New machines are competing with restaurants. Foodservice traffic growth is slow but there are some bright spots. Unit growth stays slow for a third consecutive year. Introducing two new meal periods: brunchfast and brupper. McDonald’s serves as a gathering spot in many communities. These stories and a whole lot more This Week in Foodservice.
It’s not a vending machine — it’s an automated restaurant. So say the companies offering the 24/7 Pizza Box, the Burrito Box and the Sushi Station. These concepts appeal to some customers, namely millennials, accustomed to working with apps and other online services from Amazon to Uber and don’t want to interact with a human when ordering anything.
Major wage increases hitting foodservice operators in markets from New York to California virtually force managers to look to technology for ways to control costs. In fact, a test by CKE, parent company of Hardee’s and Carl’s Jr., found that customers who ordered on screens spent more money than those who placed their order with a live employee.
The company selling the Burrito Box says they have 25 in operation and plan to install 50 in the coming months. The company selling the 24/7 Pizza Box has orders for more than 100 of the machines and expects to sell 2,500 of them next year at a cost of about $30,000.
At the risk of being thought a Luddite, I recall that about 40 years ago the next big thing was supposed to be an automated French fry machine. The first and only one I actually saw was in a little general store on the island of Molokai. It was not operating and when I asked the clerk how it performed she said she didn’t know as it hadn’t worked in the six years she had been employed at the store.
So what does the future hold for automation in the restaurant industry? Only time will tell.
Economic News This Week
- Initial-jobless claims totaled 264,000, a decline of 4,000 for the week ending June 4. The 4-week moving average was 269,500, a decline of 7,500. While job creation has been disappointing for several months, it does not appear that job reduction is occurring either.
- The Bureau of Labor Statistics reported revised productivity decreased at an annual rate of 0.6 percent in the first quarter. Hourly compensation increased 3.9 percent. Earnings had been stuck in neutral. Unfortunately, the jump in earnings coupled with the decline in productivity lead to a 4.5 percent increase in unit labor cost. This could result in employers being reluctant to invest more in their businesses.
- Consumer credit increased 4.5 percent on a seasonally adjusted basis, according to the U.S. Federal Reserve. Revolving credit — mostly credit cards — increased 2.1 percent while non-revolving credit — auto loans, student loans, etc. — grew 5.4 percent.
- The University of Michigan Consumer Sentiment Index’s June preliminary reading totaled 94.3, down 0.4 percent from May’s final reading. The Index of Current Economic Conditions rose to 111.7 from 109.9 in May. The Index of Consumer Expectations declined to 83.2 from May’s reading of 84.9.
- The Gallup Organization’s U.S. Economic Confidence Index was essentially flat in May at minus 14. This matches the April reading, which was a seven-month low.
Foodservice News This Week
- The restaurant industry is growing at a “snail’s pace,” according to data from The NPD Group. Total industry traffic was flat in the first quarter of the year but morning breakfast and snack visits were up 2.0 percent from January, February and March of 2015. An NPD spokeswoman said, “There is a confluence of changing demographics, economic pressures, and evolving consumer attitudes and behaviors creating shifts in what, when, where and how we eat.
- Foodservice locations grew at a “moderate” pace in 2015, per the National Restaurant Association. The industry added 9,877 locations in 2015. This represents a 1.7 percent increase in unit growth, up 0.2 percent from the previous year, per the association. In contrast, 2015 was the third consecutive year in which the industry didn’t add 10,000 locations. And, the industry fell behind the growth rate of all U.S. businesses, which increased by 2.0 percent.
- Jack in the Box has trademarked the term “Brunchfast,” according to BurgerBusiness. Scott Hume, publisher of BurgerBusiness, reports that a spokesperson for the burger chain declined to provide any additional information about how the company plans to use the newly registered word. Hume points out that Jack in the Box believes that McDonald’s’ all day breakfast program has hurt Jack’s sales. Meanwhile, the Frisch’s Big Boy chain uses the term “Brupper” to promote their breakfast bar for supper.
- McDonald’s has become a community center for many Americans, particularly in poorer neighborhoods. McD’s attracts diverse groups such as retirees, homeless, the addicted, community groups, bible study organizations and local officials discussing business. The restaurants are clean, safe, sell good coffee at reasonable prices, and have nice restrooms. Plus, McDonald’s seems to tolerate people lingering in their restaurants more so than other restaurants.
- The European Commission has cleared Sysco to purchase The Brakes Group, a U.K.-based food distributor. The acquisition is valued at US$3.1 billion.
- Jimmy John’s has been sued by the State Of Illinois due to the chain’s non-compete agreement that employees must sign. Non-compete agreements, which theoretically stop employees from working for a competitor for a set period of time if they leave a company, usually involve executives and technical talent. Jimmy John’s requires even hourly store employees to sign non-compete contracts. There was a class action suit filed against a Jimmy John’s franchisee that is now wending its way through the federal court system.
- Corporate Stirrings: Qdoba Mexican Eats will move its corporate headquarters from Lakewood, Colo., to San Diego. The chain will relocate next to Jack in the Box’s corporate offices in order to “reduce costs and continue… growth…” 7-Eleven will acquire 79 convenience stores and gas stations in California and Wyoming from CST Brands. Cost of the deal was not announced. Gigi’s Cupcakes has been acquired by an affiliate of FundCorp. Gigi’s is the largest of cupcake brands with over 100 stores. Terms were not disclosed. FundCorp acquired Gatti’s Pizza last year.
- Growth Chains: Rapid Fired Pizza, headquartered in Dayton, Ohio, has 3 restaurants open, 7 with signed leases and another 20 or so in some stage of pre-lease development. Texas Chicken has signed a deal for seven restaurants in the Middle East in the next several years. Casey’s General Store will expand in half a dozen states in 2017. Dunkin’ Donuts has signed a multi- store development agreement for three locations in Mankato, Minn. Dickey’s Barbecue Pit signed a two-store development agreement for Virginia.
- Comparable Store Sales Reports: Casey’s General Store up 8.4 percent, Dave & Buster’s up 3.6 percent, and Pollo Campero up 11.8 percent.
For details and same store sales of other chains, please click here for the Green Sheet.