Here’s what caught my eye to be worthy of a second look this week: Deloitte talks about the restaurant of the future (it’s closer than we might think); The Food Institute says food-away-from-home spending climbed significantly in 2014; Sam Fox to introduce concept No.16 – Doughbird; and Chipotle makes the news with three different stories.
Deloitte, the giant consulting, accounting and research firm, released a report on the restaurant of the future and the next-generation customer experience. The study’s authors believe new technology can have a tremendous impact on dining frequency, check size, customer conversion and loyalty, but also stress the fundamentals – menu, value and location – are still paramount to customer attraction and satisfaction.
As a bit of background, the study surveyed 4,500 restaurant customers, interviewed more than 20 restaurant executives and included a roundtable forum of restaurant brand leaders.
While lots of industry discussion centers on Millennials, this group represents more than a demographic. They are a mindset, too, per Deloitte. Millennials are 6 percent more likely to come back to a place that allows them to use technology to place an order and spend 20 percent more when they come back. They want to visit restaurants that send personalized offers to contact them. Millennials want to feel a restaurant knows them. They see themselves as time strapped and will use any technology that helps them save time.
Technology in the restaurants of tomorrow includes equipment with sensors that issues maintenance and service alerts, 3D printing of food and artificial intelligence that can anticipate traffic flow and schedule the workforce more efficiently. Self-driving vehicles could have a significant impact on the amount of beverage alcohol a foodservice operation will sell.
Economic News This Week
- Initial jobless claims fell to 259,000, a decline of 4,000 for the week ending Sept. 3. The 4-week moving average was 261,250, a decline of 1,750 claims. The historically low number of jobless claims shows no cause for alarm regarding the labor market.
- The Institute for Supply Management’s Non-Manufacturing ISM Report On Business retreated in August but stayed in positive-growth territory. Service businesses continue to expand, but at a much slower rate. The index read 51.4 in August, down from 55.5 in July. The New Orders Index fell to 51.4 percent, a decline of 8.9 percentage points. The Backlog of Orders Index declined 1.5 percentage points, falling into contraction mode at 49.5 percent. The Employment Index declined 0.7 percentage points but managed to stay in expansion mode at 50.7 percent. Of the 18 industries studied by the ISM, 11 reported growing in August, with Accommodation & Foodservice posting the third highest growth rate.
- The Federal Reserve reported consumer credit increased 5.8 percent in July at an annual rate. Revolving credit – mostly credit cards – grew 3.4 percent, which is a relatively low rate. Non-revolving credit – car loans, student loans, etc. – grew at an annual rate of 6.7 percent.
- The Gallup Organization’s U.S. Economic Confidence Index remained stable, staying at minus 12 for the third week in a row. Gallup interprets the index as staying “relatively calm since mid-summer of 2015 …” The index shows 12 percent more of U.S. consumers think economic conditions are poor than who feel things are in excellent or good shape. Gallup began this survey in 2008 and with the exception of a couple of weeks in January 2015 the index has always been below zero.
Foodservice News This Week
- Consumers’ spending for food away from home increased by $162 in 2014, according to a major study by the Food Institute.
- Fox Restaurant concepts will introduce Doughbird, a new concept, in February in Phoenix. The causal full-service restaurant will have a seasonal rotation of 12 to 15 pizzas and 3 flavors of rotisserie chicken. Doughbird is the 16th concept Sam Fox has created, 2 of which – True Food Kitchen and Culinary Dropout – are being expanded nationally.
- Chipotle Mexican Grill will test delivery via drones to the Virginia Tech campus. The program will run in conjunction with Project Wing, a division of Alphabet Inc., Google’s parent company. The test will take place from a food truck to assure order accuracy and safety and has been approved by the Federal Aviation Administration.
- Chipotle has settled more than 100 claims related to the outbreak of foodborne illness. Most of the claims had never been filed in courts and all had been verified by medical tests. One observer termed Chipotle’s handling of the problem as a textbook example of how to deal with food safety claims.
- Chipotle offers free food to children and students, leading some observers to conclude that the chain is trying to distract attention from a class action lawsuit charging employees were forced to work off the clock without pay, as well as the much-publicized foodborne illness issue. One source called the timing of the discount promotions a coincidence, noting that these programs are set as far as a year in advance.
- Corporate Stirrings: Wetzel’s Pretzel’s has been purchased by private equity firm CenterOak Partners. This closes out the ownership in Wetzel’s by Levine Leichtman Capital Partners, which sold their interest for seven times their original investment made in 2007. Hedge fund Pershing Square disclosed thru a regulatory filing the investment firm has taken a very substantial stake of 9.9 percent in Chipotle Mexican Grill. Pershing Square’s CEO, Bill Ackman, is now the second largest stockholder in Chipotle and is seeking talks with the company. One Wall Street analyst said Chipotle’s priority need was to increase sales and wondered what Ackman’s plans were to increase sales volume. He also speculated that Ackman may zero in on the hefty compensation earned by Chipotle’s senior management. Cicis announced that the pizza buffet chain has been acquired by the Arlon Group. Velvet Taco received a “significant” strategic growth investment from L Catterton, the largest consumer-focused private equity firm in the world. Terms of the investment were not disclosed. Jimmy John’s Sandwiches has sold a majority stake in the chain to Atlanta-based Roark Capital Group. Jimmy John’s founder Jimmy John Liautaud, who has frequently discussed taking the restaurant company public, will remain as CEO. Zio’s Italian Kitchen filed for Chapter 11 bankruptcy. Headquartered in Dallas, the chain will close 5 of its 15 restaurants and will evaluate the others. Zio’s bankruptcy attorney said that “distress in the oil and gas industry” has exacerbated downward sales trend at causal restaurants. MTY Food Group, headquartered in Montreal, has announced the acquisition of BF Acquisitions Holding LLC, owner of Baja Fresh Mexican Grill and La Salsa Fresh Mexican Grill for $27 million cash. MTY purchased Kahala Brands last month.
- Growth Chains: Ray’s Fish & Chips is opening its second restaurant and plans to add four or five more via franchising in the Central Florida area. Cicis will open 70 restaurants by the end of 2017. Newk’s Eatery will open as many 30 restaurants in Florida in the next 5 years. Baskin Robbins signed a multi-unit development agreement for 3 stores in the L.A. area in the next few years. Chipotle Mexican Grill will open 4 restaurants in the Baltimore area. Bosporus Turkish Cuisine is building a commercial kitchen and commissary to support the company’s 2 restaurants in the Orlando area. The chain has a third restaurant under construction in the area and plans to bring more on line “pretty quickly.” Friendly’s will open 4 restaurants a year in 2017 and 2018. Papa John’s will open 60 restaurants in Mexico in the next 8 years.
- Comparable Store Sales Reports: Dave & Buster’s up 1.0 percent
For details and same-store sales of other chains, see the Green Sheet.