A government study says the U.S. labor market remains healthy. Long a Wall Street darling, Starbucks now has stock analysts piling on. Chipotle Mexican Grill has an extensive turnaround plan. Silicon Valley pizza place relies heavily on technology. These stories and a whole lot more This Week in Foodservice.
The U.S. Bureau of Labor Statistics reports data from its December Job Openings & Labor Turnover study, also known as JOLT, was largely unchanged from November. This is generally good news given that the numbers were fairly strong throughout 2017.
The Bureau does not break out foodservice employment figures separately, instead combining them with the accommodation sector. Nevertheless, the study gives some indication as to the general health of the foodservice industry.
Job openings for accommodations and foodservice employers totaled 808,000 in December, up from November’s level of 773,000. The average number of job openings for the past five months was 762,000.
The sector hired 861,000 people in December, similar to November’s level of 855,000. Like the hiring data, the number of separations came in at 828,000 for December, which was similar to previous reports.
Finally, the number of people who quit their jobs in the sector totaled 598,000. Labor experts believe the quits data shows a confidence in the job market if people are willing to go to a new employer or quit an existing job without having a new one.
Thus, the job market seems to be on a firm footing at least through the end of last year.
Economic News This Week
- Initial-jobless claims totaled 221,000, a decline of 9,000 for the week ending Feb. 3. The 4-week moving average fell a total of 224,500, a dip of 10,000. This is the lowest this average has been since March 10, 1973. Jobless claims processing in Puerto Rico and the Virgin Islands still has not returned to normal.
- The Institute for Supply Management’s Manufacturing Index showed continued growth in January, albeit at a slightly slower pace. The Index stood at 59.1 percent in January, down 0.2 percent from December. (Any reading that exceeds 50 shows growth.) The New Orders Index dropped 2.0 percent to a reading of 65.4. The Production Index declined 0.7 percent to a reading of 64.5. But, the Order Backlog Index rose 1.3 percent to a level of 56.2. The Institute also reported that 14 of the 18 manufacturing industries studied experienced growth in January.
- The Institute for Supply Management’s Non-Manufacturing Index showed faster growth in January, increasing 3.9 percentage points to a level of 59.9. The New Orders Index grew 8.2 percent to a final reading of 62.7. The Order Backlog Index increased 0.5 percent. The Employment Index rose 5.3 percent to a final reading of 61.6. Of 18 service industries studied by the Institute, 15 reported growth, including Accommodation & Foodservice.
- U.S. Consumers increased their borrowing by 5.8 percent in December. Revolving credit, which is chiefly credit card borrowing, rose 6.0 percent. Non-revolving borrowing (student loans, auto loans, etc.) increased 5.7 percent.
- Americans’ economic confidence was positive in 2017 according to a poll by the Gallup Organization. Gallup’s U.S. Economic Confidence Index averaged +6 for the year. This means that 6 percent more consumers felt positively about the economy than felt negatively. This was the first year since the inception of the study in 2008 that it was positive. The Current Conditions component of the Index was +13 for the year while the Economic Outlook component was at -1.
Foodservice News This Week
- Starbucks draws fire from Wall Street. Stock market analysts say Starbucks problems are simple – too many stores and too high prices. One analyst says industry problems are primarily due to an excess number of units and Starbucks adds to the problem by continuing to open new stores. Other analysts note that McDonald’s and Dunkin’ Donuts sell beverages at significantly lower prices.
- Chipotle has a plan to improve performance. The company plans a $300 million capital investment that includes spending $50 million to refresh existing units. In addition, Chipotle will open new locations, install new food lines for digital orders and launch a customer training program in Denver.
- A Silicon Valley pizza restaurant goes high-tech. Zume Pizza uses an algorithm learning machine to predict customer demand for the day. After being partially baked, the chain transports the pizzas to a network of food trucks. When a customer places an order on the Zume app, the software determines which truck to dispatch and the pizza finishes baking while en route to the customer. Zume also uses a “team of anthropomorphized robots” that work alongside prep cooks. The kitchen can turn out 372 pizzas per hour.
- The Melting Pot revealed reimaged concept, the first in the history of the 43-year-old chain. The new design includes an open floorplan that uses warm and timeless natural materials. The Melting Pot also announced extensive menu changes.
- Long John Silver’s reverses a trend. “Re-franchising” has been the key work for McDonald’s and other chains who sell off their company-owned units to franchisees. Long John’s has gone the other direction beginning in 2015 as the chain gave up its 100 percent franchise structure and started buying back stores. The chain now owns 10 percent of its locations, making it the largest Long John Silver’s operator.
- Consumers now lean toward independent restaurants according to an analysis of Yelp data by the Washington Post. Independent restaurants got higher rankings 5 years ago by Yelp members and Indy’s increase that lead every quarter. One interesting finding: a one star rise in ratings for independent restaurants results in a 5 percent to 9 percent increase in revenue but the rating increase doesn’t have any impact on sales at chain restaurants.
- Shopping mall owners pursue Dave & Busters. Not only do malls seek to fill spaces vacated by major retailers liked Sears but they calculate Dave & Busters will drive foot traffic. And, Dave & Buster’s is testing smaller concepts that can better fit some mall’s available spaces.
- Corporate Stirrings: Kroger’s has sold its nearly 800 convenience stores to British gas station operator EG Group for $2.1 billion. Kroger will use the funds to buy back stock and lower debt. Orangewood Partners and Abdd Capital have purchased 24 Taco Bell units in the Louisville, Ky., area. Neither the seller nor the purchase price were stated. Arby’s Restaurant Group completed the acquisition of Buffalo Wild Wings Inc. Also included in the sale was R Taco. The purchase price was $2.9 billion. Arby’s Restaurant Group’s majority owner is Roark Capital Group.
- Growth Chains: Bruster’s Real Ice Cream plans to open 15 stores this year. Mexican restaurant operator CMR, which runs Red Lobster, Olive Garden and Capital Grille, has signed a partnership with Nestle Corporation to open 150 coffee shops in Mexico in the next 8 years. Dunkin’ Brands plans on opening 1,000 locations in the U.S. by the end of 2020. Capriotti’s Sandwich Shop will open 3 locations in Delaware, 3 in South Dakota, 6 in Utah and 12 in Colorado. Melt Shop, with 9 units now open, plans on having approximately 100 locations in 5 years.
- Comparable Store Sales Reports: Chipotle Mexican Grill up 0.9 percent, Jamba Inc. (System up 5.3 percent, Company owned up 6.5 percent and Franchised up 5.2 percent), Rave Restaurant Group (Pie Five Pizza down 13.7 percent and Pizza Inn up 2.7 percent), YUM Brands (KFC up 3.0 percent, Pizza Hut up 1.0 percent and Taco Bell down 2.0 percent) and YUM China (KFC up 7.0 percent and Pizza Hut up 1.0 percent.)
For details and same-store sales on other chains. Please click here for the Green Sheet.