next 6 years.
  • Comparable-Store Sales Reports: Bob Evans (down 1.4 percent), Good Times Burgers (up 19.9 percent), Ignite Restaurant Group (Joe’s Crab Shack up 1.9 percent, Romano’s Macaroni Grill down 9 percent, and Brick House Tavern up 6.6 percent), Jamba, Inc. (system up 0.3 percent, companyoowned up 3.4 percent, and franchised down 2.1 percent), McAlister’s Deli (up 8.3 percent), and McDonald’s (down 1.4 percent).

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

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