Social interaction is just as important as the food to many restaurant patrons. Restaurant brands support supermarket offerings. Fast feeders have improved their satisfaction rating with consumers. New Barnes & Noble stores will have much larger cafes and menus. McDonalds is stressing urgency over perfectionism. These stories and a whole lot more This Week In Foodservice.

Knapp-Track comparable-store sales were down for the third consecutive month in May for the 50-plus casual-dining chains in Knapp’s program, and have now been down for 4 out the 5 months this year. Comps declined by 0.8 percent in May with guest counts down 2.7 percent. This would indicate check averages were up 1.9 percent.

A “modestly encouraging aspect” of May data was that comparable-store sales were up in 3 of the 4 weeks. But, the sales decline in the fourth week was steep enough to pull down the entire month. Further, guest counts were down all 4 weeks in May on a year-over-year basis.

Since 2011, there have been only 8 out of 65 months with positive same-store guest counts.

While the May results were not a surprise Knapp-Track continues to reflect weakness in the casual-dining sector.

Knapp-Track statistics and the observations above are courtesy of Bank of America Merrill Lynch.

Economic News This Week

• Initial jobless claims fell by 18,000 to 259,000 in the week ending June 18. The 4-week moving average fell 2,250 to 267,000. This report continues to show layoffs remaining at relatively a low level.
• Existing home sales on highest pace in 9 years. Despite low inventories and increasing home prices, the National Association of Realtors reported that May existing home sales rose 1.8 percent to a seasonally adjusted rate of 5.53 million homes. This is the highest annual rate since February 2007 when it was 5.79 million. Sales were up 4.5 percent from May 2015. The median sales price increased 4.7 percent over May 2015 and marks the 51^st consecutive month of year-over-year gains.
• New home sales decreased 6.0 percent in May from April to a seasonally adjusted annual rate of 551,000. However, the U.S. Census Bureau notes this is an 8.7 percent increase over May 2015.
• Builder confidence rose 2 points in June. The National Association of Home Builders/Wells Fargo Index stands at 60, the highest it has been since January of this year. The index shows more home builders feel positive about the future than feel negative.
• The Index of Small Business Optimism rose 0.2 percent in May to 93.8. While the index has improved for 2 straight months, it remains considerably below 100 and the 42-year average of 98. Small business owners cited the political climate, including increased regulation, as one of the reasons it is not a good time to expand.
• Consumers were less optimistic in June, according to the University of Michigan Survey of Consumer Sentiment final report for the month. The Index fell to 93.5 from 94.7 in May. The Index of Current Economic Conditions rose slightly to 110.8 in June from 109.9 in May while the Index of Consumer Expectations fell from 84.9 in May to 82.4 in June. A spokesman for the University interprets the data to mean that while consumers do not expect a recession, they foresee a slow pace of economic growth.

Foodservice News This Week

• Technomic, Inc. says it’s not just the food. Consumers are looking for more than nutrition and convenience. As smart foodservice operators have known for years, restaurants are providing a total experience. People are looking for entertainment and social interaction. Technomic points out that so much social interaction is now taking place electronically, restaurants are becoming more important as a place for consumers to meet face to face.
• As supermarket delis expand their prepared foods offerings restaurant branded menu items, like Panera soups, are driving sales. Grocers are also adding online ordering and kiosk ordering modeled after restaurants.
• Limited-service restaurants improved their customer satisfaction ratings rising 2.6 percent to 79, according to the latest American Customer Satisfaction Index. Nearly all fast-food restaurants had higher satisfaction ratings, with Chipotle Mexican Grill dropping 6 percent after their food borne illness struggles. Full-service restaurants saw their customer satisfaction ratings fall by 1.2 percent to 81, meaning the gap between full service and fast food is extremely narrow.
• Barnes & Noble says new stores will double the size of cafes. The four new stores will offer full menus for breakfast, lunch and dinner, serve beer and wine, and have table service. Obviously, the goal is to get customers to linger at the store and generate more revenue. Currently cafes account for less than 10 percent of the book chain’s sales.
• Single-unit c-stores increased their lead over chain-operated stores last year and now account for 97,359 locations (63 percent of total stores). But Convenience Store News points out that chain-owned units exceed the independents in sales per store. Single stores saw their foodservice sales grow by 6.9 percent last year matching the total growth of 7.1 percent.
• McDonald’s CEO wants it faster!  Steve Easterbrook is stressing urgency over perfection. Customer taste is moving too fast to keep up with old rollout schedules. An example was the four years McDonald’s took to develop and roll out McGriddles. Switching from margarine to butter took 6 months. While changes like these cause headaches both internally and for suppliers, customers do seem to notice and have rewarded McD’s with increased sales. McDonald’s also needs to think about its margins,according to one financial analyst. He calculates that the profit margin on soft drinks is 87 percent and on fries its 75 percent and promotions that discount these two menu items are financially ruinous. Further, he believes that the outsourcing of jobs to India has nothing to do with minimum wage concerns because the outsourced positions were in accounting, which is not a generally a low-wage job.
• Corporate Stirrings: McDonald’s has received half a dozen offers for thousands of the company’s units in China. As part of the package McDonald’s has offered a 20-year franchise deal. However, there were some restrictions in the contract, which may have dissuaded some firms from making an offer. In another take on McDonald’s refranchising effort in Asia, the Service Employees International Union has mailed out letters to “hundreds” of potential buyers warning that there is considerable financial and operational risk in purchasing the McDonald’s locations. Pieology Pizzeriahas purchasedProject Pie another fast-causal pizza chain. Pieology has over 100 locations with commitments for 750. Project Pie has 30 locations. Terms of the acquisition were not disclosed. Pilot Flying J and Speedwayannounced a joint venture consisting of 120 travel plazas, primarily located in the Southeastern United States. Called PFJ Southeast LLC, the operation will consist of 41 Speedway locations and 79 Pilot Flying J locations. The operations will carry either the Pilot or Flying J name.
• Growth Chains: El Pollo Loco has signed a franchise development agreement for 6 restaurants in Tucson by August 2019. Cold Stone Creamery will open 13 stores in Cambodia in the next 5 years. Taja India has signed a 3 restaurant franchise deal for Houston. Dickey’s Barbecue Pit will open 3 restaurants in El Paso.
• Comparable-Store Sales Reports: Just one report this week – Sonic Drive-Ins (system up 2.0 percent, company-owned up 0.9 percent and franchised up 2.1 percent).

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