The National Restaurant Association’s Restaurant Performance Index was down “slightly” in February, falling to 101.0 from 101.2 in January. (Any reading that exceeds 100 indicates growth.)
The Current Situation Index hit 100.3, a decline of 0.4 percent. This marks the third consecutive monthly decline. While operators reported increased same-store sales for the month overall, customer traffic was mixed. In fact, 37 percent of operators report an increase in customer traffic compared to 44 percent that reported a dip. And it was the uneven customer traffic that generated the slight dip in the Current Situation Index.
The other component of the RPI, the Expectations Index, edged up 0.1 to a final level of 101.8. Operators are bullish about sales, with 50 percent expecting an increase in 6 months. On the flip side, only 22 percent of the operators surveyed think the economy will improve in 6 months
In any case, operators continue to invest. In February 54 percent of operators report making a capital for equipment, expansion and/or remodeling in the past 3 months. In the next 6 months, 57 percent of the operators plan to make a capital expenditure.
In summary, while no one likes to see business drifting lower, at least the Index remains in positive territory.
Economic News This Week
- The third estimate for Gross Domestic Product for the fourth quarter of 2018 is +2.2 percent. The Bureau of Economic Analysis reduced its estimate from +2.6 percent when more data became available.
- Initial-jobless claims fell by 5,000 to a level of 211,000 for the week ending March 23. The 4-week moving average fell 3,250 to a level of 217,250.
- Personal income decreased 0.1 percent in January, per a report from the Bureau of Economic Analysis.In contrast, personal consumption expenditures increased 0.1 percent
- The Chicago Business Barometer read 58.7 in March, a decline of 6 points. Any reading greater than 50 means expanding activity so the March number still indicates growth but at a slower rate than in February. Production and New Orders declined but were higher than in January. However, Order Backlogs fell into contraction territory.
- February sales of new single family homes came in at a seasonally adjusted annual rate of 667,000. This represents a 4.9 percent increase over January and a 0.6 percent increase from February 2018.
- Building permits issued to privately owned buildings dropped 1.6 percent in February from January and were down 2.0 percent from February 2018.
- The Conference Board’s Consumer Confidence Index tumbled in March after bouncing back in February. The March Index came in at 124.1 after rising to 131.4 in February. The Present Situation Index dropped from 172.8 in February to 160.6 while the Expectations Index declined from 103.8 to 99.8 in March. The Conference Board noted that the overall trend in confidence has been softening since last summer which points “to a moderation in economic growth.”
Foodservice News This Week
- McDonald’s purchased Israeli startup company Dynamic Yield. The acquisition’s new technology will allow McDonald’s to individualize offerings to customers, such as listing menu items at the drive-thru window based on products that have been ordered. The technology will also work to adjust information at McDonald’s self-order kiosks and the company’s app depending on time of day, how busy the restaurant is and even the weather. McDonald’s paid more than $300 million for Dynamic Yield and will operate it as a separate company.
- FAT Brands Inc. will rebrand its Fatburger restaurants as Skinnyburgers. FAT Brands CEO said the change will include a store redesign. Is this a legitimate change could it be an “IHOP – IHOB” ploy?
- Bloomin’ Brands introduces fast-casual concept. Going to market as “Aussie Grill By Outback” this is a counter service version of Outback. The first unit of the hamburger and sandwich concept measures just 700 square feet. Bloomin’ Brands sees Aussie Grill as a vehicle for international expansion.
- New York City restaurant jobs declined in 2018 for the first time in a decade. Most of the 6,000 lost jobs lost came from full-service restaurants. Restaurant owners tend to blame the increase in minimum wage as the cause. And there is concern that an elimination of $10 tipped wage rate and paid sick leave may result in still more jobs lost.
- McDonald’s declined to lead the charge against an increase in the minimum wage. McD’s told the National Restaurant Association it will no longer lobby against raising the minimum wage. McDonald’s stated minimum wage increases should be phased in and all industries should be treated the same way.
- Corporate Stirrings: Bessemer Investment Partners LLC acquired the assets of KorMex Foods through a new portfolio company platform set up for this purpose called MAS Restaurant Group LLC (“MRG”). MRG now operates 73 Taco Bell restaurants, including 2 co-branded KFC and 6 co-branded Pizza Hut locations in Houston and surrounding areas.
- Growth Chains: FAT Brands announced the development of 6 co-branded Fat Burger and Buffalo Express restaurants in Shanghai.
- Comparable Store Sales Reports: FAT Brands U.S. system up 0.1 percent.
For details and same store sales of other chains, please click here for the latest Green Sheet.