The Restaurant Performance Index improved in May. Gross Domestic Product for the first quarter was revised upward. Foodservice operators continued to hire in June. Two of the three largest foodservice distributors saw sales growth last year. A pizza restaurant develops robots for the kitchen. These stories and a whole lot more This Week in Foodservice.

The National Restaurant Association’s May Restaurant Performance Index increased 0.6 percent for a reading of 100.9.

The Current Situation Index increased a full percentage point, just enough to move the Index into expansion territory with a reading of 100.2. More operators reported improved same-store sales in May 2016 and fewer reported lower same-store sales from a year ago. In addition, more operators reported same-store growth (36 percent) than lower same-store sales (41 percent). May traffic counts followed a similar pattern.

The Expectations Index, the other part of the RPI, inched up 0.2 percent for a final reading of 101.7.

Operators continued to reinvest in their businesses with 62 percent reporting they made a capital expenditure in the past 3 months for equipment, expansion and/or remodeling. This is virtually the same as the 61 percent who reported they had spent on the same areas in April. And 64 percent of operators said they plan to make capital expenditures in the next 6 months, up 8 percent compared to April.

Economic News This Week

• Real Gross Domestic Product increased 1.4 percent on an annual basis for the first quarter according to the Bureau of Economic Analysis’ third estimate. This is up from 1.2 percent in the Bureau’s second estimate and double the advance estimate of 0.7 percent.
• Initial-jobless claims climbed 4,000 for a final reading of 248,000 for the week ending July 1. The 4-week moving average rose 750 for a final reading of 243,000.
• Personal income increased 0.4 percent in May compared to April according to the Bureau of Economic Analysis. But consumers kept much of their increased earnings to themselves as personal expenditures rose just 0.1 percent.
• Sales of automobiles and light trucks fell 2.9 percent in June. Observers noted the volume decline has been primarily in fleet sales (government, commercial buyers, car rental companies, etc.) which are down 7.8 percent in the first 6 months of this year, while retail sales are down about 1.0 percent. Most auto experts don’t expect to reach the total of 17.55 million vehicles sold last year.
• Factory orders for durable goods declined in May. Shipments and Unfilled orders also declined.
• The Chicago Production Manufacturing Index climbed 6.4 Points in June for a final reading of 65.7. This is the highest level for the index in three years. (Any number that exceeds 50 indicates growth.) Order Backlogs jumped to reading not seen since 1994. Only the Employment Index retreated, dipping to 56.6 in June compared to 57.1 in May.
• The Institute for Supply Management’s Production Manufacturing Index posted a reading of 57.8 in June, a 2.9 point increase compared to May. (Any reading that exceeds 50 shows expanding activity.) This is the 97th consecutive month of manufacturing expansion. The New Orders Index increased 4.0 points for a final reading of 63.5. The Production Index rose 5.3 points to a final level of 62.4. The Employment Index read 57.2, an increase of 3.7 points.
• The Institute for Supply Management’s Non-Manufacturing Index read 57.4 in June, a 0.5 percent increase compared to the previous month. This represents the 90th consecutive month of growth for the service segment. (Any number greater than 50 indicates increasing activity.) The New Orders Index rose 2.8 points for a final reading of 60.5. In contrast, the Employment Index fell 2.0 points for a final reading of 55.8 and the Order Backlog Index fell 4.5 points for a final reading of 52.5. Of the 18 service industries surveyed by the Institute, 16 reported growing in June including Accommodations & Foodservices, which was fifth in growth.
• May construction spending was virtually identical with April’s spending. May spending declined 0.6 percent from May of last year. Private construction spending was down 0.6 percent from April while residential construction spending was also down 0.6 percent from April.
• ADP’s June National Employment Report showed an increase of 158,000 new jobs in the private sector. This is considerably below average for the year to date and down from 230,000 jobs added in May. The report showed an increase of 11,000 in the leisure and hospitality sector.
• The Bureau of Labor Statistics reported the U.S. economy added 222,000 new jobs in June. The numbers were helped by government entities hiring 35,000 people. April payrolls were revised up to +207,000 and May payrolls were revised up to 152,000. The unemployment rate ticked up to 4.4 percent, an increase of 0.1 percent compared to May. The increase was in large part due to more people joining the workforce.
• The Conference Board Consumer Confidence Index increased 1.3 percent in June. The Index is now at 118.9 up from 117.6 in May. The moderate rise in June followed a small decline in May and the Index now sits near a 16-year high. The Present Situation Index increased to 146.3 from 140.6 in May but the Expectations Index dropped from 102.3 in May to 100.6.
• The University of Michigan Consumer Sentiment Index posted a June reading of 95.1, a decline of 2.1 percent compared to May. The Current Economic Conditions Index edged up 0.7 percent for a reading of 112.5 while the Index of Consumer Expectations fell 4.3 percent to a level of 83.9. The “partisan divide” still exists with Republicans much more optimistic about the future of the economy than Democrats.

Foodservice News This Week

• Foodservice hiring remained strong in June with the Bureau of Labor Statistics reporting operators added 29,300 new employees. This means that the foodservice industry was responsible for approximately 15 percent of all the new jobs in the private sector in the U.S. last month.
• Technomic reports sales among the top 50 broadline foodservice distributors grew 3.1 percent last year. The 3 largest broadliners (Sysco, US Foods and Performance Food Group) accounted for more than 60 percent of the top 50 sales. Sysco sales grew 4.1 percent, Performance Food Group sales grew 5.5 percent while US Foods sales fell 0.9 percent.
• Zume Pizza uses robots in the kitchen. The Mountain View, Calif., company has a robot that presses the dough into a circle, another that squirts on the sauce, a third that spreads the sauce and one that puts the pie in the oven. The company so far has found humans are better at some jobs, such as adding toppings. Zume plans is to use oven equipped trucks to bake and deliver more than 200 pies a day.
• Darden posted strong results for its fourth quarter of its 2017 fiscal year. The company saw both comparable-store sales and total-dollar sales increase for most of the company’s concepts in the quarter ending May 28. For the corporation, comp sales grew 3.3 percent while total sales rose 8.1 percent. Olive Garden showed a 2.6 percent increase in dollar sales with comps up 4.4 percent. LongHorn experienced a 1.2 percent increase in dollar sales while comparable store sales rose 3.5 percent. Yard House dollar sales declined 0.2 percent (the only concept that had a sales decline) although comp sales inched up 0.1 percent. Seasons 52 had a 1.3 percent decline in comparable-store sales with flat dollar sales. (For more information on Darden’s performance, please the Green Sheet below.)
• Millennials are not supposed to favor casual restaurants but Darden’s CEO said 30 percent of Olive Garden’s customers come from this demographic.  He also said the recently acquired Cheddar’s operation also “over indexes.”
• How do restaurants compare to other industries in terms of number of retail locations? According to the National Retail Federation, restaurant chains occupy the top three spots when ranking the companies with the most locations. Subway is first, followed by YUM! Brands and McDonald’s. (It’s not clear whether the study treats Yum! Brands’ KFC, Pizza Hut and Taco Bell as one entity.) Dollar Tree and Dollar General follow, occupying the fourth and fifth spots. Then it’s back to foodservice with Starbucks at number six and Dunkin’ Brands at number seven.
• Online grocery shopping will drive meal kit sales according to The NPD Group. NPD acknowledges only 5.0 percent of U.S. households use meal kits but the research firm sees young adults, particularly men, as prime customers for both online grocery shopping and meal kits. A single web site can meet the customers’ need for convenience with a fresh meal that can be prepared at home.
• Growth Chains: Bar Louie plans to open 59 restaurants in California starting with 1 each in San Diego county and Los Angeles county as well as “key locations in Northern California.” The Duck Donuts franchisee in central Florida has opened its first location and plans to open three more. Pie Five Pizza plans to open two restaurants in New Jersey with other units to follow in the region. The Quick Trip c-store chain plans to open 100 stores in Austin and San Antonio. Lenny’s Grill & Subs plans to open 6 restaurants this year, 15 to 18 next year and to have double the chain’s current number of 95 restaurants in 5 years. Subway will add 500 locations in the UK and Ireland in the next 3 years. Bruster’s Real Ice Cream has signed an agreement with a franchisee for 3 stores in Memphis plus units in Jackson, Tennessee and Tupelo and Oxford, Miss.
• Comparable Store Sales Reports: Darden (All brands up 3.3 percent, Bahama Breeze up 1.4 percent, Capital Grille up 0.5 percent, Edie V’s up 3.3 percent, LongHorn up 3.5 percent, Olive Garden 4.4 percent, Seasons 52 down 1.3 percent and Yard House up 0.1 percent.) and YUM! China (KFC up 4.4 percent & Pizza Hut flat.)

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