Knapp Track reports casual restaurant sales continue to creep up. The U.S. employment picture improves after a poor showing in March. C-stores continue to focus on improving foodservice business. All this plus comparable store sales reports from 20 chains.
Knapp-Track continues to show improving comparable store sales among the approximately 50 casual restaurant chains that participate in the study administered by its namesake Malcolm Knapp. In April comp store sales increased 1.1 percent and guest counts declined 1.8 percent. This would indicate an increase in check average of 2.8 percent. April marks the ninth straight month Knapp-Track has shown comparable store sales increases but the rate of the increase is far from robust.
Joseph Buckley, restaurant stock analyst for Merrill Lynch, stated he believes “restaurant sales remain surprisingly soft given year over year gasoline prices and an improving job market.” Knapp-Track data is courtesy of Bank of America Merrill Lynch.
Economic News This Week
- The April ADP National Employment Report showed private sector payrolls increased 169,000, far below the 200,000-plus new jobs economists expected and the lowest since January 2014. ADP said that 94,000 of the new jobs were at employers with fewer than 50 workers.
- Initial-jobless claims climbed to 265,000, an increase of 3,000 for the week ending May 2. The 4-week moving average was 279,500, a decrease of 4,250. This is the lowest the 4-week average has been in 15 years.
- U.S. employment rose in April after growing slowly in March. The Bureau of Labor Statistics reported the economy added 223,000 jobs last month after revised figures show employment increased by just 85,000 in March. The private sector accounted for 213,000 of the new jobs with government entities hiring 10,000. Unemployment fell from to 5.4 percent, a decline of 0.1 percent.
- Labor productivity declined 1.9 percent in the first quarter on an annual seasonally adjusted rate. Unit labor costs increased 5 percent in the first quarter as the result of a 3.1 percent increase in hourly compensation and a 1.9 percent fall in productivity.
- Consumers increased their borrowing at a seasonally adjusted annual rate of 5.5 percent in the first quarter of this year. Non-revolving credit (auto loans, student loans, etc.) rose 7.5 percent while revolving loans (mostly credit cards) fell at a rate of 0.25 percent.
- The Institute for Supply Management’s Non-Manufacturing Index hit 57.8 in April, an increase of 1.3 percent. Any number that exceeds 50 indicates increased business activity in the service sector. Of the 18 industries the ISM surveys, 14 reported increased business activity including the Accommodations & Foodservice segment.
- Texas is the most business friendly state according to a survey by Chief Executive Magazine. The 511 CEOs responding to the study said other states offering low taxes, favorable regulatory environments and a quality work force are Florida, North Carolina, Tennessee and Georgia. The least business friendly state according to the study was California followed by New York, Illinois, New Jersey and Massachusetts.
- The Gallup Organization’s U.S. Economic Confidence Index declined six points, recording a score of minus 9 for the week ending May 3. This was the largest week-to-week decline since July 2014.
Foodservice News This Week
- Foodservice operators swung back into hiring mode in April with the industry adding 26,000 new employees. This represents better than 12 percent of all the total private sector hiring last month and is up from 8,700 in March.
- C-Stores are dedicated to improving foodservice sales according to a survey sponsored by cspnet.com. The survey found 33 percent of those surveyed had a “high dedication” to their foodservice business, offering 10 to 15 menu items while 49 percent had a “moderate dedication” by offering 3 to 9 menu items. Most offered items were sandwiches, subs, wraps and breakfast sandwiches with 79 percent of operations having them on their menu. Close behind were hot dogs, sausages, or encased items at 75 percent. Hamburgers were offered by 63 percent and pizza by 40 percent. To be included, all items were prepared on site as opposed to being packaged by a manufacturer.
- C-stores increased pizza servings by 20 percent in the year ending in February, according to the NPD Group. Further, NPD states that foodservice is now the top category for gross profit dollars and number 2 in sales in C-stores.
- The New York Governor wants to increase fast food workers’ pay. Governor Cuomo has proposed that the wages of fast food workers be studied and if not sufficient that a wage board be established to set a higher minimum wage. The governor’s plan would bypass the New York legislature. New York State’s minimum wage is set to go up to $9.00 an hour this year.
- McDonald’s April sales showed slight improvement. McD’s worldwide comparable store sales fell 0.6 percent in April with U.S. comps down 2.3 percent. Comparable store sales in Asia/Pacific, Middle East and Africa fell 3.8 percent while comp store sales in Europe were up 1 percent. Same-store sales were “solid” in the UK and Germany but were partially offset by negative performance in France and Russia. Actual sales for the company dropped 8.8 percent but adjusting for currency fluctuations sales would have been up 1.5 percent. Overall, April results for McDonald’s were somewhat better than most predictions.
- Panera Bread’s “Panera 2.0” approach pleases customers and drives sales. The system, now installed in 123 of Panera’s 1,900 restaurants, has increased sales by 6 percent and accounts for 20 percent of customer orders. Kiosks consisting of a row of iPads speed up the ordering process. Panera 2.0 offers another element called Rapid Pick-Up, which allows consumers to place orders on their iPads or smartphones and pick up their food from a marked shelf in the restaurant. The down side has been an increase in expenses as a result of the upfront costs of the new technology.
- Corporate Stirrings: Good Times Restaurants, Inc. announced the firm’s registered public offering will be priced at $8.15 a share for 2.4 million shares. Good Times projects net proceeds to the company of $17.9 million. Wendy’s will sell its bakery operation in the second quarter of this year. Wendy also has announced the chain will “re-franchise” more of their company-owned units with 380 scheduled to be sold this year and 260 in 2016. Wingstop has filed for an initial public stock offering of $86.25 million to trade on the NASDAQ. Bojangles stock price rose from the initial share price of $19 to as high as $27.97 on its debut day before retreating to around $25.
- California Pizza Kitchen has started redesigning its interiors with a more rustic look in order to attract younger customers. The chain plans to remodel 80 restaurants by the end of next year.
- Growth Chains: Taco John’s has signed an agreement to open restaurants in 10 Love’s Travel Stops. Texas Roadhouse plans to open 25 to 30 restaurants this year. Kwik Trip c-stores plans to open 40 stores annually for the next 5 years across Wisconsin, Minnesota, and Iowa. Yellow Cab Pizza, whose home office is in the Philippines, plans on opening their first U.S. store in Hawaii. A Dunkin’ Donuts’ franchisee in Albuquerque will open five Dunkin’ Donuts and four co-branded Dunkin’ Donuts and Baskin Robbins units. Arooga’s signed a multi-unit franchise agreement for six restaurants in New Jersey. Wahlburger’s has 60 stores in development including 20 in the Middle East as well as new restaurants in New York and Massachusetts. Huddle House will open 1 new restaurant in Virginia, 1 in Florida and 3 in Texas. Arby’s will open 60 new restaurants this year and will add double that number in 2016. Pie Five Pizza has signed an agreement for 10 units in Arkansas. The Halal Guys signed a franchise agreement for the Philippines, Indonesia and Malaysia. Papa Murphy’s will open at least 9 new locations in Memphis in the next 3 to 5 years.
- Comparable Store Sales Reports: Bloomin’ Brands (Blended up 3.6 percent, Outback up 5 percent, Carrabba’s up 1.9 percent, Bonefish Grill up 3.0 percent, and Flemming’s up 3.6 percent), Bravo Brio Restaurant Group (total down 1.2 percent, Bravo down 1.7 percent, and Brio down 1 percent), Carrols Restaurant Group up 8.4 percent, CEC Entertainment down 5 percent, Chuy’s up 1.9 percent, Denny’s (system up 7.2 percent, company-owned up 7.6 percent, and franchised up 7.1 percent), Diversified Restaurant Holdings up 8 percent, Famous Dave’s (company-owned down 4.9 percent and franchised down 0.1 percent), Ignite Restaurant Group (Joe’s Crab Shack down 3.8 percent and Brick House Tavern up 5.4 percent), Jamba Juice (system up 5 percent, company-owned up 6.0 percent, and franchised up 4.2 percent), Kona Grill up 2.2 percent, McDonald’s down 2.3 percent, Noodles & Company (system up 0.9 percent, company-owned up 0.8 percent and franchised up 1.4 percent), NPC International down 3 percent, Papa John’s (system up 6.5 percent, company-owned up 8.1 percent, and franchised up 6 percent), Papa Murphy’s (domestic up 5.6 percent, company-owned 6.4 percent, and franchised up 5.5 percent), Potbelly up 5.4 percent, Texas Roadhouse (company-owned up 8.9 and franchised up 8 percent), Wendy’s (company-owned up 2.6 percent and franchised up 3.4 percent), and YUM (KFC up 7 percent, Pizza Hut down 1 percent and Taco Bell up 6 percent.)
For details and same-store sales of other chains, please click here for the Green Sheet.