The National Restaurant Association reports its Restaurant Performance Index rose for the second month in a row and struck an 8-month high. The index was up 0.7 percent to 101.9.

The Current Situation Index component climbed 1.1 percent from October to 102.1 in November. Same-store sales did very well with 68 percent of respondents reporting an increase — the highest level in nearly two years. Customer traffic was also good with 49 percent of operators reporting an increase in the number of customers in November 2019 vs. November 2018.

The second component of the RPI also showed improvement with 46 percent of operators forecasting their sales will be up in 6 months, compared to 31 percent saying the same thing in October. The November reading was highest it has been in 6 months. However, operators are not necessarily optimistic about the near future, with 22 percent thinking the economy will improve in 6 months and 22 percent thinking it will worsen.

As for investment, 53 percent operators reported they made a capital expenditure in the last 3 months for equipment, expansion and/or remodeling. Half of the operators in a spending mode is pretty good. And, 52 percent said the same in the October survey. Looking ahead, 58 percent of those surveyed plan on making a capital expenditure in the next 6 months.

The results of the RPI survey for November were certainly positive and followed a similar good report for October.

Economic News This Week

• Initial jobless claims deceased 2,000 to 222,000 for the week ending Dec. 28. The 4-week moving average rose 4,750 to 233,250. It would appear that jobless claims may be somewhat erratic due to seasonal hiring and layoffs. The Department of Labor says it adjusts for this seasonal variation but there are some doubters.
• Sales of U.S. autos and light trucks hit approximately $17 million in 2019 despite forecasts that sales would fall for the year. Moreover, consumers chose expensive SUVs, crossovers and pickup trucks. Buyers have fit the higher priced vehicles into more manageable monthly payments with cheap leases, subsidized low interest rates and longer loan terms. Forecasters are looking for decline in 2020 to 16.5 million to 16.8 million vehicles.
• Existing home sales fell 1.7 percent in November from October to a seasonally adjusted annual rate of 5.35 million. However, sales are up 2.7 percent over November last year. A spokesperson for the National Association of Realtors said sales would have been better with more inventory. As of November, available inventory accounts for a 3.7-month supply. A 6-month supply is considered ideal.
• New home sales were 719,000 in November on a seasonally adjusted annual basis. This is 1.3 percent more than October sales and up 16.9 percent over November 2018.
• Builder confidence reached a 10-year high in December. The National Association of Home Builders/Wells Fargo Housing Market Index rose 5 points to 76, which is the highest index since June 1999. While low mortgage rates, high employment and increasing wages are all driving new home sales, builders feel the market could be stronger if more land and labor was available.
• The Chicago Business Barometer hit a 4-month high in December rising 2.6 points to 48.9. (Any reading under 50 indicates declining activity while any result over 50 means expansion.) Production gained 4.9 points to 47.2, which is the highest level since August. New Orders had a “marginal” decline to 49.1. Order Backlogs Rose to a 3-month high of 46.2. While still a contraction phase, the barometer seems to be showing improvement.
• Durable goods orders fell 2.0 percent in November. The predictions had been for 1.0 percent increase due to the end of the General Motor strike. This was the largest drop in durable goods orders since May 2019.

Foodservice News This Week

• YUM! Brands will acquire Habit Burger. In a surprise move that has some stock analysts puzzled, YUM! will buy the 280-unit fast-casual chain for $14 share or roughly $375 million. Longtime foodservice industry stock analyst Mark Kalinowski noted that Habit Burger is too small to have much impact on YUM’s earnings and speculates that YUM may not be the right owner.
• The Hooters restaurant chain has been sold. The purchasers are two private equity firms, Nord Bay Capital and TriArtisan Capital Advisors. It has been reported that two of the current owners, Chanticleer Holdings LLC and H.I.G. Capital, will maintain stakes in Hooters. Terms of the deal were not announced. Indications are that the new owners will concentrate on developing Hoots, a fast-casual spinoff of Hooters that does not require employees to wear revealing uniforms and hires males as well as females.
• San Francisco has more than 400 restaurants close in 2019 according to Yelp data. The shuttered operations include some of the finest and most respected establishments. Getting a large portion of the blame is labor costs. One restaurateur said that payroll once accounted for 30 percent of expenses but now can be as high 50 percent. He contends that at that level the restaurant model simply cannot work. A shortage of labor, maintenance costs and high rents were also cited as major problems. A meeting with San Francisco’s city supervisors brought a promise that the supervisors would look into lowering the cost of fees and eliminating redundant permits.
• Chipotle is testing walk-up windows in urban areas. The company says the goal is to attract more orders from online and mobile devices. The window is part of a new, slightly smaller Chipotle design that has fewer seats than current restaurants. Other changes include a grab-and-go beverage case and pickup shelves near the front door. The first of the new designs featuring the walk-up widow is in Chicago across from Wrigley Field. A spokesman for Chipotle says the chain competes with Starbucks for prime real estate locations.
• Famous Dave’s opened its first smaller footprint design in December. The restaurant is approximately 3,000 square feet vs. an average 6,500 to 7,000 square feet in older designs. The new restaurant is “bar-centric” with a compact dining area. The design also includes technological advances, such as tabletop ordering and digital kiosks.
• C-stores reported a strong 2019. According to a survey by the National Association of Convenience Stores, three quarters of c-stores increased sales last year, as opposed to just 7 percent who reported a sales decline.
• Seattle residents spent the most on food away from home during 2017-2018 according to the Bureau of Labor Statistics, followed by residents of Washington, D.C. However, residents of Honolulu spent the largest proportion of their annual expenditures on food away from home.
• Houlihan’s closes more than 10 of its restaurants just prior to the finalization of the chain’s sale to Landry’s. Landry’s, run by billionaire Tilman Fertitta, is well known for pruning out weak-performing locations when making a purchase rather than trying to resuscitate them.
• Corporate Stirrings: Granite City Food & Brewery has filed for Chapter 11 bankruptcy protection. The company is seeking permission from the court to sell the 25-unit chain to KRG Granite Acquisition for $7.5 million plus liabilities.
• Growth Chains: Darden opened 37 company-owned restaurants: Olive Garden added 9; Cheddar’s Scratch Kitchen and LongHorn Steakhouse each added 8; Yard House opened 4; Edie V’s and Seasons 52 both opened 3 each; and Bahama Breeze and The Capital Grille both opened one. The Toasted Yolk will open 3 locations in early 2020 with 19 more in development. Buddy’s Pizza, with 16 stores currently, plans to be a 50-unit chain within 5 years. Cicis will add 15 restaurants this year and then open 25 to 40 a year with a goal of being a 600-unit chain. Captain D’s will open 3 restaurants in Southern Florida and 3 in Georgia. Bojangles will open 40 restaurants in Love’s Travel Centers across Arkansas, Illinois, Mississippi and Oklahoma. Fazoli’s will open 5 locations in the Tampa area in 2021. HNT Chicken (HTN stands for Hot ‘N Tender) plans on having 40 to 50 locations in the Philadelphia area by June and 65 by the end of 2020, with a total of 100 stores by the end of 2021. Fayetteville, Ark.-based Slim Chickens, with the aid of an investment from 10 Point Capital, hopes to expand its current 80 units to 600 locations in the next 10 years. Jersey Mike’s will open 5 locations in Buffalo, N.Y., area.

For the same-store sales of restaurant chains, please click here for the latest Green Sheet.