Restaurant industry analyst Malcolm Knapp looks to the future. A chunk of the money Starbucks will save due the new tax bill will end up in the pockets of their employees. McDonald’s “joint employment” trial may be nearing a settlement. These stories and a whole lot more This Week in Foodservice.
Malcolm Knapp, founder of Knapp-Track, which monitors the sales of 50 casual restaurant chains, reported that same-store sales of casual restaurants were down 0.5 percent in December following a drop of 0.5 percent in October and down 1.0 percent in November. Knapp believes same-store sales would have been up 0.4 percent for December except for Christmas shifting weeks from 2016 and bad weather in much of the country.
Knapp forecasts the casual dining same-store sales will grow in a range of 0.3 percent to 0.5 percent in 2018 after being down zero percent to 1.0 percent last year. He believes the newly enacted tax changes will result in the increase. He also noted that tax reform will have greater impact on higher earning households.
Other comments by Knapp included that he expects quick service restaurants to outperform the full-serve sector. He expressed concern that immigration law changes could potentially cause issues in restaurant hiring, particularly for back-of-the-house workers. Further, he thinks that the 50 percent deductibility for expensed meals that was retained in the new tax bill is important to the industry.
Knapp also reported that casual restaurants in the state of Texas have outperformed the rest of the country by 2 percent to 3 percent. He believes that will continue since many people in the areas hit by the hurricanes remain displaced as it is difficult to find construction workers.
Malcolm Knapp’s data and observations are courtesy of Bank of America Merrill Lynch.
Economic News This Week
- Real Gross Domestic Product increased 2.6 percent in the fourth quarter according to the Bureau of Economic Analysis advance estimate. The Bureau’s final estimate for the third quarter was raised to 3.6 percent. For 2017 GDP rose 2.3 percent. Since the end of the Great Recession, GPD has been averaging approximately +2.0 percent per year so it appears in 2017 the economy was definitely on an upswing.
- Initial jobless claims rose 17,000 to 233,000 for the week ending Jan. 20. The 4-week moving average fell 3,500 to 240,000. The Department of Labor continues to report that filing claims in Puerto Rico and the Virgin Islands have still not returned to normal.
- Personal income increased 0.4 percent in December. Personal Consumption Expenditures also increased 0.4 percent according to the U.S. Bureau of Economic Analysis.
- Existing home sales slipped in December. The National Association of Realtors reported that December existing home sales declined by 3.6 percent from November to a seasonally adjusted annual rate of 5.57 million. However, for the entire year of 2017 sales were up 1.1 percent, which was the best sales year since 2006.
- Sales of new single-family houses were 625,000 in December on a seasonally adjusted annual rate basis. This is 9.3 percent below November but 14.1 percent above December 2016. For 2017, the Census Bureau estimates there were 608,00 new homes sold, up 4.1 percent from 2016.
- New Orders for Manufactured Durable Goods rose 2.9 percent according to the U.S. Census Bureau’s advance report for December. Shipments for manufactured durable goods increased 0.6 percent while unfilled orders also rose 0.6 percent.
- The Conference Board Leading Economic Index increased 0.6 percent in December after increasing +0.5 percent in November and +1.3 percent in October. The Conference Board spokesman said this rapid rise indicates continuation of strong economic growth through the first half of this year.
Foodservice News This Week
- Starbucks announced tax savings will be passed on to employees. The chain said they will spend more than $250 million on increased pay, company stock and expanded benefits. Starbucks did not say how much they expected to save from the new U.S. corporate tax law. Prior to the Starbucks announcement, Darden said that part of its tax reduction would be passed on to employees. Other companies, including FedEx, have announced similar plans to share their tax savings with employees.
- McDonald’s “joint employment” trial is on hold. The hamburger giant is fighting the National Labor Relations Board’s contention that McD’s was — and is — jointly responsible, along with its franchisees, for labor law violations. A recent ruling in another case may be a sign that the new board appointed by the current administration is reversing the previously held position. The pause in the trial is an indication that a settlement might be coming.
- The number of convenience stores in the U.S. increased to 154,958 last year. The National Association of Convenience Stores reported this was an increase of 423 stores or +0.3 percent.
- Pilot Flying J Travel Centers is rolling out its Pilot Express concept. The company says this smaller version of its travel center puts more emphasis on food, including homestyle meals, fresh salads, made-to-order sandwiches, and premium beverages. There are four Pilot Express units open now, one in Florida to open soon and more to be opened later this year.
- A group of Dunkin’ Donuts and Baskin Robbins locations in the Chicago area were sold to seven different buyers. The press release from Joyal Capital Management said their organization handled the sale of 67 units but did not provide the name of the seller or the names of buyers, or the amount paid.
- Corporate Stirrings: The Keg restaurant chain in Canada was purchased by Cara Operations Ltd. Cara has about 1,200 locations including Swiss Chalet, Harvey’s and East Side Mario’s. The company is one of the three largest restaurant groups in Canada.
- Growth Chains: Mompops, a purveyor of healthy frozen treats, will open three stores in Memphis. Wayback Burger opened 26 locations last year and will open 8 more this year.
- Comparable Store Sales Reports: Luby’s (Luby’s Cafeteria up 1.5 percent, Fuddrucker’s up 0.6 percent, Cheeseburger in Paradise down 10.5 percent and Combo Units up 1.3 percent) and Starbucks up 2.0 percent.
For details and same-store sales reports for other chains, please click here for the Green Sheet.