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

Operator Impact of Higher Minimum Wage in New York, Papa John’s Sale Update, Grocery Stores’ Negative Period

The state of New York increased the minimum wage as of Dec. 31. Operations with 10 or fewer employees must pay at least $13.50 an hour while operations with 11 or more employees must pay $15 an hour.

In response to the higher mandated wages, the New York City Food Alliance surveyed full service operators. Here are the key findings:

  • Menu price increases — 90 percent increased menu prices last year as a result of the mandated wage raises while 87 percent said they will do so this year.
  • Reduced employee hours — 76 percent of the respondents reduced employee hours and 36 percent eliminated jobs in 2018 due to the wage increases.
  • More reduced hours planned — 74 percent of those surveyed said they would reduce hours and 47 percent will eliminate jobs this year due to the wage increases.
  • Cost reductions — 60 percent of respondents will rework food and beverage menu offerings this year to reduce costs due to the minimum wage law.
  • Fewer repeat customers — 34 percent of the operators said their repeat customers dined at their restaurants less frequently after they raised menu prices in 2018.
  • Fewer employees — 40 percent of those surveyed reported employing fewer people in 2018 than in 2017 but their payroll stayed about the same.

All of this seems to paint an unhappy picture for the industry, consumers and perhaps for some of the employees as well.

Economic News This Week

  • Initial jobless claims fell 13,000 to 199,000 for the week ending Jan. 19 This is the lowest number of jobless claims since Nov. 11, 1969. The 4-week moving average declined by 5,500 to 215,00.
  • Christmas holiday retail sales hit $850 billion. This was the highest in 6 years and up 5.1 percent from 2017. Online sales generated huge sales dollars and buy online/pick up in store programs were particularly effective. The partial shutdown of the federal government has delayed the detailed retail numbers for December but some experts are predicting strong Christmas sales bode well for the economy in 2019.
  • The Conference Board Economic Index declined 0.1 percent in December, which the board characterized as “slightly” declined. However, the board stated the U.S. economic growth may slow this year. Also, the report noted that some government economic data in the index was not available due to the partial government shutdown, so the board made estimates. The board will recalculate the index when the government reports become available.
  • Existing home sales declined by 6.4 percent in December from November to a seasonally adjusted annual rate of 4.99 million. Sales are down 10.3 percent from a year ago. The number of existing homes on the market decreased from November but increased from December 2017. Median existing home prices were up 3.9 percent from December last year. A spokesman for the National Association of Realtors said the shutdown of the federal government has not had a negative impact on existing home sales yet but has the potential for doing so.

Foodservice News This Week

  • Reports have Papa John’s International considering a sale to Restaurant Brands International. At least one report has Restaurant Brands partnering with the equity firm of 3G Capital and John Schnatter, Papa John’s founder. Rumors have circulated that Papa John’s has been receiving various proposals and offers for months.
  • Average spending for the Super Bowl will be $81.30 this year for a total of $14.8 billion according to a study sponsored by the National Retail Federation. The study found 72 percent of adults plan to watch the game, down from 76 percent last year. And 13 million will watch the game in a bar or restaurant.
  • Grocery store sales turn negative. BMO Capital Markets reported that grocery store sales declined 1.1 percent in the 4-week period ending Jan. 13, 2019. This was the first time grocery sales were negative since April 2017.
  • Starbucks No.5 on Fortune’s list of World’s Most Admired Companies. McDonald’s was No. 37. Apple ranked No.1.
  • Starbucks rolls out delivery service. After what the company termed a success in Miami, Fla., the coffee giant is expanding delivery to select stores in Boston, Chicago, Los Angeles, New York, and Washington, D.C. Starbucks is partnering with Uber Eats for their delivery program. The chain will also begin testing delivery in international markets starting with London.
  • Domino’s Pizza has signed a lease on a 68,000-square-foot food processing and distribution facility in Lexington County, S.C. Construction will begin this spring.
  • Growth Chains: Chinese fast-food operator Shaxian Snacks plans to add 15 more units in the U.S. and 10 in Japan this year. Shaxian currently has 1,900 locations and has plans to open 2,000 additional stores. BurgerFi is expanding in Florida and Georgia and will open 25 to 30 restaurants this year. Marco’s Pizza will open 23 locations in Florida in the next few years. Saladworks plans on opening a total of 17 restaurants in Arkansas, California, Colorado, Minnesota, Ohio and Virginia. Taco Bell has a focus on the international market with 500 units set to open in 2019 and an addition of a 1,000 stores in the next few years. This includes 40 Taco Bell units in Thailand. The Old Spaghetti Factory believes that opening 2 restaurants a year is the right pace for the company. New owners of Stoner’s Pizza Joint closed 10 of 25 units it purchased but have now announced plans to reach 100 stores in 4 years.
  • Comparable store sales report: Starbucks up 4.0 percent.

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