Experts disagree on impact of higher minimum wages. Restaurant “real” sales were up fractionally in the first half of the year. Foodservice jobs are at risk of being automated. Blaze Pizza may be the fastest-growing chain ever. These stories and many more This Week in Foodservice.
Does increasing the minimum wage help low-wage workers? The answer depends on who you ask, or, in this instance, which study you are reading.
Seattle’s minimum wage increases have boosted hourly earnings for low-paid workers but have also caused hours worked to be cut and led to job cuts according to a study commissioned by the city and run by the University of Washington. For the average low-wage worker in Seattle, that translates into a loss of about $125 per month per job, the Seattle Times reported. The study was published by the National Bureau of Economic Research, a non-profit think tank.
The University of Washington study followed a study by the University of California, Berkeley that concluded the minimum wage jumps led to higher pay for restaurant workers without costing jobs. The UW study corroborated the Berkeley finding when taking into account all wage levels in the restaurant industry. But the University of Washington research found low-wage workers had their hours reduced.
Spokesmen from Berkeley criticized the University of Washington research on a number of grounds and, as might be expected, one of the authors of the UW research defended it. Specifically, the author of the UW report said since employers have to pay more, they bypass teens and immigrants and look for experienced people.
Economic News This Week
- Initial jobless claims dipped to 233,000, a decline of 15,000 for the week ending July 15. The 4-week moving average was 243,750, a decline of 2,250. Layoffs reamin at a low level.
- The Empire State Manufacturing Survey showed modest growth in July. Coming off a 2-year high in June, the index declined 10 points in July for a final reading of 9.8, per the New York Federal Reserve. Any reading that exceeds zero indicates growth, which means manufacturing continues to grow in the region but at a slower rate than in June. The New Orders Index totaled 13.3, a decline of 4.8 points. The Shipments Index dropped 11.8 points. The Unfilled Orders Index fell 9.3 points to minus 4.7. Employment indexes also fell.
- The Philadelphia Manufacturing Business Outlook Survey Index fell in 8.1 points in July for a final reading of 19.5. Any reading that exceeds zero indicates expanding activity, so despite declining from June’s level, manufacturing in the Philadelphia area remains in growth mode. The Index has been positive for 12 consecutive months but July is the lowest reading since November. The New Orders Index tumbled almost 24 points, just barely staying positive at 2.1. The Shipments Index fell 7.4 points for a reading of 12.2 while the Unfilled Orders Index fell almost 7 points for a final reading of 7.2.
- Privately owned housing starts rose 8.3 percent in June over May on a seasonally adjusted annual rate. Starts were up 2.1 percent over June 2016. Single family housing starts were up 6.3 percent over May. June building permits issued were up 7.4 percent from May and were up 5.1 percent over June 2016 on a seasonally adjusted rate. June single family permits issued were up 4.1 percent from May.
- The Conference Board’s Leading Economic Index increased 0.6 percent in June after growing 0.2 percent in April and May. The Conference Board sees the increase as a sign the U.S. economy will continue to grow throughout 2017 and perhaps even have “… a moderate improvement in GDP in the second half of the year.”
Foodservice News This Week
- “Real” sales at restaurants and bars were up 0.67 percent in the first half of this year according an estimate from The Food Institute. The report said that “real” sales (i.e., sales adjusted for menu price changes) were up 3.61 percent for all of 2106.
- Eighty six percent of accommodation and foodservice jobs are at risk of being automated, per a Wall Street Journal article. This makes the industry No.1 for possible worker displacement for automation by 2030.
- Blaze Pizza may be the fastest growing restaurant chain in U.S. history according to Technomic Inc. The company went from 2 locations to 200 in 4 years. Blaze Pizza’s CEO attributes the phenomenal growth to “franchising done right.” The chain signs franchisees with prior restaurant experience and who will build in their own neighborhoods. Blaze plans to open 100 locations next year.
- Pizza Hut plans to hire 14,000 drivers this year. In addition to hiring 3,000 drivers a month for the rest of the year, Pizza Hut will begin using the Delivery Network Algorithm to offer better delivery service and predict delivery time taking into consideration weather, road construction and traffic.
- Subway redesigns its stores. Most Subway units have not been remodeled since the early 2000s. The changes include a brighter look, vegetables displayed behind the counter and ordering tablets. Cost of implementing the redesign was not provided.
- McDonald’s introduced a new restaurant design in Phoenix. Called Alphabet, the new store uses black and white crafted alphabet letters and food illustrations in picture frames. The lobby interior features black, white, yellow and natural wood tones. The restaurant also has zoned seating with a variety of seating types as well as lower lighting levels, free WiFi and a double drive-thru.
- McDonald’s franchisees have turned bullish, expecting same-store sales to rise 3.2 percent in the second quarter. The survey, run by Mark Kalinowski of Nomura-Instinet frequently finds McD’s franchisees to be very pessimistic. Mr. Kalinowski reports the beverage promotion and the Signature Crafted Recipes have driven sales growth. It is important to note that sample base is small with just 26 franchisees representing a total of 219 units surveyed.
- Corporate Stirrings: Bobby’s Burger Place, a 17-unit fast-casual operation that was founded in 2008 by Food Network star Bobby Flay, is exploring going public. The company would use a clause in the 2008 American JOBS Act that allows smaller companies to have an initial public stock offering. The chain hopes to raise $15 million to expand overseas as well as in the U.S. The Kwik Trip c-store chain has acquired the assets of the PDQ company including 35 stores in California and Wisconsin. All of the locations will be retained and converted in Kwik Trip stores. The cost of the conversions will be $30 million to $35 million.
- Growth Chains: The Halal Guys, with 49 units currently open, has 350 more in development. The Philly Pretzel Factory opened three locations in Philadelphia. Gloria Jean’s Coffee plans on opening 7 stores in the Chicago area and Northern Indiana. Chick-fil-A will be opening restaurants in Buffalo, Rochester and Syracuse. PizzaRev will be opening 3 restaurants in Kansas. Famous Toastery has a franchise growth plan that they believe will take the chain from the current 20 units to 65 units by the middle of next year. Rock & Brew, owned in part by KISS rockers Paul Stanley and Gene Simmons, plans to open 10 to 15 restaurants in the Chicago area in the next 5 to 7 years. Capriotti’s Sandwich Shops plans to open 15 restaurants this year and has a goal of 500 locations by 2025.
- Comparable Store Sales Reports: Del Frisco Restaurant Group (Del Frisco Grille down 3.2 percent, Double Eagle Steak House down 0.5 percent, and Sullivan’s down 5.2 percent)
For details and same-store sales of other chains, Click Here for the Green Sheet.