Malcolm Knapp sees some positive signs for casual dining chains. The number of chain coffee shop units continue to grow. Weeks after the hurricanes, some restaurants remain closed. The Tilted Kilt unveils two new designs. These stories and more This Week in Foodservice.

Sales at casual dining restaurant chains showed a modest improvement in September, according to the Knapp Track Report. Same-store sales declined only 1.1 percent. In August, same-store sales for the 50- plus casual chains that participate in Knapp-Track were down 2.1 percent.

Malcolm Knapp, the report’s author, reported that September sales data was affected by what he termed “hurricane noise.” Back out the second week of the month – the week Irma hit Florida – and restaurant sales would have increased 0.2 percent, according to Knapp. He believes there could be pent up demand in Florida and Texas that results in positive comps in October, noting that Texas and Florida represent 23 percent of industry sales.

Knapp continues to believe that political uncertainty remains a drag on consumers. He also sees increased September auto sales, perhaps due to the replacement of hurricane-damaged cars, which may have a negative effect on consumer spending in the Houston area.

Malcolm Knapp’s information is courtesy of Bank of American Merrill Lynch. 

Economic News This Week

• Initial-jobless claims fell by 22,000 to a level of 222,000 for the week ending Oct. 14. The 4-week moving average fell 9,500 for a final reading of 248,250. The Department of Labor reports processing claims in Puerto Rico and the Virgin Islands remains difficult due to severe hurricane damage.
• Industrial production increased 0.3 percent in September according to the U.S. Federal Reserve Bank. The Manufacturing output index increased 0.1 percent, the mining output index rose 0.4 percent and the utilities index climbed 1.5 percent. However, all three indexes were revised down significantly for both July and August. The report also stated that the effects of Hurricane Harvey and, to a lesser extent, those  of Hurricane Irma, held down September production by 0.25 percent. Capacity utilization for the industrial sector increased 0.2 percentage points in September to 76.0, a rate that is 3.9 percentage points below its long-run (1972-2016) average.
• The Empire State Manufacturing Survey reported expansion at a “robust pace” in October. The New York Federal Reserve reported the headline index rose 6 points to a level of 30.2, its highest reading in 3 years. The New Orders Index fell 6.9 points but still showed expansion at a level of 18.0. (Any reading that exceeds zero indicates growth.) The Shipments Index increased an impressive 11.3 points for a reading of 27.5. The Unfilled Order Index fell 6.6 points for a reading of 2.3. The Number of Employees Index rose 5.0 points for a reading of 15.6 but the Average Employee Work Week Index was flat.
• The Philadelphia Federal Reserve Manufacturing Business Outlook Index totaled 27.9, an increase of 4 points. This represents its highest reading since May. (Any reading that exceeds zero indicates growth.) Both the New Orders Index and the Shipments Index declined but stayed in positive territory. The Current Employment Index gained 24 points to a record high of 30.6.
• New residential construction slowed in September with the number of housing starts falling 4.7 percent from August. But, this was a 6.1 percent increase from September of last year. The number of single family housing starts declined 4.6 percent from August. The number of building permits issued dropped 4.5 percent from August and 4.3 percent from September 2016. But Single Family permits rose 2.4 percent from August.
• Existing home sales increased 0.7 percent to a seasonally adjusted annual rate of 5.3 million. The slight increase follows three months of sales decline. The National Association of Realtors says that the limited number of homes for sale, along with disruption by hurricanes and wild fires, hurt the existing home despite “… considerable buyer interest in most parts of the country.”

Foodservice News This Week

• The number of coffee shops in the U.S. grew by 2.0 percent this year, according to the NPD Group’s ReCount Study. Chain coffee shops increased 5.9 percent but independent coffee shops declined by 2.0 percent. The highest density of coffee shops were in Juneau, Alaska, with sister city Anchorage coming in second.
• Weeks after the hurricanes hit, some Houston restaurants still aren’t open. Operators in the affected areas face a variety of problems. Some who were not in flood plains were flooded anyway. Some with property insurance didn’t have business interruption insurance or if they did, it was insufficient. In some cases, the insurance companies have been slow to settle claims.
• Tilted Kilt opens two new prototypes. One is a traditional 6,500-square-foot setup while the other is a 4,800-square-foot design aimed at smaller markets. A new look features a brighter appearance throughout and includes redesigned kitchens that improve work flow. Tilted Kilt also plans to pursue banquet and catering business.
• Sysco plans to purchase HFM FoodService, a Hawaii-based distributor with operations on all four major Hawaiian islands and Guam. HFM’s current management and staff will be retained. Price of the acquisition was not revealed.
• Romano’s Macaroni Grill filed for bankruptcy. The focus of the Chapter 11 action, according to current CEO Nishant Machado, is to negotiate lower lease rates for 37 closed restaurants. At one time, Macaroni Grill was the hottest chain in the country but has gone through numerous owners in the last decade. The current owner, Red Rock, purchased the chain for just $8 million in 2015 from Ignite Restaurant Group, which had purchased it 2 years earlier from Golden Gate Capital for $55 million.
• Growth Chains: Arby’s has signed development agreements with 2 franchisees for a total of 25 restaurants to open over the next 5 years in the Chicago area. Denny’s has signed an agreement for 10 restaurants in the U.K. TelePizza’s Russian franchisee has converted 15 stores of a local franchisee in St. Petersburg to the TelePizza brand and plans on opening 16 additional locations in Northwest Russia over the next 3 years. TelePizza also announced a joint venture agreement with Forty Pizza, the leading pizza delivery company in the Czech Republic that will convert Forty’s stores to TelePizza operations. In addition, TelePizza plans to open 25 stores in the next 3 years in the Czech Republic. Denny’s has signed a franchise agreement for 10 restaurants in the U.K. Krave Kobe Burger Grill, with 2 units in Southern California currently, plans to open 10 more next year and have 60 locations by 2020. Domino’s Pizza has purchased the 17-unit Hallo Pizza in Germany and will convert them to the Domino’s brand. Sbarro plans to open 30 locations in Romania.
• Comparable Store Sales Reports: Del Taco up 4.1 percent and Sonic Drive Ins (System down 3.3 percent, company owned down 4.8 percent and franchised down 3.2 percent).

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