Like so many of his fellow restaurateurs, Cameron Mitchell was forced to close his operations to comply with government stay at home orders aimed to slow the spread of COVID-19. In Mitchell’s case this meant closing 36 restaurants and laying off 4,500 employees.
Mitchell received $10 million from the federal Paycheck Protection Program but discovered some problems with this initiative. He found difficulties with the timing of the loan, the loan’s amortization period and the requirements of how the money is to be spent. He has come up with improvements to the loan program in each of these areas. Mitchell noted obtaining the loan was relatively easy since he has a long-standing relationship with his bank. He also said he is not upset about the problems with the program as it was “…made in a vacuum and done quickly without all the real information…”
Economic News This Week
- Initial jobless claims fell by 810,000 to a final level of 4.43 million for the week ending April 18. The previous week’s claims were revised down by 8,000. The 4-week moving average totaled 5.79 million, an increase of 280,000. In the last month 26 million claims were filed.
- Home builder confidence posted a historic decline. The April National Association of Home Builders/Wells Fargo Market Index plunged 42 points for a reading of 30. This was the largest single monthly change and marks the lowest builder confidence reading since June 2012.
- Existing home sales fell 8.5% in March, per the National Association of Realtors. Sales were at a seasonally adjusted annual rate of 5.27 million, down just 0.8% from a year ago. The Realtors seemed to indicate that the biggest problems lay with social distancing and stay at home rules rather than with economics.
- The April University of Michigan’s Index of Consumer Sentiment declined 17 points. The April reading of 71.8 was down from 89.1 in March. The Current Conditions Index fell from 103.7 in March to 74.3 in April. The Expectations index fall was not as severe but never the less was significant, dropping from 79.7 to 70.1 in April.
Foodservice News This Week
- Restaurant chains rethink accepting government loans. Last week, Shake Shack returned the $10 million loan the chain received from the government. Now several other chains decided to follow Shake Shack’s lead. Those restaurant chains returning PPP loans include J. Alexander Holdings, Inc., Kura Sushi, Potbelly, Ruth’s Cris Steak House and Sweetgreen. Ruth’s CEO said the company borrowed the money to keep as many of its employees working as possible. When the chain learned the funds were exhausted it decided to give the money back to help small companies. The Fiesta Restaurant Group said it was “reviewing” the new paycheck loan guidance.
- Miami Grill unveiled its next generation business model. Features of Miami’ Grill’s Express Double Drive Through model include order ahead curbside pickup and a window for pedestrian business. The fast-casual chain also developed a version with a small space for customer ordering and pickup but no dining area. The building is prefabricated, which lowers costs and makes the time period to begin earning faster.
- The National Restaurant Association released a 10-page guide to help restaurants reopen – when the time is right. Essentially the guide is an expanded best practices list of recommendations prepared with input from the FDA, Centers for Disease Control and Prevention and the Environmental Protection Agency.
- Burger King in the U.K. has not made April rental payments and, along with other chains, has requested a nine month “rent holiday.” One operator said no one expects the business to return to anything near normal until at least mid-2021.
- Domino’s first quarter featured mixed results. Comparable store sales rose 1.6% for the quarter. From March 23 to April 19, though, U.S. comps were up 7.1% as Domino’s strong delivery volume rose as consumers heeded mandates to shelter in place to slow the spread of COVID-19. All of Domino’s U.S. locations remain open, but 1,700 of the pizza chain’s international restaurants are closed. Outside the U.S., Domino’s comparable store were down 3.2%. Given the complicated situation with the coronavirus outbreak Domino’s has withdrawn all earlier guidance.
- Reports have surfaced that some furloughed foodservice employees are choosing not to return to work. Their reasoning is pure economics. State unemployment benefits paired with U.S. Congress’ authorizing an additional $600 a month means many of the laid off employees now make more money than they would if they were working. The monthly $600 payment from the government is scheduled to end July 31 but pressure is mounting to extend the program.
- US Foods has a new biggest shareholder and it is a familiar name. Private equity firm KKR Investments purchased $500 million of newly issued stock in the broadliner. KKR bought the company in 2007 before trying to sell it to Sysco in 2013. After the government blocked the deal, US Foods went public.
- Corporate News This Week: The Cheesecake Factory has received a $200 million convertible preferred investment from the Roark Capital Group. Roark has investments in several dozen well-known brands including Arby’s, Buffalo Wild Wings and Jimmy John’s.
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