Restaurant sales in June were slower than in May. A new report looks for foodservice to grow 3.33 percent in the next 5 years. A C-store chain says it will open at least 600 locations in the next few years. Taco Bell expands their Cantina concept. These stories and a whole lot more This Week In Foodservice.

Restaurant sales fell in June according to the Census Bureau. While total U.S. retail sales rose 0.6 percent compared to May, sales at restaurants and bars declined 0.3 percent for the month. Still, total retail sales increased 3.1 percent for the first 6 months of this year and June sales increased 2.7 percent from June 2015. Excluding sales of autos and auto parts, June retail sales rose 0.7 percent. 

Restaurant and drinking places had sales increases of 6.4 percent in the first 6 months of 2016 and 4.9 percent compared to June 2015. It is probably worth noting that restaurant and bars sales increased a solid 0.8 percent in May.

There are some factors to consider when analyzing the Census Bureau report. First, the Bureau classifies it as an “advance” report since it is based on a small preliminary sample subject to revision. Second, the government only surveys restaurants and drinking places. Thus, the study excludes somewhere between 30 percent to 40 percent of the foodservice industry, including hotels, resorts, retail operations, clubs, employee foodservice, colleges and universities, school foodservice, healthcare, and military. Finally, some of the data is adjusted for seasonal variations, holidays, weekends, etc. but menu price changes are not factored into the numbers.

Economic News This Week

• Consumer borrowing increased by 6.2 percent in May on a seasonally adjusted annual rate, according to the U.S. Federal Reserve. Revolving credit — mostly credit card loans — increased at a relatively low 3.0 percent while non-revolving credit — auto loans, student loans, etc. — rose 7.3 percent.
• The Producer Price Index for Final Demand increased 0.5 percent in June on a seasonally adjusted basis. Final demand service prices rose 0.4 percent and final demand goods prices rose 0.8 percent. However, the prices of the “core” index — the goods index not including food and energy — was flat for the month. Final demand food prices increased 0.9 percent while final demand energy prices jumped 4.1 percent.
• Initial jobless claims for the week ending July 9 were 254,000, identical to the week before. The 4-week moving average was 259,000, a decline of 5,750.
• New rules regarding overtime wages may be phased in rather than take effect on December 1 of this year. Four members of Congress introduced legislation to phase in the rules over a three year period to hopefully give businesses time to adjust to the higher pay.
• The Index of Small Business Optimism reached 94.5, an increase of 0.7 percent in June. The study’s sponsor, the National Federation of Independent Business, interpreted the results to mean that small businesses are “in a maintenance mode experiencing little growth…”
• Can auto sales maintain a seven-year growth pattern? One forecaster looks for a “modest decline” in car and light truck sales this year but other observers predict a second record-breaking year.
• Industrial Production rose 0.6 percent in June after falling 0.3 percent in May. Production for the manufacturing segment rose 0.3 percent, utilities production rose 2.4 percent due to warmer weather, and mining production was up 0.2 percent. Capacity Utilization increased 0.4 percent in June to 75.4 percent. This is 4.6 percentage points below the long run (1972-2015) average. 
• The University of Michigan Index of Consumer Sentiment dropped significantly in the study’s preliminary July reading. The index declined to 89.5 from 93.5 in June. The Current Economic Conditions Index read 108.7, a decline of 2.1 points. The Index of Consumer Expectations was 77.1, down significantly from June’s total of 82.4. A spokesperson for the University of Michigan stated that a “record number” of respondents mentioned the Brexit vote as a concern. These were mainly consumers at high income households.

Foodservice News This Week

• The U.S. foodservice market will enjoy a compound annual growth rate of 3.33 percent from 2016 to 2020, according to data from a study entitled Foodservice Market In The US 2016-2020. The report from Research and Markets names Aramark, Domino’s and Starbucks important players to watch in the next five years.
• BW Gas & Convenience Holdings, LLC purchased 21 convenience stores from Kum & Go, L.C. in Iowa. The stores will be extensively remodeled and the name changed to Yesway, BW Gas & Convenience Holdings’ new brand. The company plans to acquire 600 to 1,000 C-stores in the US in the next few years.
• Taco Bell will open a restaurant on the Las Vegas Strip. The two- story location will use the chain’s cantina design and feature alcoholic beverages, sharable dishes, an open kitchen and an outdoor patio. The concept is aimed at high volume urban locations and Taco Bell is considering opening Cantina models in Atlanta, New York, Boston, Ohio, Berkeley, Austin, and Fayetteville.
• Rapid Fired Pizza will build a flagship location which will also serve as test center. The Dayton, Ohio-based chain operates five restaurants with another half dozen set to open this year. Long range plans call for expansion into four states.
• Convenience store distributor Eby-Brown will open a distribution center in Shepherdsville, Ky. The 300,000-square-foot facility will employ 250 people and serve customers in Kentucky, Tennessee, and Indiana.
• Corporate Stirrings: YUM! Brands Inc. will spin off its China businesses into a separate company in October. YUM! Brands’ most recent quarter comparable store sales were flat overall in China. KFC same store sales increased 3.0 percent in China but Pizza Hut comps were down 11.0 percent. Starbucks has become a global licensee and investor in Princi, the renowned boutique bakery and café. Princi products will be integrated into Starbucks Reserve Roastery and Tasting Rooms in Shanghai and New York. There have been reports that McDonald’s is struggling to attract bidders for its properties in China due to what some observers feel are “onerous” requirements such as keeping management intact for two years and limitations on the buyers’ ability to go public. Also, McDonald’s supposedly is requiring bidders to have fast food experience.
• Growth Chains: Capital One, the credit card company, is expanding its hybrid coffee shop/ financial office to two new locations in Chicago. The Wawa C-store chain will open at least 50 stores in Southern Florida in the next 5 years. Auntie Anne’s Pretzels plans to open 60 stores a year in the next few years and beyond. Starbucks will open 500 stores in Thailand in the next 4 to 5 years. Dickey’s Barbecue Pit will open three restaurants in the Amarillo area. Another Broken Egg Café will open restaurants in Hilton Head, Savannah, and a third location to be named later. Dunkin Donut’s franchisee in Los Angeles will open eight new restaurants. A Smoothie King franchisee in Houston plans to open six stores in that market. Jamba Juice has signed an agreement to open six locations in the Detroit area. Zoe’s Kitchen will open restaurants in Philadelphia; Newark, Del.; and Lawrenceville, New Jersey. 
• Comparable Store Sales Reports: YUM! Brands (KFC up 2.0 percent, Pizza Hut flat and Taco Bell down 1.0 percent)

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