The National Restaurant Association’s Restaurant Performance Index declined 0.4 percent from May to 101.2 in June; the Current Situation also declined 0.4 percent for the month. Same-store sales rose but customer traffic levels were “somewhat softer.”

The other component of the RPI, the Expectations Index, also dropped 0.4 percent as operators were not bullish about sales growth and staffing levels as they were the prior month.

As for operators’ willingness to invest in their businesses, this too, was a bit softer than in the previous month. In June, 55 percent said they made a capital expenditure for equipment, expansion and/or remodeling in the past 3 months compared to 61 percent in May. Those operators planning a capital expenditure in the next 6 months fell slightly, from 56 percent in May to 54 percent in June.

Trying to predict future performance has been difficult as the Expectations Index is up one month and down the next. At least the index is above the 100 mark, indicating the industry is still in the expansion mode.

Economic News This Week

• Initial jobless claims rose by 8,000 to 215,000 for the week ending July 27. The 4-week moving average fell by to 1,750 to 211,500.
• ADP reported that the private sector added 156,0000 new jobs in July with large employers (+ 500 employees) accounting for approximately half of the increased employment. The Leisure & Hospitality Sector added 26,000 employees.
• The U.S. Bureau of Labor Statistics reported that employment increased by 164,000 in July, which was close to the forecast. While considerably less than the average monthly increase of 223,000 last year, adding 164,000 jobs a month for a year would bring the unemployment rate down to 3.1 percent. The unemployment rate in July held steady at 3.7 percent while the number of unemployed persons was also little changed at 6.1 million. (For the employment picture in the foodservice industry, please see the Foodservice News This Week section below.)
• The Bureau of Economic Analysis reported that disposable personal income increased 0.4 percent in June and personal consumption expenditures increased 0.3 percent for the month. Both are recognized as strong performance. Consumer spending is important in driving the economy as business investment has not been very high.
• The Chicago Production Manufacturing Index had disappointing results. Sometimes called the Chicago Business Barometer, the index fell by 5.3 points to 44.4. Any reading less than 50 shows declining activity. The index has now been less than 50 for 2 consecutive months and points to the steepest decline since December 2015. The Production Index dropped to a 10-year low. The New Orders Index declined while the Employment Index fell below 50 for the first time since October 2017.
• The Conference Board Consumer Confidence Index rebounded in July with the index rising to 135.7, up from 124.3 in June. The Present Situation Index increased to 170.9 from 164.3 in June while the Expectations Index rose to 112.2 from 97.6 in June. A spokesman for the Conference Board noted that after a “sharp decline in June” due to trade and tariff tensions, the index is now at the highest level this year and consumers should continue to spend in the near term.
• The University of Michigan Index of Consumer Sentiment final results for July was little changed from the preliminary monthly results. Nor was there virtually any change from the June survey. The index was 98.4 in July vs. 98.2 in June. The Current Economic Conditions Index reading was 110.7 in July compared to 111.9 in June. The Index of Consumer Expectations was 90.5 in July compared to 89.3 at the end of June.

Foodservice News This Week

• Foodservice hiring increased in July. After foodservice employment actually declined in June, operators added 15,400 employees in July. Thus, the industry accounted for more than 10 percent of the jobs added in the private sector last month.
• The Cheesecake Factory will acquire Fox Restaurant Concepts. Included in the purchase is the balance of North Italia in which the Cheesecake Factory had invested $88 million in 2016 in anticipation of the purchase. The price of the acquisition is $353 million cash.
• Perkins & Marie Callender’s is preparing to split up the two companies as part of a voluntary Chapter 11 bankruptcy procedure. The company is discussing the future with investors and potential buyers.
• KFC will open a drive-thru only operation in Australia, the first in the world. The five-lane operation will make “service quicker, easier and more convenient” according to a KFC statement. The plan is for customers to order and pay for their meal with their KFC smart phone app or website before arriving at the site.
• Growth Chains: FAT Brands announced it is partnering with Croft Ventures LLC, the parent company of Famous Franchisees LLC, to develop 25 Fatburger locations in Texas. Capriotti’s Sandwich Shops, with 100 locations and another 130 in development, signed 48 new franchisees in the first 6 months of this year and expects to sign more than that in the last 6 months. Mooyah Burgers, Fries & Shakes will open 2 locations in central Florida by the end of the year and plans 17 more in the next few years. Another Broken Egg, after years of little growth, has signed 9 new franchisees for a total of 31 new locations. The chain wants to have 300 units by 2025.
• Comparable Store Sales Reports: Applebee’s down 0.5 percent, Baskin Robbins down 1.4 percent, Cheesecake Factory up 1.0 percent, Denny’s (domestic system up 3.8 percent, company owned up 4.4 percent and franchised up 3.7 percent), Habit Restaurants Inc. up 3.9 percent, IHOP up 2.0 percent, Texas Roadhouse (company owned up 4.7 percent and franchised up 4.3 percent), YUM! Brands (KFC U.S. up 2.0 percent, Pizza Hut U.S. up 2.0 percent and Taco Bell up 7.0 percent) and YUM China (KFC up 5.0 percent and Pizza Hut up 1.0 percent.)

For details and same-store sales of other chains, click here for the latest Green Sheet.