This Week In Foodservice

Jerry Stiegler aggregates key industry information and provides brief analysis to help foodservice professionals navigate the data.


Restaurant Sales Gain, Job Market Looking Up and More

Restaurant sales had a modest gain in May. U.S. job openings hit an all-time high. The NRA says foodservice will hire over half a million workers this summer. Businesses fight proposed changes in overtime pay regulations. L.A. raises minimum wage to $15. These stories and a whole more in This Week In Foodservice.

U.S. Retail Sales increased 1.2 percent in May, according to the Census Bureau. Compared to May 2014 sales were up 2.7 percent. Without automotive vehicles and parts sales rose 1 percent.

Restaurants and drinking place sales lagged the overall retail market, increasing just 0.1 percent for the month. However, restaurant and bar sales were up 8.2 percent over May of last year. For the first 5 months of 2015 restaurants and bars sales are up 8.9 percent while total retail sales grew 1.9 percent.

As we caution every month, there are limitations to the data. The statistics above are based on a limited sample and are considered to be advance numbers, which are subject to revision when a larger sample is analyzed. Only restaurants and bars are surveyed. Thus, about one third of the foodservice industry – hotels, clubs, retail, employee feeding, schools, colleges, healthcare foodservice, etc. – is not included. The data is adjusted for seasonal changes, holidays and weekends but not for menu price changes.

Economic News This Week

  • Job openings are at an all-time high according to the Bureau of Labor Statistic’s Job Openings and Labor Turnover (JOLT) Study for April. The Bureau reported there were 5.4 million job openings on the last day of April, which is the highest number of opening since the study was initiated in 2000. Hires and separations were little changed from March. The closely watched “quits” number – quits are considered to be an indication of worker confidence — was 2.7 million, about the same as March.
  • Initial jobless claims rose by 2,000 to 279,000 in the week ending June 6. The 4-week moving average rose by 3,750 to 278,740. Note that the total claims for the week and the 4-week average are virtually identical, indicating the low number of claims is remarkably consistent.
  • The Producer Price Index for final demand rose 0.5 percent in May with final demand goods up 1.3 percent and final demand services unchanged from April. The increase for final demand goods was driven in large part by a 17 percent increase in the price of gasoline, which drove energy prices up 5.9 percent. Food prices were up 0.8 percent. Without the increases in food and energy final demand goods prices were up 0.2 percent.
  • Industrial Production decreased 0.2 percent in May according to the Federal Reserve. The drop in May was unexpected and followed a 0.5 percent decline in April. But May Industrial Production was up 1.4 percent over May 2014.
  • May Capacity Utilization fell 0.2 percentage points to 78.1. This reading is 2 percent percentage points below it’s long run (1972-2014) average.
  • The Empire State Manufacturing Survey declined 5 points to minus 2 from +3.09 in May. The Index was also negative in April. The new orders index fell 6 points to minus 2.1 while the shipments index edged down slightly but stayed well in positive territory at 12.0. The labor market indexes showed small increases in employment and the average workweek.
  • The Reuters/University of Michigan Consumer Sentiment Index rose more than expected in June to 94.6, up from 90.7 in May. The survey found the current economic conditions index rising to 106.8 from 100.8 in May while the consumer expectations index rose to 86.8 from the final May reading of 84.2.

Foodservice News This Week

  • Restaurants will hire 522,000 seasonal workers this summer. Increased tourism is the main reason for the increased hiring but warmer weather also brings more outdoor dining, requiring more wait staff. This is the third year in a row that summer hiring has exceeded half a million employees but the National Restaurant Association’s projection is down from 2013 (551,200) and 2014 (535,900). The restaurant industry trails only the construction business for creating seasonal jobs.
  • Revised regulations for overtime pay could cost businesses $5.2 billion a year as 1.7 million retail workers become eligible for overtime compensation. This is according to a study funded by the National Retail Federation. A vice president of the White Castle chain testified before Congress that the new rules “would stifle opportunities for career advancement…” and that employees might be worse off if management cuts hourly wages to make up for the higher overtime pay or cut bonuses and/or benefits. The proposed rule changes would define management as earning $42,000 annually, up from $27,000 currently.
  • Los Angeles passes $15 an hour minimum wage. The new law will take the minimum wage from $9 an hour to $15 an hour in increments to $15 an hour by 2020. The law applies to all employers with more 25 workers within the city limits.
  • Casual dining restaurants will be most affected by minimum wage increases, according to Moody’s Investor Services. Moody’s theorizes that since casual restaurants require more servers they will be hit hardest.
  • A bill requiring restaurants to compensate employees for late work schedule changes was not acted on by the California State Assembly and is dead for this year. The Assemblymen who introduced the bill said he will reintroduce it next year. The bill was backed by the United Food and Commercial Workers union.
  • Dunkin’ Brands is “evaluating” delivery service. One observer said Dunkin’ customers are cost-conscious so “the company will have to walk a fine line between profits and the price of convenience.”
  • Gordon Foodservice has opened a 420,000-square-foot distribution center near the Pittsburgh airport. The facility currently employs 200 people and expects to hire 100 more in the next year or two.
  • Corporate Stirrings: Naf Naf Grill, a Chicago-based, Middle Eastern cuisine chain with 13 units, has received a growth-equity investment from the Roark, Capital Group. Villa Enterprises, the multi-brand operator and franchisor, has been awarded the contract to transform the Orlando International Airport Airside 2 food court. The new Food Hall by Villa will open in February and feature 6 concepts: Villa Italian Kitchen, Green Leaf’s & Bananas, The Market by Villa, Jersey Mike’s Subs, Asian Chao Oriental Eatery, and Chipotle Mexican Grill.
  • Growth Chains: The Halal Guys “sold out” the state of California with three multi-unit franchise agreements for a total of 100 restaurants. Tropical Smoothie Café plans to open at least 6 locations in the Detroit area in the next 3 years. Roy Rogers is planning on opening 70 restaurants in the Mid-Atlantic and Northeast at a pace of 1 to 2 corporate locations and 3 to 5 franchise units per year. Boston Market may open as many as 20 restaurants next year and as many as 30 restaurants in 2017. Donato’s Pizza plans to open as many as 12 locations in Birmingham, Ala. Texas Roadhouse plans to grow their current 450 restaurants to up to 800. Dave & Buster’s plans on opening 7 to 8 restaurants this year. Papa John’s, with over 1,300 international locations, plans to expand by 150 to 200 more per year. Krispy Kreme will open 120 to 140 stores this year: 10 to 12 domestic company owned, 15 to 20 domestic franchised and 95 to 110 global locations. Dine-Equity, parent of Applebee’s and IHOP, has 10 restaurants in the United Arab Emirates and will open 16 more in the next 5 years. Pint Room, headquartered in Columbus, Ohio, has 3 locations and will open a forth in Littleton, Colo. El Pollo Loco plans to open 6 restaurants in Salt Lake City by the end of 2018.
  • Comparable Store Sales Reports: Bojangles up 7.9 percent, Casey’s General Store up 13.5 percent, Dave & Buster’s up 4.9 percent, Krispy Kreme up 5.2 percent, and Luby’s (all concepts down 1.1 percent, Luby’s Cafeteria’s down 1 percent, Fuddrucker’s up 0.2 percent, Cheeseburger In Paradise down 7.2 percent, and combo units down 3.7 percent.)

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