Foodservice employees across the U.S. were looking forward to a higher minimum wage as the calendar rolled over to 2020. In fact, 14 states increased their minimum wage the first of the year while another 7 (Alaska, Florida, Minnesota, Montana, Ohio, South Dakota and Vermont) have automatic cost of living adjustments in their minimum wage which will take effect sometime later this year. And, three more states and the District of Columbia will increase minimum wage during the year.
According to a New York Times study, the average minimum wage in the U.S. now sits at $11.80 adjusted for inflation. In any case, the minimum wage is pretty much a partisan issue with most Democrats for raising it and most Republicans against raising it.
Those against raising the minimum wage argue it hurts workers by cutting hours and/or eliminating jobs. Some proponents of raising the minimum wage don’t dispute this move comes with some negative effects but insist that in the long run more workers, and the economy as a whole, will be better off because of this.
As for suppliers to the field, if they can demonstrate their products cut labor costs, it is a safe bet they will find operators will be paying attention.
Economic News This Week
- Minimum wage may be a political hot button, but does it save lives? A new study contends that raising the minimum wage would prevent thousands of suicides. The authors state that a $1.00 increase in the minimum wage would have prevented 27,550 suicides during the study period of 1990 to 2015. As best can be determined, there have not been any follow up studies confirming or disputing these findings.
- Initial-jobless claims hit 211,000, an increase of 6,000 for the week-ending January 18. The 4-week moving average was 213,250, a decline of 1,250. It appears the number claims have settled down after some shifting around caused by post-Christmas layoffs.
- Existing home sales hit 5.5 million in December, a 3.6 percent increase. December was the best sales month of the year and provided enough sales to match 2018 volume. The National Association of Realtors continues to emphasize its belief that existing home sales would be stronger if more homes were available for sale. The association believes this problem is especially limiting to first-time home buyers.
- New home construction is growing. December housing starts were up 16.9 percent from November. Compared to December 2018, starts rose a hefty 40.8 percent, with single family housing starts in December up 11.2 percent. The number of building permits issued in December for privately owned housing were down 3.9 percent from November but up 5.8 percent from December 2018. Single family permits issued in December were down 0.5 percent.
- December new single-family home sales were estimated at 694,000 on a seasonally adjusted annual basis. This was 0.4 percent less than November but 23 percent more than December. The Census Bureau estimated 2019 new home sales at 681,000 which is 10.3 percent over the 2018 estimate.
- The Conference Board’s Leading Economic Index fell 0.3 percent in December. The Index has declined four of the last five months, but the Conference Board believes with the current financial conditions and consumers outlook both positive, the economy should continue to grow at 2.0 percent thru early 2020.
Foodservice News This Week
- Fresh Bowl plans to expand to 50 kiosks by the end of this year and 100 in 18 months. The company, which currently has five locations in New York City, offers salads and other on-the-go meals in returnable glass jars. Customers who return the jar get a discount off their next order. Rate of return runs as high as 85 percent depending on location.
- The Krystal Company filed for Chapter 11 bankruptcy. One of the oldest fast-food chains in the U.S., Krystal attributed its difficulties to changing customer tastes, higher labor and commodity costs, increased competition, particularly from fast casual restaurants and unfavorable lease terms.
- DoorDash became the number one food delivery service in the U.S. last year with one-third market share. Grubhub fell to number 2 with a 32 percent share followed by Uber Eats with a 20 percent share and Postmates with 10 percent. In addition, a study by Zion & Zion shows consumers find problems with restaurant delivery services 24.4 percent of the time. Consumer complaints include missing or incorrect food items, food too hot or too cold, and late delivery.
- Corporate Stirrings: 7-Eleven, Inc. will acquire 7-Eleven Stores of Central Oklahoma, which includes more than 100 locations that have operated independently for 67 years. Cost of the transaction was not given. The parent company of Smoky Mountain Pizzeria Grill is suing KFC. According to the suit, Smokey Mountain claims the chicken chain is infringing on pizza chain’s name and logo for KFC’s Smoky Mountain line of barbecue chicken. Texas-based Bar Louie closed 38 of its 134 locations and filed for Chapter 11 bankruptcy. The chain had hired an investment banker in September to sell the company, but no sale resulted. Secured lenders have now agreed to bid on the assets guaranteeing a sale if no higher bidder comes forward. The minimum bid will be $82.5 million plus the assumption of liabilities.
- Growth Chains: Captain D’s will open three locations in Southern Florida. Twin Peaks plans to add as many as 10 new franchisees for up to 40 locations this year. New York City-based Café d’Avignon plans to open five cafes in the Orlando market. Teriyaki Madness will open 5 locations in Milwaukee and 10 in Florida. Wawa c-stores will open 60 units in 6 states.
- Comparable Store Sales: Ark Restaurants down 0.7 percent
For details and same-store sales of other chains, Please Click Here for the latest Green Sheet.