The foodservice industry faces dual labor problems. Low unemployment levels translate into a shortage of workers and wages continue to rise. The increasing pay is the result of the tight employment market, of course, but also because of legally mandated wage increases.

One way some foodservice operators are choosing to deal with these challenges is by simplifying their menus. Dave & Buster’s, for example, cut 20 percent of the items off its menu. Some operators have replaced menu items with new selections that take less time to prepare. Both moves require less labor.

Technology can also cut labor costs. Customers using their phones, tablets and computers to order reduces labor costs, as does the use of ordering kiosks.

Operators are also focusing on reducing employee turnover. Chipotle, McDonald’s, Starbucks and Taco Bell have extensive retention programs. Initiatives include college tuition assistance, parental leave benefits and sick days for part-time employees.

Domino’s clusters stores so drivers have less territory to cover and can make more deliveries. The theory goes if the drivers make more they are less likely to leave.

Economic News This Week

  • The partial government shutdown is hurting the U.S. economy. Initiatives from road and bridge repair projects to approval of labels for new food and beverage products to the issuance of Small Business Administration loans have been put on hold. And, furloughed government workers continue to cut spending wherever they can, which probably includes at least some dining out. It is probably true the shutdown will end sooner or later, which means most of the projects will gain approval and government employees will get back pay. But some things – like those skipped meals out – will be lost for good. Some economists forecast that for every two weeks the shutdown occurs, one tenth of a percentage point will be knocked off the first quarter’s Gross Domestic Product.
  • Initial jobless claims totaled 213,000, a decline of 3,000 to 213,000 for the week ending Jan. 12. The 4-week moving average was 220,750, a dip of 1,000. If there is any softening in the job market it has not appeared in jobless claims statistics.
  • Job openings fell 243,000 in November to a final level of 6.9 billion, according to the Bureau of Labor Statistics JOLT Study. The number of hires declined by 218,00 to a level of 5.7 million. The number of separations (5.5 million) changed little from October, although the number of quits edged down to 3.4 million. This could indicate workers are more cautious about changing jobs. The number of layoffs and discharges totaled 1.8 million, which represents little change from the previous month.
  • The Producer Price Index for Final Demand fell 0.2 percent in December on a seasonally adjusted basis. Final demand goods prices declined 0.4 percent for the month while the “core” Index (excluding food and energy) was up 0.1 percent. The price index for final demand services was down 0.1 percent. In the past 12 months the Producer Price Index is up 2.5.
  • The Consumer Price Index declined 0.1 percent in December on a seasonally adjusted basis. In the 12 months ending in December the consumer price index is up 1.9 percent. Excluding food and energy the CPI was up 0.2 percent in December and up 2.2 percent for 2018.
  • The Federal Reserve reported industrial production rose 0.3 percent in December. This comes after a 0.4 percent increase in November. The manufacturing sector rose 1.1 percent, mining rose 1.5 percent and utilities fell 6.3 percent. In 2018 industrial production was up 4.0 percent. Capacity utilization increased 0.7 percent in December 78.7 percent which is about 1.1 percentage points below its long run (1972-2017) average.
  • The University of Michigan’s Preliminary January Index of Consumer Sentiment fell to 90.7 from 98.3 in December. Both components of the index fell as well. The Current Economic Conditions Index declined to 110.0 from 116.1 last month and the Index of Consumer Expectations dropped to 78.3 from 87. 

Foodservice News This Week

  • Consumers paid 0.4 percent more for food in December than in November, per the Consumer Price Index. In 2018 food prices rose 1.6 percent. In December, food at home prices rose 0.3 percent while food away from home prices increased 0.4 percent. Last year food at home prices climbed 0.6 percent while food away from home prices jumped 2.6 percent.
  • Del Taco’s refranchising program will move the chain from 55 percent company-owned units to 45 percent company-owned units. The initial part of the program will start with selling 13 low-volume stores to franchisees while buying back 2 high-volume units in Los Angeles.
  • The Rego Restaurant Group is on a purchasing path. Owned by a San Diego private investment firm, Rego Restaurant Group purchased fast-casual concept Taco Del Mar roughly a month after closing on its acquisition of Quiznos. Rego acknowledged both operations have had their problems, but the company believes it can fix these chains. In fact, Rego is looking for other chains to acquire and would consider buying another 6 to 10 companies. There is an old marketing theory that says it is cheaper to buy a brand than to start one. Earlier this month, Rego Restaurant Group introduced a new president.
  • The foodservice market will grow faster than the market for food at home, forecasts The Food Institute. In its annual forecast presentation, The Food Institute president put foodservice growth at +5.1 percent vs. +2.8 percent for grocery store sales.
  • McDonald’s is number one on the 2019 Franchise 500 Ranking. Dunkin’ came in second, Sonic Drive-Ins third, Taco Bell fourth, Culver’s sixth, Jersey Mike’s Subs ninth, Jimmy John’s Gourmet Sandwiches tenth and Baskin-Robbins was twelfth. Click here for an explanation of the ranking process and the rest of the Top 50 please click the following link.
  • Growth Chains: Domino’s Pizza plans to add 9,700 locations by 2025. If this comes to fruition, it represents a 60 percent unit increase. The Angry Crab chain plans to have 100 restaurants by 2023. Cousins Subs plans to open  40 units in the Chicago area. FATBurger Brands added 10 cobranded Fat Burger and Buffalo Express restaurants in Arizona, California, Pennsylvania, Texas and Virginia. Teriyaki Madness plans to reach a total of 100 restaurants this year with a target of having 500 locations. Capriotti’s Sandwich Shops will open three restaurants in Delaware. Clean Juice will open locations in California and Colorado and plans to have 100 stores by the end of this year.

For the latest comparable store chain sales reports, please click here for the Green Sheet.