This Week In Foodservice

Jerry Stiegler aggregates key industry information and provides brief analysis to help foodservice professionals navigate the data.


This Week in Foodservice

Two Burger Chain IPOs, McDonald’s Updates McCafe, Cracker Barrel’s Recovery Teams in Action and Kroger to Open its First Restaurant

Two burger chains prepare initial public offerings. Cracker Barrel’s recovery teams have restaurants affected by the hurricane up and running. The rule that effectively doubled the salary level of employees who were exempted from overtime pay appears dead. McDonald’s updates McCafe. These stories and a whole lot more This Week in Foodservice.

Fat Brands, owner of the 160 Fatburger restaurants, filed paperwork with the Securities and Exchange Commission for an initial public stock offering. The company wants to raise $24 million to buy the Ponderosa and Bonanza steak chains, retire debt and finance expansion. Seventeen-unit Bobby’s Burger Palace, owned by celebrity chef Bobby Flay, wants to raise up to $15 million for expansion. The company has yet to file any paperwork with the government agencies and other details are not yet available.

Both restaurant chains plan to go public under federal rules called Regulation A, which are designed for small companies.

Some in the financial community seem cautious if not outright unenthusiastic. One executive at an investment advisory firm pointed out that fast-casual restaurant firms that have gone public have “really underperformed.” Two better-burger chains that went public fairly recently seem to have challenges. Shake Shack, for example, reported its comparable store sales declined by 1.8 percent in its last fiscal quarter while Habit Burger’s comp sales rose 0.1 percent.

One school of thought says restaurants should not be publicly held at all. The theory is that the restaurant business has some unique constraints that make it difficult to provide the constant stream of increasing profits that Wall Street favors. It is a complex matter but many chains have been successful as private entities. Perhaps the classic example of this is Dairy Queen.

Economic News This Week

  • Initial-jobless claims shot up by 62,000 to a final level of 298,000 for the week ending Sept. 2. This is the highest number of claims filed since April 2015. The 4-week moving average rose 13,500 to a level of 250,250. The large jump in claims took observers by surprise but most took a wait-and-see approach. One economist speculated that the number of claims reflected the end of summer jobs at resorts and other seasonal employers. The Department of Labor methodology supposedly adjusts for these factors.
  • The Institute for Supply Management’s Non-Manufacturing Index increased 1.4 percent in August for a reading of 55.3. (Any number that exceeds 50 indicates expansion.) The New Orders Index grew by 2.0 points for a final reading of 57.1 while the Employment Index rose 2.6 percentage points for a final reading of 56.2. Of the 16 non-manufacturing industries studied, 15 reported growing in August, including the Accommodations & Foodservices sector.
  • The Institute for Supply Management reports on the impact of Hurricane Harvey. The institute did a special survey the end of August and found its members expressed concerns about how Harvey would affect their businesses, primarily in the areas of materials delivery and prices. The respondents also believe that Harvey’s impact could be felt as long as 6 months after the hurricane.
  • Labor productivity increased 1.5 percent in the second quarter of this year. The Bureau of Labor Statistics reported that output grew 4.0 percent while the number of hours worked rose 2.5 percent. Unit labor costs increased 0.2 percent as hourly compensation rose 1.8 percent and productivity grew 1.5 percent.
  • New orders for manufactured goods declined 3.3 percent In July. Shipments increased 0.3 percent while unfilled orders fell 0.3 percent. This is from the U.S. Census Bureau’s full monthly report for the month. 

Foodservice News This Week

  • The Federal Overtime Rule appears to be dead. A federal judge struck down the rule and the U.S. Justice Department has announced it will not appeal the decision. The rule doubled the salary level that employees had to make to be exempt from overtime pay. It’s important to note this was a rule — not a law — issued by the U.S. Department of Labor during the Obama administration.
  • McDonald’s relaunched its McCafe concept with a sleek, modern appearance. The new store will offer new espresso beverages using new coffee equipment and will have expanded retail offerings.
  • The Kroger Company will open its first restaurant. The largest traditional grocery chain in the U.S. will call the concept Kitchen 1883, which refers to the year the company was founded. The grocer will locate the restaurant in a Kroger Marketplace outlet in Union, Ky. The company did not provide details about the type of operation.
  • Corporate Stirrings.Burger King’s largest franchisee outside of the U.S., TFI TAB Gida Yatirimlari AS, plans an initial public stock offering on the New York Stock Exchange. Headquartered in Turkey, TFI TAB Gida Yatirimlari AS serves as the Burger King franchisee for Turkey and China. Bloomberg says that political turmoil in Turkey over the last 3 years has led to Turkish firms opting for overseas stock listings.
  • Growth Chains: Dickey’s Barbecue Pit will open three restaurants in New Mexico. Dave & Buster’s will open 10 large and 4 small operations this year. The Altamara Group will bring its Marea concept to Shanghai. The Condado Taco chain will expand to Cincinnati, Indianapolis and Louisville. Casey’s General Store increased its plans for new stores and will now build or acquire 90 to 120 locations in 2018. Whimsy Cookie Company, with 1 store currently, plans to have  14 open by the end of 2018 and has its sights set on 50 locations. Pie Five Pizza has opened their first restaurant outside the U.S. It is in Pakistan and Pie Five plans on having 40 locations in that country.
  • Comparable Store Sales Reports: Casey’s General Store up 3.7 percent and Dave & Buster’s up 1.1 percent.

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