Same-store sales increased 1.6 percent in June for the 50 casual dining restaurant chains that participate in the Knapp-Track Report, a study conducted by Malcolm Knapp. It is important to note that comp sales were down 0.9 percent in all of 2017. Knapp attributes the improvement is due to slower unit growth, an improved job picture and a modest improvement in income growth.

Looking ahead, Knapp believes comparable sales will rise 1.0 percent in 2018.

The family-dining sector saw a greater slowdown in May compared with casual restaurants, Knapp adds. Sales at family-dining chains remained slow in June, which is in contrast to casual dining. He expects economic headwinds will affect older consumers, which will limit eating out at family-dining operations.

Knapp’s information is courtesy of Bank of America Merrill Lynch.

Economic News This Week

• Initial-jobless claims totaled 207,000, a decline of 8,000 for the week ending July 14. This is the lowest number of first-time claims since Dec. 6, 1969, when the labor force was much smaller, per The Department of Labor. The 4-week moving average declined by 2,700 to a final level of 220,500.
• The Empire State Manufacturing Survey edged down by 2.4 points in July but still shows continuing robust growth with a final reading of 22.6. (Any number greater than zero indicates growth.) The New Orders Index fell 3.1 points to a level of 18.2. The Shipments Index fell 8.9 points to a level of 14.6. The Unfilled Orders Index was flat. The Number of Employees Index declined 1.8 points.
• The Philadelphia Federal Reserve Manufacturing Business Outlook Survey showed continuing expansion in July with the Index up 6 points. The New Orders Index rose 14 points after falling 23 points in June. The Current Shipments Index fell 4 points. The Current Employment Index dropped 14 points to 16.8. (Any reading greater than zero indicates expansion.) The Average Work Week Index fell 11 points.
• Industrial production increased 0.6 percent in June after falling 0.5 percent in May. Manufacturing output rose 0.8 percent, mining output rose 1.2 percent while utility output moved down 1.5 percent. The Federal Reserve also reported that Capacity Utilization for the industrial sector increased 0.3 percentage point in June to 78.0 percent, a rate that is 1.8 percentage points below its long-run (1972-2017) average.
• June housing starts declined 12.3 percent from May, per the Commerce Department. In addition, June starts were down 4.2 percent compared to the same month in 2017. Single-family housing starts fell 9.1 percent. The number of building permits issued declined 2.2 percent from May and were down 3.0 percent from June 2017. The number of single-family permits issued rose 0.8 percent.
• The Conference Board’s U.S. Leading Economic Index increased 0.5 percent in June. The Index now stands at 109.8 (2016 = 100). The Board states that the June increase points to “continuing solid growth in the U.S. economy.”

Foodservice News This Week

• Reports say Papa John’s and Wendy’s had merger talks. However, John Schnatter’s, Papa John’s founder, recent racially insensitive comment and his trouble with his board of directors may have cooled the merger talks.
• McDonald’s and Starbucks join together to build-a-better cup. The giant restaurant chains, direct competitors in the beverage business, have challenged entrepreneurs to come up with a fully recyclable, compostable cup. And, they want it in the next three years. Called the NextGen Cup Challenge, the program will have a six-month accelerator phase with those accepted into the program receiving $1 million.
• Potbelly will introduce new and more interesting sandwiches. The chain’s new CEO also wants to come up with different names to set the new menu items apart from competing sandwich shops. He admitted the menu was too big and that the chain expanded too quickly into too many markets.
• A Labor Board judge overturned McDonald’s proposed settlement of alleged labor law violations by the chain’s franchisees. Part of the settlement dealt with the “joint employer” issue. McDonald’s is weighing whether to appeal the ruling to the full NLRB.
• Reinhart Food Service plans to expand its Bowling Green, Ky., distribution center. Reinhart, a division of Reyes Holdings, will invest $14.2 million to add 75,000 square feet to the facility. Reinhart delivers 170 million cases of food and foodservice products annually to customers in 34 states.
• Starbucks will open a location that has employees trained in American sign language. The employees at this new store in Washington, D.C., will all be deaf or partially deaf and be able to communicate with the hearing impaired. Starbucks gave no indication if the coffee giant plans more of these units.
• Corporate Stirrings: Luby’s plans to close more restaurants in order to generate cash to pay down debt. Earlier this year the chain announced the closing of 14 locations but did not announce how many more units would be sold now. Krispy Kreme plans to purchase Insomnia Cookies. Philadelphia-based Insomnia Cookies is known for the delivery of cookies and brownies as late as 3 a.m. Merrill Lynch downgraded YUM China stock from “Neutral” to “Underperform” because on their judgement “KFC is likely to peak out and Pizza Hut still not an easy fix.”
• Growth Chains: Salad Works opened a restaurant in Atlanta and plans to add at least 12 more in the next 3 years. Bad Daddy’s Burger Bar will have 35 locations by the end of this year and plans to open 8 to 10 units per year.
• Comparable Store Sales Reports: Domino’s Pizza (U.S. system up 6.9 percent, company owned up 5.1 percent and franchised up 7.0 percent ), Noodles & Company (system up 5.4 percent, company owned up 5.0 percent and franchised up 5.4 percent) and Sonic Drive Ins. (System down 0.2 percent, company owned up 0.2 percent and franchised down 0.2 percent).

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