Hiring was up substantially in July, including in the foodservice business. IFMA projects a decline in the amount foodservice operators will spend in 2023. Starbucks continues to attract attention from Wall Street. These stories and a whole lot more This Week in Foodservice.

How can anyone lose $180 million? When the U.S. Congress passed the Restaurant Revitalization Fund legislation, the law called for the Small Business Administration to distribute the money. This made sense since the SBA is an established organization experienced in paying out funds to small firms like restaurants.

The next part of the saga is well known. The SBA announced that cash was exhausted before most of the applicants received any payments. The issue seemed to have been back in the hands of the U.S. Congress.

Then a couple of weeks ago the Government Accounting Office discovered that $180 million of the Restaurant Revitalization Fund had never been distributed. One question many have asked is how can $180 million go undistributed during such a time of need?

In any case, the Small Business Administration is developing a plan to distribute the $180 million to foodservice operators with the program to be overseen by the U.S. Justice Department. At this date it has not be determined if the funds will go to applicants who had previously applied and had not received any money or if the plan will require operators desiring the government cash to apply again. Another question is will the eligibility be limited to people who were rejected initially?

While the $180 million will provide real relief to those operators that receive it, the fact remains the industry’s challenges run far deeper and this alone won’t bail out the industry.

Economic News This Week

• Initial-jobless claims totaled 260,000, an increase of 6,000 for the week ending July 30, per the Department of Labor. The 4-week moving average hit 254,750, an increase of 6,000.
• What recession? Non-farm payroll increased by 528,000 in July per data from the U.S. Department of Labor’s Employment Situation Report. This is significantly more than most forecasts which were in the range of 425,000 to 450,000 new jobs. And the unemployment rate fell to 3.5% July from 3.6%, a level it had been sitting at for months. So even then the economy is slowing, employers keep hiring.
• Consumer borrowing increased by 10.5% in June, per data from the U.S. Federal Reserve. Revolving credit, which is essentially credit card borrowing, rose 16.0% while nonrevolving credit (auto loans, student loans, etc.) increased 8.8%.

Foodservice News This Week

• Foodservice employers added 74,100 Jobs in July, per the U.S. Bureau of Labor Statistics. This accounts for approximately 14% of the new jobs the U.S. added in July. Despite these gains, labor remains a center-of-the-plate issue for all operators. In fact, prior to this jobs data being released, the National Restaurant Association reported the industry had yet to recover 728,000 jobs lost due to the initial government shutdowns in response to the COVID-19 pandemic.
• The International Foodservice Manufacturers Association projects operator spending in the foodservice industry will decline by 0.1% on a real basis in 2023, compared to 2022. While that is considered flat growth in real terms, IFMA projects the industry will see inflation of 7.7%. This means most foodservice operators will spend more in 2023 than they did in 2022 as a result of higher cost of goods rather than increased consumer demand. On a segment basis, quick-service restaurants are expected to decline 0.8%, fast-casual 1.3%, midscale full-service dining 2.2% and casual dining 1.2%. In contrast, IFMA projects spending among onsite segments will grow 2.4% largely because their recovery from 2020 was slower than other segments.
• Starbucks’ latest quarterly financial report shows strengths and problems. On the plus side, Starbucks reports overall customer demand remained strong without any tendency to trade down to less expensive products that some other companies have reported. In keeping with this finding, Starbucks comparable store sales were up 3% worldwide, this growth came despite a 44% decline in comp sales at the chain’s China locations. In contrast, comparable sales increased 9% at U.S. locations.
• Savory Fund made an investment in 86 Repairs, a Chicago-based restaurant tech company that offers restaurants and other commercial kitchens round-the-clock support for on-demand repair management and planned maintenance programs. 86 repairs also provide access to data-driven insights on repair and maintenance (R&M) spending. 86 Repairs recently announced it raised $15.2 million in Series A funding led by Silicon Valley-based Storm Ventures with participation from Savory Fund, Lightbank, TDF Ventures, Gordon Food Service (GFS), Cleveland Avenue, Tamarind Hill, MATH Venture Partners, and others. The service sector remains a hotbed for investment and acquisition. For example, last week PT Holdings acquired Commercial Kitchen Parts & Service of San Antonio. And just prior to that, Tech 24 Care acquired Temco.
• Capriotti’s Sandwich Shops and Wing Zone will grow through ghost kitchens. Through a partnership with RaaS, a company that manages restaurants through ghost kitchens, the chains will begin to grow in Southern California and then expand throughout Oregon and Washington State and then expand into the Midwest and Sunbelt. RaaS also operates its own brands, including Gabriella's Pizza, @Flowers, Los Pollos Hermanos, Pizzaoki, and Crumbs.
• Growth chains: Keke’s breakfast chain with 55 units currently, had been opening 4 to 6 restaurants a year now, with Denny’s ownership, plans on opening double that number in future years. Marble Slab Creamery announced an agreement to open 10 units in Egypt over the next 10 years. The first unit will open in Cairo in 2023, the company projects.