The National Restaurant Association’s Restaurant Performance Index tumbled 1.8 percent from 101.9 in March to 100.1 in April. A reading of more than 100 indicates expansion so the index remains in positive territory, but just barely. The Current Situation Index declined 2.1 percent to 99.7 percent, which indicates contraction among this component of the monthly study. Factors fueling the decline of the Current Situation Index include softening same store sales and customer traffic. The Expectations Index also declined as operators became less optimistic about both their own sales in the future as wall as the overall economy.
While 53 percent of operators report they continue to make capital expenditures for equipment, expansion and/or remodeling in the past 3 months – a number that has been relatively steady for the past months – the percent of operators planning capital expenditures in the next 6 months declined from 61 percent in March to 55 percent in April.
The sharp drop in the index is puzzling given a nice gain in March. It remains to be seen if the April report is a beginning of a trend or a statistical fluke.
Economic News This Week
- The Bureau of Economic Analysis’ second estimate for gross domestic product for the first quarter of 2019 is +3.1 percent. This represents a .1 percent decline from the first estimate. Economists, businesses and others tend to look at a 3.0 percent growth in GDP as a desirable level.
- Home price growth slowed for the 12th consecutive month. The S&P Core Logic Case-Schiller Home Price Index puts the home price increase in the past year at +2.3 percent, only slightly greater than the rate of inflation. Housing experts are surprised the housing market is not more robust given the strength of the economy and the good labor market.
- The Bureau of Economic Analysis reported real disposable income increased 0.1 percent in April. Real personal spending increased less than 0.1 percent.
- April private construction spending declined 1.7 percent from March. Residential construction spending in April declined by 0.6 percent from March.
- The Conference Board’s Consumer Confidence Index increased in May, rising to 134.1 from 129.2 in April. The Present Situation Index stands at 175.2, up from 169 in April. The Expectations Index increased to 106.6 from April’s 102.7. The index is back to levels seen last fall when the reading was near an 18-year high. A spokesman for the Conference Board said the high levels suggest that there will be no significant pull back in consumer spending in the months ahead.
- University of Michigan’s Index of Consumer Sentiment increased in its final reading for May. The index stood at 100.0 at the end of the month, up from 97.2 in April. The Current Economic Conditions Index fell from 112.3 in April to 110.0. The controversy over tariffs was the cause, according to a university spokesman. Consumers still have confidence in the future as indicated by the Index of Consumer Expectations increasing to 93.5 in May from 87.3 in April.
Foodservice News This Week
- McDonald’s opens a flagship restaurant in New York City’s Times Square. The 3-story restaurant features all of McDonald’s high-tech upgrades, such as digital menu boards, 18 self-order kiosks and wireless mobile charging stations at tables. During its first-quarter earnings call, McDonald’s executives said they see a “net positive impact” from store renovations.
- Celebrity chef Jamie Oliver closed all 25 of his U.K. restaurants. The business is now in administration, the British version of bankruptcy. Approximately 1,000 employees have lost their jobs. Partly to blame is the shakeout in casual dining due to conditions related to Brexit. Unaffected are Chef Oliver’s international operations.
- IHOP appears to toy with another name change. The previous name change wasn’t a name change at all but a promo to introduce hamburgers. Now IHOP is showing the ihob loco is shown slowly turning the “b” back to “p.” The ploy seems to be the pancakes are actually burgers. We’ll see in a few days.
- Chick-fil-A had “Missing Man” tables at many of the chain’s restaurants during the Memorial Day Weekend. The tables had various symbolic items to honor dead, missing or imprisoned service members.
- Corporate Stirrings: The Cheesecake Factory may buy another restaurant chain. Cheesecake Factory’s chief financial officer has been quoted as saying the company is interested in acquiring a 14-unit North Italian operation. Red Robin Gourmet Burgers closed what it describes as 10 underperforming restaurants as the chain’s search for a new CEO continues.
- Growth Chains: Luckin Coffee Inc., which is challenging Starbucks in China, will open 2,500 more locations by the end of this year. The chain plans to have 10,000 stores by 2021. Teriyaki Madness set a goal of having 500 locations in the U.S. in 5 to 7 years, a major increase from the chain’s current 55 U.S. restaurants.
- Comparable Store Sales Reports: FAT Brands down 0.4 percent and Red Robin Gourmet Burgers down 3.3 percent.
For details and same-store sales of other chains, please click here for the Green Sheet.