The National Restaurant Association’s Restaurant Performance Index hit 101.3 in April, a decline of 0.5 percent. Declines in customer traffic and same-store sales drove the study’s Current Situation Index to 101.8, a decline of .9 percent. The Expectations Index also declined, but just by 0.1 percent.
One positive note from the survey was that operators were increasingly optimistic about the future: 47 percent predict sales will increase in the next 6 months vs. just 7.0 percent who project a decline.
Looking at operators’ willingness to invest in their businesses, 67 percent report making a capital expenditure for equipment, expansion and/or remodeling in the last 3 months, compared to 61 percent in March.
As for investing in the future, 59 percent plan to spend on equipment, expansion and/or remodeling in the next 6 months vs. 63 percent who reported similarly in the March survey.
In summary, despite some slipping backward, the index remains greater than 100, indicating the industry continues in an expansion mode.
Economic News This Week
- The Commerce Department’s second estimate for Gross Domestic Product for the first quarter of 2018 was revised down to +2.2 percent. The Department’s advance estimate was +2.3 percent. In the fourth quarter of 2017 Gross Domestic Product rose 2.9 percent.
- Initial-jobless claims fell to 221,000, a decline of 13,000 for the week ending May 26. The 4-week moving average rose to 222,250, an increase of 2,500. The closeness of last week’s number of claims and the 4-week moving average indicates very little volatility in initial jobless claims.
- ADP reported U.S. employment rose by 178,000 in May. The Payroll processing company said the leisure and hospitality sector added 33,000 new jobs for the month. Midsize companies (those with 50 to 499 employees) accounted for about half of the new hires.
- Employment increased by 223,000 in May, per the Bureau of Labor Statistics. This marks the largest increase in 3 months. Unemployment fell to 3.8 percent, the lowest unemployment rate in 18 years. Unemployment among women fell to 3.6 percent, the lowest unemployment since 1953 when there were far fewer women in the workforce.
- Personal income increased 0.3 percent in April according to the U.S. Commerce Department. The Commerce Department also reported personal consumption expenditures increased 0.6 percent.
- New vehicle sales increased 4.7 percent in May due to strong light truck demand. SUV sales were also up substantially. Despite expert’s predictions that sales would fall from 2017, sales volume is up 1.2 percent in the first 5 months of 2018.
- The Chicago Business Barometer hit 62.7 in May, an increase of 5.1 points. (Any reading that exceeds 50 indicates expansion.) Both production and new orders increased. Unfilled orders surged while the employment indicator bounced back from a 6-month low in April.
- Construction spending in April rose 1.8 percent over March on a seasonally adjusted annual basis. Compared to April last year, construction spending was up 7.6 percent. Residential construction spending in April was up 4.5 percent from March.
Foodservice News This Week
- Foodservice and drinking place employment increased 17,600 in May, per the Bureau of Labor Statistics. This accounts for 8.0 percent of the May increase in U.S. employment.
- Chipotle adds drive-thru windows – with a twist. Chipotle Mexican Grill already installed a few drive-thru windows – two in Ohio and at restaurants in Tennessee, Texas and Massachusetts. More are on the way. What makes Chipotle unique is that customers cannot order food via the drive-thru. Customers must place their orders through Chipotle’s app or online and can pick up their food via the drive-thru. The chain believes convenience is critical and drive-thru pickup will increase sales.
- Zoes Kitchen will slow its expansion. The chain’s CEO did not provide a specific plan as far as adding units but added that the company will conduct a thorough review of its underperforming restaurants. This might indicate that Zoes’ will close some of its restaurants. The president said he believes delivery and discounting has created headwinds for the entire restaurant sector. Zoes’ recently reported soft financials for the last quarter including a 2.3 percent decrease in comparable store sales. More on Zoes: The chain’s new design and open kitchen; and a 2016 Q&A with Zoes Kitchen CEO Kevin Miles.
- Bravo Brio’s new owner plans to invest “millions and millions” in the chain. Veteran restaurateur Brad Blum is collaborating with Brazilian-based GP investments to form a new firm called FirstFood Global to run the company. He will invest in better quality food, employee straining and remodeled restaurant.
- Starbucks’ image has taken a beating as a result of the racial incident in one of its Philadelphia locations. Surveys regarding the coffee chain’s Workplace Reputation, Purchasing Consideration and Buzz score all plunged.
- Corporate Stirrings: The Burns Oil Company sold its 12 c-stores in southern Mississippi to Keith’s Superstores. Keith’s has 41 locations in Southern Mississippi as well as running a wholesale petroleum and transportation business. Price of the acquisition was not given in the press release. Arby’s Restaurant Group Inc. acquired 40 restaurants from Grant Avenue Development, an Arby’s franchisee with units in New York, Pennsylvania and Virginia. Arby’s plans to retain the restaurants and remodel these locations in the future. The price of the acquisition was not revealed in the press release.
- Growth Chains: The Yesway C-store Chain now has more than 100 locations after the purchase of 11 Pick-A-Dilly stores and continues to strive to reach their goal of 500 stores in the next several years.
- Comparable Store Sale Reports: Freshii up 1.6 percent, Habit Burger down 1.4 percent and Steak N Shake down 1.7 percent.
For details and same-store sales reports on other chains, please click here for the Green Sheet.