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

July U.S. Restaurant Sales Gain, New McAlister’s Deli Prototype and More Delivery Service Announcements

The U.S. Census Bureau’s advance monthly retail sales report showed total retail sales increased 0.5 percent in July over June and were up 6.4 percent over July 2017. For the first 7 months of this year total retail sales rose 5.5 percent. But, the bureau revised the advance June sales figure down to a mere 0.2 percent increase. The original report had total retail sales up 0.5 percent in June over May.

The advance sales report put July restaurant and drinking place sales at 1.3 percent over June and increasing 9.7 percent over July of last year. For the first 7 months of this year, foodservice and drinking places sales rose 5.5 percent. The advance report for foodservice sales for June were up to 1.6 from the 1.5 percent increase in the advance report.

So far this year only one month — March — saw a decline in restaurant sales vs. the previous month.

There are limitations and cautions with this report. The Census Bureau labels the data and an “advance” report as it is based on a small initial sample which is subject to revision when there are more responses to the survey. Note the change in restaurant sales in September outlined above.

The Census Bureau only surveys restaurants and drinking places. A significant part of the foodservice industry is not included. Not surveyed are hotels, motels, resorts, retailers (supermarkets, convenience stores, etc.) employee feeding, healthcare, K-12 schools, colleges and military feeding.

Some of the sales figures are adjusted for holidays, weekends and other seasonal variations but none of the data is adjusted for menu price changes.

Economic News This Week

  • Small business optimism came within 0.1 point in July. The National Federation of Independent Business reported the Small Business Optimism Index was 107.9 last  month, right below the highest reading of 108 in the 45-year history of the study. A spokesman for the Federation stated small business owners have never been so optimistic for so long before, which he believes is powering the second-longest economic expansion in U.S. history. Small business folks cited the availability of qualified workers as their No.1 problem.
  • Initial jobless claims fell by 2,000 to 212,000 for the week ending August 11 from the previous  week. The 4-week moving average increased by 1,000 to 215,500. This report continues to indicate a very healthy labor picture.
  • The U.S. Federal Reserve reported industrial production increased by 0.1 percent in July after rising at an average of 0.5 percent over the previous 5 months. Manufacturing production rose 0.3 percent but mining fell 0.3 percent and utilities fell 0.5 percent. Capacity utilization in July was unchanged from June at 78.1 percent, a rate that is 1.7 percentage points below its long run (1972-2017) average.
  • Labor productivity increased 2.9 percent in the second quarter this year according to the Bureau of Labor Statistics. This is based on output rising 4.8 percent and hours worked rising 1.9 percent. Unit labor costs decreased, reflecting a 2.0 percent increase in hourly compensation and a 2.9 percent increase in productivity.
  • The Empire State Manufacturing Survey index hit a 10-month high in August. The Federal Reserve Bank of New York reported the index rose 3.0 points from July to 25.6. (Any reading above zero indicates increasing activity.) The New Orders Index fell slightly, declining 1.1 points to 17.1. The Shipments Index jumped 11.1 points to 25.7. The Unfilled Orders Index increased 11.1 points from zero in July. The Number of Employees Index fell 4.1 points while the Average Work Week Index increased 3.3 points to 8.9.
  • The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey weakened in August with the major index falling 14 points. But while all the indicators (new orders, shipments, unfilled orders, number of employees and average employee work week) all dropped significantly, they all stayed positive The Federal Reserve spokesperson said they expect continuing growth in their area but at a slower pace.
  • The U.S. Census Bureau’s July data on residential construction reported housing starts rose 0.9 percent over June but fell 1.4 percent from July 2017. Single family housing starts also rose  0.9 percent from June. Building Permits Issued increased 1.5 percent from June and 4.2 percent over July 2017. Single family authorizations were up 1.9 percent from June.
  • The University of Michigan’s Index of Consumer Sentiment preliminary August report fell to 95.3 from 97.9 in July. The August finding is the lowest since September last year. A spokesman for the university placed the reason for the decline on consumers perception of market prices.

 Foodservice News This Week

  • Major foodservice distributors reported good financial results for their last quarters. Sysco had sales increase 6.2 percent, gross profit rise 5.7 percent and U.S. broadline case volume increase 5.0 percent. US Foods net sales were flat, gross profit was up 5.7 percent and total case volume dropped 0.9 percent. But independent restaurant case volume increased 3.8 percent.  Performance Food Group net sales rose 3.7 percent, gross profit was up 6.4 percent and case volume increased 6.4 percent.
  • McAlister’s Deli will open a new prototype restaurant in Atlanta. The new design will be accompanied by “a deeper, more community centric brand positioning.” The company states that their customers view the chain as a “natural community gathering place.” The prototype has a community table for large groups, an on the go counter placed in the front of the restaurant and check-in touchscreen for the pickup window.
  • Add Boston Market to the list of chains offering delivery service. The 330-unit chain will offer online delivery service nationwide. Boston Market is partnering with Grubhub and DoorDash and will offer free delivery for orders over $15 as an introductory offer. Dickey’s Barbeque Pit and Church’s Chicken also announced delivery programs. Both are using third-party delivery firms. 
  • Steak ‘n Shake offers a deal to new franchisees. The chain will let new franchisees buy into an existing company-owned restaurant for $10,000. The deal is conditional on the applicant successfully completing a 6-month training program.
  • Corporate stirrings: Reports have surfaced that investment groups are considering buying YUM China. One report has the China investment firm of Hillhouse Capital Group putting together a group to buy the KFC and Pizza Hut operator in China. Sources also say KKR & Company and Baring Private Equity are also evaluating a possibility of bid for the chain. Wendy’s plans to sell 640 company-owned restaurants in the U.S. and Canada to franchisees. The chain’s refranchising effort will cover 380 units this year, that includes 100 in Canada. Wendy’s will also sell their Zanesville, Ohio, bakery this year. Wendy’s announced it will sell its stake in Arby’s back to Inspire Brands Inc. Wendy’s 12.3 percent share of Arby’s will fetch $450 million, which is a 38 percent premium over the valuation Wendy had been carrying the Arby’s investment on their books. Carolina Convenience Corp. has divested their  S-Mart c-stores and their wholesale fuel distribution business. The buyer is an affiliate of Dublin, Ireland-based Applegreen plc, the convenience store banner of Petrogas Group Ltd. Carolina Convenience said the move was made for the company to focus on their Hardee’s restaurants and other businesses. Cava Group to acquire Zoës Kitchen announced they will be acquired by Cava Group. The purchase will be financed by a “significant equity investment in CAVA by Act III Holdings as well as participation from existing investors.” The deal will be all cash forZoës Kitchen stock. Bojangles has announced the chain will be closing 10 underperforming units, cutting back on menu items, refranchising 30 company-owned restaurants and examining expansion plans. This has led to speculation that the chain will be putting itself up for sale or become a takeover target.
  • Growth Chains: Shipley Do-Nuts, which currently has approximately 300 locations, plans to have 400 by 2022. Shake Shack plans to grow by 10 to 12 units per year. King’s Bierhouse will open 3 locations in the Houston area. Reis & Irving plans to have 1,000 locations with their vending-robot frozen desert operation and 2,000 by the end of next year. Popeye’s has signed an exclusive master franchise agreement for the Philippines.
  • Comparable Store Sales Reports: Arcos Dorados up 5.9 percent, Bad Daddy Hamburgers up 0.5 percent, Brinker International (Chili’s company owned up 0.6percent, Chili’s U.S. franchised down 0.5 percent and Maggiano’s up 0.3 percent), Carrols Restaurant Group up 5.0 percent, CEC Entertainment up 1.0 percent, Chuy’s Holdings up 1.0 percent, Diversified Restaurant Holdings down 6.4 percent, Famous Dave’s (company-owned up 1.2 percent and franchised down 1.9 percent), Freshi Inc. up 0.9 percent, Good Times Burger’s up 3.8 percent, Jamba Inc. (system up 2.2 percent, company-owned up 0.3percent and franchised up 2.4percent.) Kona Grill down 12.1percent, One Hospitality Group up 7.5 percent, Potbelly Sandwich down 0.2 percent, Texas Roadhouse (company owned up 5.7 percent and franchised up 3.9 percent) and Wendy’s up 1.9 percent.

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