McDonald’s breakfast all day program had some unintended consequences. It was originally hailed as a major success as sales rose in the program’s first year, as did profits, as breakfast ingredients like eggs are cheap.
But McDs found some regular breakfast patrons skipped their morning visit and got their McDonald’s fix in the afternoon or evening and, thus, were spending less overall at McDonald’s. Also, all-day breakfast slowed kitchen production and increased costs.
To improve the situation, McDonald’s is pairing breakfast items with McCoffee drinks and offering new menu products like coffee cakes as well as introducing specials.
But there is more breakfast competition these days as well.
Economic News This Week
- Real gross domestic product increased 3.4 percent on an annual rate in the third quarter of 2018. This is the third estimate from the Bureau of Economic Analysis. While the third quarter GDP is down from the second quarter’s 4.2 increase, economists are pleased with the result.
- Initial-jobless claims totaled 216,000, a decline of 1,000 for the week-ending Dec. 22. The 4-week moving average totaled 218,000, a dip of 4,750.
- The U.S. Department of Labor continues to report more job openings than people looking for work. The JOLT study (Job Openings and Labor Turnover) showed little change in October including hires and separations.
- Personal income rose 0.2 percent in November while personal consumption expenditures increased 0.4 percent.
- The Philadelphia Federal Reserve reported manufacturing activity in the region continued to grow but “remained subdued” in December. The General Activity Index decreased from 12.9 in November to 9.4. This is the lowest reading since August 2016. The New Orders Index rose 5 points to 14.5 but remains below its average reading for the year. The Shipments Index fell 1 point to 10.0, its lowest in 27 months.
- New orders for manufactured durable goods increased 0.8 percent. Transportation equipment orders were up 2.9 percent for the month. Excluding transportation, equipment durable goods orders were down 0.3 percent. Excluding defense, new orders were down 0.1 percent.
- November privately owned housing starts rose 3.2 percent from October but fell 3.6 percent from November 2017. Single family housing starts declined 4.6 percent from October.
- Building permits issued for privately owned housing increased 5.0 percent from October and rose 0.4 percent above November 2017. Permits for single family homes edged up 0.1 percent more than October.
- Sales of new single family homes in October were 544,000 on a seasonally adjusted annual basis. This is down 8.9 percent from September and down 12.0 percent from October 2017.
- Home builder confidence fell 4 points for a December reading of 56. Although still in in positive territory, this is the lowest the National Association of Home Builders/Wells Fargo Housing Market Index has been since May of 2015, due to rising home prices. But a spokesperson for the association noted that falling mortgage interest rates should have a positive effect on home sales in the new year.
- Existing home sales rose 1.9 percent in November compared to October, marking the second consecutive month of increasing sales. However, sales declined 7.0 percent from November 2017. The National Association of Realtors also reported median home prices rose for the 81st straight month.
- The Conference Board’s Consumer Confidence Survey declined in December to 128.1 from 136.4 in November. The Present Situation Index was little changed, falling to 171.6 from the November reading of 172.7. The Expectations Index was down fairly significantly from 112.3 in November to 99.1 in December.
Foodservice News This Week
- Chick-fil-A may have surpassed Burger King and Wendy’s in U.S. Sales in 2018, according to Mark Kalinowski of Kalinowski Equity Research. One forecaster predicted Chick-fil-A sales would be up 15.5 percent in 2018 and traffic up 10 percent. This would make Chick-fil-A the third largest chain in the U.S. behind McDonald’s and Starbucks. And, Chick-fil-A has plenty of potential growth. For example, Kalinowski points out that Chick-fil-A has only 11 restaurants in the state of New York.
- Among the national retailers in New York City, Dunkin’ Donuts ranks No.1 with 624 stores. Also in the top 10 are Subway at No.3 with 330 stores; Starbucks at No.4 with 327 stores; Baskin Robins No. 7 with 227 stores and McDonald’s No. 8 with 207 stores. Most of the chains increased their number of locations in 2018 with the exception of McDonald’s, which had a net decline of 8 restaurants, and Subway, which lost 133 locations.
- Buffalo Wild Wings’ completed its first redesign in six years. The company says the new design takes it back to its roots as a great American sports bar. The design features a more prominent bar, free-flowing and flexible seating areas, VIP spaces, stadium-like A/V technologies with LED modular screens and a fully enclosed patio with rollup doors and skylights. Two redesigned units opened in December 2018 with two more set to open in January.
- Celebrity Chef Mike Isabella will close nearly all of his restaurants. At one time his organization was a $30 million empire with more than a dozen restaurants but following charges of sexual harassment, Isabella filed for reorganization under Chapter 11 of the bankruptcy code. Now the filing has been changed to Chapter 7 for liquidation.
- Taylor Gourmet is in Chapter 7 bankruptcy protection and the chain’s assets will be liquidated. There are reports that a number of companies, including Cosi, are interested in acquiring at least some of Taylor’s assets.
- Corporate Stirrings: Applebee’s has purchased 69 restaurants in North and South Carolina. The corporation plans to own and operate these restaurants for the “foreseeable future.” Applebee’s also announced a settlement with its franchisee RMH Franchise Holdings Inc. RMH filed for bankruptcy in May. The settlement calls for Applebee’s to receive all past due royalty and advertising fees as well as termination fees. Boston Market has been sued by an organization that provides lunches to schools in Southern California. The suit claims Boston Market did not supply lunches as required by contract. Alimentation Couche-Tard and CrossAmerica announce asset exchanges. Alimentation Couche-Tard will sell CrossAmerica 192 U.S. company-operated Circle K stores. CrossAmerica will sell Couche-Tard the real estate property for 56 U.S. company-operated convenience and fuel retail stores currently leased and operated by Couche-Tard and 17 company-operated convenience and fuel retail stores in the upper Midwest of the U.S. currently by CrossAmerica. The Fiesta Restaurant Group announced that as the result of the firm’s “Strategic Renewal Plan” the company will close 14 Pollo Tropical locations in Florida and Georgia and 9 Taco Cabana restaurants in Texas.
- Growth Chains: Taco Bell will open three of its Cantina concepts especially designed for the New York market in the New York City area. Black Bear Diner opened 15 locations in 2018.
- Comparable Store Sales Reports: Darden Restaurants (Blended up 2.1 percent, Bahama Breeze down 1.1 percent, Capital Grille up 3.7 percent, Cheddar’s Scratch Kitchen down 40 percent, Edie V’s up 0.9 percent, LongHorn up 2.9 percent, Olive Garden up 3.5 percent, Seasons 52 down 0.8 percent and Yard House down 11 percent.)
For details and same-store sales of other chains, please click here for the Green Sheet.