Are healthier fast-food chains the wave of the future? Technomic reduces its estimated restaurant sales growth in 2016 and 2017. Foodservice operators doubled the number of people hired in November from October. Technology isn’t going to save restaurants.
Some major food purveyors like PepsiCo and Campbell Soup say that healthier foods — sometimes called “cleaner foods” — represent not just a trend but a movement. How seriously the McDonald’s/Burger King/KFC crowd really take this is anyone’s guess but the fast-food giants continue to switch products to reduce artificial ingredients, use cage free eggs, drop antibiotic fed chickens, and so on.
Meanwhile, it seems at least nominally healthier chains continue to pop up at a fast pace. Business Insider accumulated a current list that includes Eatsa, an automated vegetarian chain; Salad and Go, which has 6 locations in Arizona with plans for 8 more; and Digg Inn, which partners with nearby farmers to offer locally sourced vegetables. Digg Inn has 14 locations in New York City and 1 in Boston.
Another chain using locally sourced meat and produce in sandwiches, soups and salads is The Kitchenette in Memphis. A third farm-to-table operation is Everytable in Los Angeles, which has a unique strategy of adjusting menu prices to the average income of the surrounding neighborhood.
Canadian-based Freshii has also been around for 10 years with its self-described mission to make healthy food convenient and affordable — and more than 300 locations worldwide.
How successful these operations will be remains to be seen, but we can be sure that regardless of how healthy the food is, it better taste good.
Economic News This Week
- Gross domestic product rose 3.2 percent in the third quarter according to the second estimate — based on more complete data than the advance estimate released in October — from the Bureau of Economic Analysis. The increase beat most projections and was the biggest gain in two years. Most economists consider 3.0 percent GDP growth a good sign of economic expansion.
- . The S&P CoreLogic Case-Shiller National Home Price Index in the September was 184.8, edging past the July 2006 reading of 184.6. While this is good news for home owners and the economy as a whole, adjusted for 16 percent inflation in the time period, home prices are still lagging.
- Construction spending rose 0.5 percent in October vs. September and was up 3.4 percent over October 2015. Residential construction was up 1.6 percent over from October.
- The Chicago Business Barometer rose 7 points in November to 57.6, the highest the index has been since January 2015. (Any number that exceeds 50 indicates expanding manufacturing activity.) The New Orders Index increased 10.7 points to 63.2. The Production Index and the Order Backlog Index both also rose. The Labor Index was the only component to fall.
- The Institute for Supply Management Manufacturing Index improved by 1.3 points to 53.2 in November. (Any reading of more than 50 means manufacturing activity in the U.S. is expanding.) The New Orders Index crept up by 0.9 percent to 53. The Production Index increased by 1.4 percentage points to 56, but the Employment Index slid 0.6 percent to 52.3. Of the 18 manufacturing industries studied by ISM, 11 reported growth in November.
- The Institute for Supply Management Non-Manufacturing Index rose 2.4 percentage points to 57.2 percent in November. (Any reading of more than 50 indicates growing activity.) The November results are a 12-month high and marks the 82nd consecutive month of non-manufacturing expansion. The New Orders Index retreated by 0.7 percent to 57 percent. The Employment Index rose 5.1 percentage points to 58.2 percent. Of the 16 industries included in the ISM survey, 14 reported growth in November. This includes the Accommodation & Foodservices sector.
- Personal income rose 0.6 percent in October while personal spending increased 0.3 percent, indicating consumers saved increased earnings and are being conservative in spending.
- Initial jobless claims rose 17,000 for a total of 268,000 in the week ending Nov. 26. The 4-week moving average of claims was 251,000, an increase of 500. Claims remain well below historical averages.
- ADP reported that the U.S. added 216,000 new jobs in November. This is the third best month in 2016. Service jobs increased 228,000 and goods-producing jobs declined by 11,000. Small companies (less than 50 employees) accounted for 37,000 jobs; mid-sized companies (50-499 employees) added 89,000 new positions; and large firms (+500 employees) added 90,000 more employees.
- The Bureau of Labor Statistics reported that the U.S. economy added 178,000 jobs in November, 156,000 in the private sector and 22,000 by government entities. The unemployment was 4.6 percent, its level lowest since August 2007. The 0.3 percent decline was due to both more people finding work and people giving up looking for work. Overall, observers seemed to feel the employment report was good but not great. (For foodservice hiring in November, please see the Foodservice News This Week section below.)
- The Conference Board Consumer Confidence Index increased “significantly” in November after declining in October. The index rose to 107.1 from 100.8 in October. The Present Situation Index rose from 123.1 in October to 130.3 while the Expectations Index rose to 91.7 from 86.0 in October. The Conference Board said the survey was done pre-election and a small sample of consumers done post-election indicated they were not influenced by the outcome. The Conference Board believes the findings bode well for retailers during the Christmas season.
- Technomic adjusted its forecasts for both 2016 and 2017. Restaurant sales will grow more slowly as customer traffic falters. Technomic reduced full-service restaurant sales by 1.4 percent in 2016 and by 0.8 percent in 2017. Nominal growth is now seen as 3.7 percent but with inflation estimated at 2.7 percent, real growth will be just 0.8 percent. In terms of sales at limited service restaurants, Technomic adjusted its projection to 4.5 percent from 5.5 percent in 2016 and to 4.9 percent from 5.7 percent in 2017. Technomic also sees high menu prices as a drag on fast-casual restaurant sales but predicts that this segment will continue to be one of the fastest growing foodservice segments.
- Foodservice operators added 18,900 new employees in November. This was almost double the 9,900 hired in October, which brought some negative comments regarding a slowing in the restaurant market. The latest report from the Bureau of Labor Statistics has foodservice accounting for 12 percent of the jobs added in the private sector last month.
- Technology can’t help the restaurant slump according to Scott Hume, publisher of BurgerBusiness, after studying a report issued by MarketForce Information on casual dining brands. For example, only 37 percent of respondents have ever used a tablet at a casual restaurant. Further, just 26 percent said using a tablet assures correct orders and just 20 percent said using a tablet makes the dining experience more enjoyable. On the other side, just 16 percent of those surveyed agreed their casual dining visit was more of an experience than just a meal transaction. Hume concluded that it is the “operational basics that elevate meals and improve satisfaction.”
- Minimum wage is the wrong conversation to have according to Nick Sarillo, CEO and founder of Nick’s Pizza & Pub. Sarillo believes the foodservice industry has a “hire six to keep one” mentality instead of developing a culture of trust and cooperation among employees based on organizational values. Nick’s Pizza & Pub pays an average of $10.25 and the turnover rate is 25 percent annually as compared to 150 percent average for the industry.
- Food halls have experienced explosive growth according to a commercial real estate broker. Cushman & Wakefield reports that food halls grew 37 percent in the first 9 months this year with 18 more projects scheduled to come on line in the last 3 months. The company attributes the growth to the foodie movement, the impact of celebrity chefs, support by Millennials, and publicity by culinary cable channels.
- Crumbs Bake Shop will offer catering and delivery in the New York City area. The special catering menu that does not include all items available in Crumbs’ restaurants.
- Corporate Stirrings: Logan’s Roadhouse Inc. has emerged from bankruptcy that included the closing of 34 restaurants and renegotiated leases and contracts. McDonald’s selected Lionhorn PTE Ltd. as the developmental licensee for Malaysia and Singapore markets. The 2 countries currently have about 390 McDonald’s restaurants of which more than 80 percent are company owned. The deal is part of McDonald’s commitment to refranchise a large number of company-owned operations. Starbucks CEO Howard Schultz is stepping down to assume the role of developing the chain’s upscale Roastery store operation. The CEO position will go to Kevin Johnson, Starbucks’ current president and COO. The last time Schultz stepped down as CEO — in 2008 to concentrate on international expansion — Starbucks stock dropped significantly. Carrols Restaurant Group announced the acquisition of 7 Burger King restaurants in Ohio, making a total of 56 restaurants added this year and giving the chain a total of 762 Burger King restaurants.
- Growth Chains: Jamba Juice plans to open 20 locations in the Detroit area. Bojangles has signed an agreement for four restaurants in the Lehigh, Penn., area. Coffee & Bagels, a joint venture of Caribou Coffee and Einstein Bagels, will open its 46th restaurant by the end of 2016. A&W Restaurants will open 15 units this year and plans to open 20 in 2017. Sub Zero Ice Cream has opened 2 new locations in Houston and plans to add 10 more.
- Comparable Store Sales: No reports this week.
Foodservice News This Week
For past reports of chain same-store sales, see the Green Sheet.