The National Restaurant Association’s Restaurant Performance Index bounced up in February. Foodservice operators continued to build up their staffs in March. California’s move to raise the minimum wage to $15 an hour got a chilly reception from foodservice management. Chipotle appears to be getting ready to introduce a burger concept. Arby’s saves millions by reducing energy usage. These stories and a whole lot more in This Week in Foodservice.

The National Restaurant Association reported its Restaurant Performance Index totaled 102.1 in February, up 1.5 percent from January.

A 3.1 percent jump in the Current Situation Index helped drive the increase. In fact, 71 percent of participating operators reported an increase in same-store sales, the highest number since July 2015. And, 56 percent of operators reported increased traffic in February.

The RPI’s other major component, the Expectations Index, declined 0.1 percent but stayed well above the breakeven point at 101.4. However, 46 percent of the operators surveyed expected sales to rise in the next 6 months, which is a significant increase from the 39 percent who expected an increase in the previous month. Pushing the Expectations Index down was the operators’ outlook for the economy as a whole. Just 16 percent of operators expect the economy to improve, while 20 percent feel it will worsen. The National Restaurant Association notes February marked the fourth consecutive month that  operators had a net negative outlook for the economy, the longest such stretch in seven years.

In terms of purchasing, 61 percent of participating operators said they had made a capital expenditure for equipment, expansion or remodeling in the last 3 months. As for future plans for capital spending, 56 percent of operators plan to invest in equipment, expansion and/or remodeling in the next 6 months. This is, however, a drop from 65 percent who answered this question in the affirmative in January.

Overall, the February RPI is mostly positive. It is possible that some of the uncertainty about the future is a result of this being an election year.

Economic News This Week

• ADP’s March Employment Report shows the private sector producing 200,000 new jobs. Small employers, those with fewer than 50 employees, accounted for 86,000 of the new hires. Midsize employers, those companies with 50 to 499 employees, added 75,000 employees, while large employers added 39,000 people.
• Initial jobless claims totaled 276,000, an increase of 11,000 for the week ending March 26. The 4-week moving average was 263,250, an increase of 3,500. This marks the 56th consecutive week claims have been less than 300,000 – the longest streak since 1973.
• The U.S. economy added 215,000 jobs in March. The private sector added 195,000 jobs, while government entities added the other 20,000 positions. New job growth has been strong since last fall but some economists are puzzled by the fact that the number of hours worked and earnings have been increasing very slowly. One theory is that a high percentage of the new jobs are part-time wage positions. The unemployment rate, which is derived from another study, ticked up to 5.0 percent in March from 4.9 percent in February.
• By climbing 6 points, The Chicago Purchasing Manager’s Index entered expansion territory with a reading of 53.6. Factors contributing to the growth include strong performance in production and employment.
• The Institute for Supply Management’s Manufacturing Index had a reading of 51.8 in March, an increase of 2.3 percent from February. This represents the first time in 6 months that the manufacturing segment has shown expansion. (Any number above 50 indicates growth.) The New Orders Index increased 6.8 percentage points to 58.3 percent while the Production Index was at 55.3 percent, up 2.5 percentage points from February. However, the Employment Index fell 0.4 from February to 48.1 percent.
• Sales of cars and light trucks increased in March but growth was less than expected. Most major manufacturers saw sales increase with light truck and SUV volume offsetting a decline in car sales. Automobile firms are competing with record sales volume in 2015 and are offering heavier discounts to attract buyers.
• The Conference Board’s Consumer Confidence Index hit 96.2 in March, up from February’s reading of 94.0. The Present Situation Index totaled 113.5 in March, down from 115 in February. In contrast, the Expectations Index hit 84.7, up from February’s reading of 79.9. So what does it all mean? A Conference Board spokesman interpreted the data to mean “…consumers don’t see the economy gaining any significant momentum in the near-term, nor do they see it worsening.”
• The University of Michigan Consumer Survey crept up in March in the final report vs. the preliminary survey but still was down from the February findings. The Consumer Sentiment Index finished the month at 91.0, down from 91.7 in February. The Current Economic Conditions Index dropped to 105.6 in March from 106.8 in February. The Index of Consumer Expectations edged down to 81.5 from 81.9 in February.

Foodservice News This Week

• Foodservice operators remained in hiring mode in March with the industry adding 24,800. For the month, foodservice had one of the largest number of new employees in the country.
• California’s move to raise its hourly minimum wage to $15 brought immediate response from restauranteurs. One operator said, to begin, he would have to raise prices given his thin margins. Next he would “re-engineer” the menu to require fewer kitchen staff. He might also reduce bus boys and have servers bus tables. The wage increase still has to work its way through the California legislature.
• Chipotle Mexican Grill wants to trademark the term “Better Burger”. The fast-casual multi-concept operator has an Asian chain called ShopHouse and a pizza concept called Pizza Locale operating under its umbrella. A company spokesman said the Chipotle Model of using a few ingredients to customize menu items could apply to a variety of foods. He revealed no other information about the hamburger operation.
• Arby’s has reduced energy consumption by 15.2 percent since 2011. The company had an energy reduction program of “15% By 2015” for its company owned stores. The chain has also reduced water consumption 8.6 percent in its company owned units. The program has generated $20.4 million in energy related cost savings.
• The number of New York City restaurants offering breakfast is up 30 percent in the last few years according to the reservation service OpenTable. Even cuisines that wouldn’t seem to translate easily into breakfast menus, such as Japanese or Italian, have developed morning menu items. Many operators see breakfast as a new revenue stream to offset higher rent and wage costs.
• Corporate Stirrings: East Coast Foods Inc., the parent company of Roscoe’s House of Chicken and Waffles, has filed for bankruptcy protection. The firm was recently hit with a court judgement for approximately $3.2 million for discrimination and wrongful termination against a former employee. It is not clear what effect the bankruptcy will have on the chain’s seven Los Angeles restaurants. Chicago-based pizza chain Giordano’s may be for sale according to published reports. The company was bought out of bankruptcy by Victory Park Capital Advisers in 2011 for about $52 million and now has nearly 50 units. The speculation is the operation could bring $100 million if sold.
• Growth Chains: McDonald’s will open 1,500 restaurants in China, Hong Kong, and Korea in the next 5 years. Dave & Buster’s plans to open 9 or 10 restaurants this year. Papa Murphy’s will develop 15 stores in Hawaii in the next 4 years. Old Chicago Pizza & Taproom will open up to 12 new locations this year. Dickey’s Barbecue will open 3 restaurants in Eastern Michigan. Dippin’ Dots and Doc Popcorn will open 15 co-branded units this year. Famous Dave’s has signed a franchise agreement for three restaurants in Charlotte, N.C.
• Comparable Store Sales Reports: Dave & Buster’s up 6.0 percent, ONE Group down 2.9 percent, and Sonic Drive-Ins (System up 6.5 percent, Company owned up 6.3 percent, & Franchised up 6.5 percent.)

For details and same-store sales of other chains, Please Click Here for the Green Sheet.