Restaurant industry performance in June was consistent with May, per the National Restaurant Association. McDonald’s quarterly financial performance exceeded Wall Street’s forecasts. Buffalo Wild Wings opened its B-Dub Express concept in Minnesota. Chipotle Mexican Grill will add a drive-thru window as a test to one of the chain’s Ohio locations. These stories and a lot more This Week in Foodservice.

The National Restaurant Association’s Restaurant Performance Index barely changed in June. The June Index read 101.0 vs.100.9 in May. Any number that exceeds 100 indicates expanding activity.

While the overall index remained consistent, there were some changes to its individual components. The Current Situation Index totaled 100.8 in June, up .6 from May. Driving the increase was a jump in same store sales – 54 percent of operators reported an increase compared to only 34 percent reporting a decline. This is the first time since March that more operators experienced an increase than had a drop in same-store sales.

The other major component, the Expectations Index, totaled 101.3 in June, down 0.4 percent from May. Operators’ outlook for the economy tumbled as just 16 percent expect better conditions in the next 6 months. But 42 percent of those surveyed expect their sales to be higher in 6 months. This is best response to this question since March 2016.

Fifty-nine percent of operators report investing in their businesses in the form of a capital expenditure for equipment, expansion and/or remodeling in the past 3 months. This is down slightly from 62 percent who reported they had done so in May. Asked to look ahead, 58 percent of operators said they plan to make a capital investment for equipment, remodeling or expansion in their operation in the next 6 months. While this is a decline from 64 percent who reported similarly last month, historically it represents a decent result.

Economic News This Week

• Real Gross Domestic Product for the second quarter of 2017 increased 2.6 percent, according to the Bureau of Economic Analysis’ advance estimate. As usual the Bureau’s press release stressed that the advance estimate is based on data that is incomplete and/or subject to revision. The Bureau’s final estimate for the first quarter was revised down to 1.2 percent from 1.4 percent. The good news is that the economy continues to show growth eight years after the end of the last recession. The bad news is that this is slowest recovery from a recession in over 60 years.
• Initial jobless claims totaled 244,000, an increase of 10,000 for the week ending July 22. The 4-week moving average was unchanged at 244,000. In other words, the U.S. job market remains healthy.
• Sales of existing hones declined by 1.8 percent in June to a seasonally adjusted annual rate of 5.52 million. While the June figures represent the second lowest so far in 2017, sales are still up 0.7 percent from last year. The National Association of Realtors reports a low number of homes for sale and rising prices continue to effect sales.
• Sales of new homes totaled 610,000 in June
• New orders for manufactured durable goods increased 6.5 percent, according to the U.S. Census Bureau’s advance report for June.  Shipments of manufactured durable goods were virtually unchanged while unfilled orders increased 1.4 percent.
• The Chicago Business Barometer declined to 58.9 in July from 65.7 in June. (Any reading that exceeds 50 indicates expansion.) This marks the lowest reading in five months and breaks a string of five months of increases. The New Orders Index fell totaled 60.3, a decline of 11.6 points. The Production Index totaled 60.8, a decline of 6.9 points. The Order Backlog Index totaled 57.9, a dip of 4.9 points.
• Corporate sales for U.S. companies run ahead of forecasts. Among the 57 percent of the S&P 500 companies that have reported thus far, 73 percent of the firms’ earnings have exceeded forecasts, the Wall Street Journalreported as of the close of business July 28. The 5-year average is 53 percent beating the stock market analysts’ predictions. If the remaining companies have similar reports it will be a record.
• The Conference Board’s Consumer Confidence Index increased in July to 121.1, up from 117.3 in June. The Present Situation Index rose to 147.8 in July from 143.9 in June while the Expectations Index increased from 99.6 in June to 103.3 in July. A spokesperson for the Conference Board noted that consumers assessment of current conditions is at a16 year high.
• The University of Michigan Consumer Sentiment Index declined slightly in the final July survey. The Index fell to 93.4 from the final results in June of 95.1. The Current Economic Conditions Index rose to 113.4 from 112.5 in June while the Index of Consumer Expectations dropped from 83.9 in June to 80.5 in July. The Expectations Index has reflected a significant difference between Democrats and Republicans since last year but the variation has narrowed somewhat as Republicans have reduced their optimism about the future of the economy.

Foodservice News This Week

• McDonald’s second quarter financial performance beat forecasts. Worldwide comparable store sales rose 6.6 percent, which the company attributed to increased guest counts. U.S. same-store sales were up 3.9 percent. Total dollar sales decreased 3.0 percent as a result of the chain’s sale of company owned units. Net income rose 28 percent while earnings per share increased 36 percent. In other McDonald’s news, the burger giant has expanded delivery service to more than 4,200 restaurants in 13 countries. The chain now offers its McDelivery service at more than 7,800 restaurants in 47 countries on 6 continents.
• Buffalo Wild Wings’ first B-Dubs Express opened in Edina, Minn. Buffalo Wild Wings’ CEO stated the goal of the new smaller design is aimed at attracting millennials who focus on eating quickly and on getting delivered food.
• Chipotle Mexican Grill will test a drive-thru window at an Ohio location this fall. Given Chipotle’s appeal to millennials and millennials’ desire for fast service this would seem like a natural.
• Dunkin’ Donuts will reduce the number of items on its menu in some of the chain’s eastern locations. Items that will no longer be available include afternoon sandwiches, some muffins, some bagels, some drinks, danishes, cookies, brownies, and bagel twists. The goal is to “enhance speed of service and in-store operations.”
• The Demos’ Restaurant Chain will open a new concept. The Nashville based, five-unit, family-owned chain plans to open a fast-casual concept with the name PDK Southern Kitchen & Pantry. The menu includes burgers, chicken, soups, banana pudding, and salads made in front of the customers. The restaurant will also offer locally made retail foods. The restaurant should open by the end of the year with a second unit planned to open in 2018.
• Corporate Stirrings: Starbucks announced it has entered into an agreement to purchase the 50 percent of East China JV that it does not own from its joint venture partners Uni-President Enterprises Corporation and President Chain Store Corporation for $1.3 billion. Starbucks will sell its 50 percent interest in its Taiwan operation to the two entities above for $175 million. Starbucks plans of raising the number of their locations in China from the current 2,800 to 5,000 by 2021.Starbucks revealed it plans to close all 379 of its Teavana stores, a chain the company acquired 5 years ago. The company did not say if or why it has not tried to sell Teavana. The reason for the sale according to Starbucks was inconsistent financial performance.
• Growth Chains:Marco’s Pizza plans to open 20 locations in the Raleigh-Durham market by 2020. The Melting Pot signed a development agreement for 17 restaurants in Mexico over the next 7 years. While small local and regional chains dominate the Russian pizza market, Domino’s believes the chain can possibly have 1,500 units in the country while Papa John’s has plans to open 60 to 80 restaurants a year in Russia for the next 5 years. Bar Louie will open 3 restaurants in El Paso.
• Comparable Store Sales Reports: Baskin Robbins down 0.9 percent, Bloomin’ Brands (Combined down 0.3 percent, Outback up 0.3 percent, Carrabba’s up 0.4 percent, Bonefish down 2.6 percent, & Flemming’s down 1.3 percent, BJ’s Restaurants down 1.4 percent, Bojangles down 1.4 percent, Buffalo Wild Wings (Company owned down 1.2 percent & Franchised down 2.1 percent), Chipotle up 8.1 percent, Del Taco up 7.1 percent. Domino’s (System up 9.5 percent, Company owned up 11.2 percent & Franchised up 9.3 percent, Dunkin’ Donuts up 0.8 percent, McDonald’s up 3.9 percent, Ruth’s Hospitality Group up 2.9 percent, and Starbucks up 5.0 percent.

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