Bloomberg columnist says pizza chains will do well if a recession hits. Foodservice operators increase hiring in July. The NRA believes a recession is unlikely. Prediction – self-driving cars will mean billions in revenue for bars and restaurants. Zika virus fears are reducing restaurant sales in Miami. These stories and a whole lot more This Week Foodservice.

Shelly Banjo, a writer who is described as a gadfly columnist for Bloomberg news, weighed in on the restaurant market and was pretty negative in noting second quarter earnings for many chains were down or had slower growth. Banjo also mentioned Bloomberg’s own research that shows restaurant sales were flat in June.

Banjo went on to say she expects pizza chains to do well given their low menu price and easy ordering procedures of the various systems all the major chains offer. As proof, she pointed to Domino’s as one of the few chains experiencing significant comparable store sales for its last quarter. This was true enough with Domino’s U.S. system comps up a healthy 9.7 percent.

Along those lines, Banjo went on to indicate we could expect good things from Papa Murphy’s and Papa John’s. She was half right. Papa John’s comparable store for North America rose a strong 4.8 percent, but Papa Murphy’s comps fell 4.0 percent down even more from the previous quarter’s drop of 2.8 percent. (Details in the Green Sheet.) This shows the problems in trying to look into the future.

Economic News This Week

• Personal consumption expenditures increased 0.4 percent in June. This was the second month in a row consumers increased their spending by that amount. Personal income increased 0.2 percent, indicating consumers were either taping their savings or borrowing to support their increased consumption.
• The U.S. private sector added 179,000 jobs in July, per ADP’s National Employment Report. Using the company’s payroll data, ADP said that small businesses (less than 50 employees) added 61,000 employees, medium businesses (50 – 499 employees) added 68,000 employees, and large businesses added 50,000 employees. The report also show that the service industries were responsible for the entire gain as goods producers lost 6,000 jobs.
• Initial-jobless claims climbed by 3,000 for a total of 269,000 in the week ending July 30. The 4-week moving average increased by 3,750 for a total of 260,250. This marks the 74th straight month with initial jobless totals less than 300,000, per the Department of Labor. The last time this happened was in 1973.
• The U.S. economy added 255,000 jobs in July, per the Bureau of Labor Statistics. The Bureau also revised May and June hiring upward of 18,000. Unemployment was steady at 4.9 percent. Thirty-eight thousand of the new jobs came from government hiring, an unusually large increase.
• The Institute for Supply Management’s Production Manufacturing Index totaled 52.6 in July, a decline of 0.6 percent from June. Any number that exceeds 50 shows expanding manufacturing activity. The New Orders Index was virtually flat at 56.9. The Production Index totaled 55.4, an increase of 0.7 percent. The Employment Index was 49.4, a decline 1 percent. Of the 18 manufacturing industries studied by the Institute, 11 reported expansion.
• July auto and light truck sales increased 0.7 percent to an annual rate of 17.9 million vehicles. However, roughly half of the major car manufacturers saw sales decline for the month. As some experts had forecast, it appears that sales are slowing after years of heavy growth.
• New orders for manufactured goods declined 1.5 percent in June. Shipments rose 0.7 percent and unfilled orders fell 0.8 percent. Orders for manufactured durable goods decreased 3.9 percent. Shipments for manufactured durable goods increased 0.4 percent while unfilled orders fell 0.8 percent.
• June construction spending declined 0.6 percent from May but was up 0.3 percent over June 2015. For the first six months of this year construction spending is up 6.2 percent. Residential construction was virtually even with May spending.

Foodservice News This Week

• Foodservice operators hired 21,200 new employees in July. The new hires represented almost 10 percent of private sector hiring and was more than 8 percent of all the new jobs.
• The National Restaurant Association says fears of a restaurant recession are “overblown.” Perhaps in response to recent predictions for a possible recession, the association’s chief economist said a recession remains unlikely as long as employment is good.
• Will self-driving cars be a boon for restaurants and bars? The investment firm of Morgan Stanley did some math and says maybe. The theory is that customers don’t have to worry about consuming more beverage alcohol and drink sales will rise, perhaps even by billions of dollars.
• Zika virus fears have resulted in the closing of outdoor restaurants and bars in the Miami, Fla., area. In a separate story, The Wall Street Journal reported that airline stocks tumbled on a warning from the Center for Disease Control for pregnant women to avoid the Miami neighborhood where people have contracted the Zika virus. While no numbers are available, a decline in tourism could potentially have a significant effect on restaurant sales.
• Real restaurant sales increased 4.2 percent in the first half of 2016, according to the Food Institute. The Institute uses the U.S. Census Bureau retail sales figures then adjusts for inflation as determined by the Consumer Price Index from the Bureau of Labor Statistics. The data for the first six months of 2016 shows a rather sharp decline from real sales growth of 5.5 percent in 2015. Grocery store real growth is up 2.2 percent in the first 6 months, which is up from +1.6 percent in 2015.
• Restaurant Brands International sales results were mixed in the company’s last quarter. Tim Horton’s did well but Burger King stumbled. Scott Hume, publisher of BurgerBusiness, noted that Restaurant Brands International CEO seemed to slide over Burger King’s performance while acknowledging he did “see some softness in the industry in the second quarter.” BK saw comparable store sales fall 0.8 percent in the U.S. and Canada even though the chain had bunch of new products. Hume said the new menu items garnered a ton of social-media impressions they didn’t translate into sales. Further, Hume pointed out Burger King had a net loss of 15 units in the quarter which might be a cause for concern.
• YUM! and McDonald’s share of the Chinese market has declined this year. Chinese consumers are looking for healthier menu items, home grown restaurant chains are coming on strong, and higher income consumers are choosing fancier restaurants.
• Tropical Smoothie Café’s new restaurant design helps drive customer traffic. The warmer colors and woods, open kitchen along with community style seating and new smoothie bar brings in 10 percent more first-time visitors, as well as increasing existing guest visits by 28 percent.
• Corporate Stirrings: Report: Logan’s Roadhouse prepares to file for bankruptcy. The chain has about 250 restaurants in 26 states. Earlier, a Logan’s representative declined to comment on “market rumors.”  Why is McDonald’s moving its headquarters to downtown Chicago? According to a recent article in The New York Times, corporate relocations are complicated matters but one reason to move to city centers is to attract younger employees who wish to live in more vibrant areas. Bagger Dave’s Burger Tavern will be spun off as a separate company by its parent Diversified Restaurant Holdings. Diversified Restaurant’s CEO indicated the reason for the spin off was that by “Separating these two very different businesses will enable each to better pursue their strategies and growth plans independently.” Diversified Restaurant Holdings will continue to operate their 64 franchised Buffalo Wild Wings.
• Growth Chains: Black Bear Diner is on track to open 14 new units this year and has 20 more in the pipeline for 2017. The chain hopes to have 100 locations by 2018. Smoothie King plans to open 15 stores in Houston. Krispy Kreme has signed a development deal for 10 shops in Costa Rica in the next 5 years. Dunkin’ Donuts signed store development agreements with 3 franchise groups for 13 restaurants and 3 Baskin Robbins multi-brand units in the Atlanta area. Noodles and Company will add 10 to 15 new units next year after opening 49 in 2015 and 35 to 40 this year. Bar Louie has signed a franchise development agreement for 5 eateries in the Houston area with the first to open this year. Bojangles has signed a franchise development agreement for “multiple units” in Southern Alabama and Southeast Mississippi.
• Comparable Store Sales: Applebee’s down 4.2 percent, Arcos Dorados up 9.5 percent, Bravo Brio Restaurant Group (systemwide down 7.1 percent, Bravo down 8.4 percent and Brio down 6.4 percent). Burger King down 0.8 percent, Captain D’s up 3.1 percent, Chuy’s up 1.0 percent, Denny’s (systemwide down 0.5 percent, company-owned locations down 0.1 percent and franchised locations down 0.5 percent), El Pollo Loco (systemwide up 2.4 percent, company-owned stores up 2.0 percent, and franchised locations up 2.75), Fiesta Restaurant Group (Pollo Tropical down 1.4 percent and Taco Cabana down 3.8 percent), Habit Burger up 4.0 percent, Ignite Restaurant Group (Joe’s Crab Shack down 6.8 percent and Brick House Tavern down 6.3 percent), IHOP up 0.2 percent, J. Alexander’s Holdings (J. Alexander’s / Redlands down 1.8 percent and Stony River Steakhouse up 1.8 percent), Jack in the Box (systemwide up 1.1 percent, company-owned locations down 0.2 percent and franchised locations up 1.5 percent), Jamba Juice (system wide up 4.2 percent, company-owned locations up 5.7 percent and franchised locations up 4.0 percent). Noodles & Company (systemwide down 1.0 percent, company-owned locations down 0.9 percent, and franchise-run locations down 2.1 percent), Papa John’s (North American locations up 4.8 percent, company owned locations up 5.6 percent and franchised locations up 4.5 percent), Papa Murphy’s (domestic locations down 4.0 percent, company owned locations down 6.6 percent, and franchised units down 3.7 percent), Potbelly Sandwiches company-owned locations up 1.7 percent, Qdoba (systemwide up 0.6 percent, company owned up 1.0 percent and franchised locations up 0.1 percent), Steak N Shake down 0.7 percent, and Tim Horton’s US up 5.9 percent. 

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