Following a period of being up one month and down the next, the National Restaurant Association’s Restaurant Performance Index finally showed some consistency in July. Unfortunately, the trend was down as the overall index fell to 100.4 in July from 101.2 in June. While any reading greater than 100 indicates growth, the July decline shows that industry barely remains in positive territory.

The Current Situation Index was 100.7, a decline of 0.3 percent. The number of operators reporting increased same store sales declined, although more reported an increase than a decline. Looking for something positive? Operators reporting increased customer traffic totaled 44 percent, up 5 percent from June.

The RPI’s other major component, the Expectations Index also had a rough month, falling a stiff 1.1 percent to a final reading of 100.1. All four of the forward-looking indicators “registered sizable declines,” pushing the Expectations Index down to where it was in December 2015.

The percentage of operators reporting they made a capital expenditure for equipment, expansion or remodeling in the last 3 months fell from 55 percent in June to 50 percent in July. The percentage of operators reporting plans for capital expenditures for equipment, expansion or remodeling in the next 6 months fell from 54 percent in June to 48 percent in July.

Let’s hope for the RPI to improve in August.

Economic News This Week

• Gross Domestic Product increased at an annual rate of 2.0 percent in the second quarter, according to the second estimate from the Bureau of Economic Analysis. This represents a slight decline from the first estimate of 2.1 percent. Most economists and other observers seem pleased with the GDP reports so far this year.
• Initial-jobless claims hit 215,000, an increase of 4,000 for the week ending August 24. The 4-week moving average was 214,500, a decline of 500 claims.
• Disposable Personable Income increased 0.1 percent in July, according to the Bureau of Economic Analysis. Personal Consumption Expenditures, which measures household spending, increased 0.6 percent in July. As pointed out in last week’s newsletter, economists see consumer spending as the number one driver of the economy.
• New orders for manufactured durable goods rose 1.9 percent in June following two months of declining orders. Transportation equipment led the increase with orders growing by 3.7 percent.
• The Chicago Business Barometer edged back into expansion mode in August with a reading of 50.4, up 6 points from July. (Any reading greater than 50 indicates expansion while less than 50 means contracting activity.) The Production Index remains “muted” despite its increase. The Order Backlog Index moved back into expansion territory at 51.3 after 3 straight months of contraction. The Labor Index improved slightly but stayed well in the contraction mode at 43.7.
• The Conference Board’s Consumer Confidence Index declined slightly in August. The index stands at 135.1, down from 135.8 in July. The Present Situation Index increased from 170.9 in July to 177.2. The Expectations Index declined from 112.4 to 107.0 in August. While consumer confidence was little changed in August, the Conference Board believes that if trade and tariff tensions continue to exist it could negatively impact consumer confidence.
• The University of Michigan’s Index of Consumer Sentiment tumbled in August, falling to 89.8 from 98.4 in July. This marks the largest monthly decline since December 2012, when the index dropped 9.8 points. The survey’s chief economist put the blame on consumers’ uncertainty regarding tariff policies.

Foodservice News This Week

• Visits to restaurants held steady in July, per data from The NPD Group. Customer spending, though, grew by 3.0 percent. Full-service restaurant visits have been declining and preventing overall restaurant visit growth for several years. NPD notes that in 5 years the mid-scale/family dining full-service family dining segment has lost 500 million visits. But the casual dining, full-service sector held steady after four years of declining visits. And while NPD expects relatively flat traffic near term, it sees pockets of growth in the QSR and fast casual segments.
• HFM FoodService will go market under the name Sysco Hawai’i.HFM Foodservice was acquired by Sysco in October 2017 and just opened a 3,000-square-foot test kitchen at the company’s facility in Oahu.

Corporate Stirrings: Landry’s made an offer of $37.2 million for the bankrupt Restaurants Unlimited chain. Currently owned by Sun Capital, Restaurants Unlimited owns numerous brands including Kincaid’s and Palomino. Rumors have surfaced that Del Taco may be up for sale. Supposedly, Del Taco is drawing interest from private equity firms and other foodservice chains. One possible buyer mentioned is Applebee’s, which has expressed interest in acquiring another chain in the past. Nine Allsup’s convenience stores in Texas have been sold. They will be renamed Hop-In, a brand operated by Majors Management, Marvin Hewatt Enterprises Inc. in Lawrenceville, Ga. Allsup's operates 300 stores in Texas and New Mexico.

• Growth Chains: Meritage Hospitality Group Inc., a major Wendy’s franchisee, announced the launching of its new breakfast concept, Morning Belle. The first location will open this month in Grand Rapids, Mich. The company plans to have 35 Morning Belle restaurants open by the end of 2025. Kura Sushi USA, working with $41 million raised by their recent public offering, is on track to have 300 locations in the next few years and could conceivably double their number of units in 5 years. Mooyah Burgers, Fries & Shakes will open 9 locations in Orlando. Plant-based chain Neat Burger will open their first restaurant this month. The store will be in London and the company plans 14 more franchises in the next 24 months.
• Comparable Store Sales Reports: El Pollo Loco (System up 0.7 percent, company owned up 0.4 percent and franchised up 0.9 percent.) and Red Robin Gourmet Burgers down 1.5 percent

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