What’s the future look like for food delivery? Noodles & Company introduced a new, more efficient kitchen. Little Caesars’ delivery service goes national. Applebee’s and Muscle Maker enter the fast-casual arena.

Third-party delivery has drawn considerable attention from foodservice industry analysts in recent years. And rightfully so given the role these companies have played in keeping the industry in a growth mode, however slim that may be. That said, change may loom on the horizon.

A Food Institute blog shared comments from at least one stock analyst who said Uber may “significantly curtail” or “possibly shut down” its food delivery business.” The analyst states that UberEats has gone from an asset to a liability.

There is concern that Google’s entry into the field will raise problems for all the third-party ordering and delivery firms. In that same blog, the Food Institute quotes the CEO of ChowNow, a company that sells online ordering software for restaurants, as saying “It is pretty clear that Google is “intercepting orders that would have gone to GrubHub and others.”

Also making headlines of late is GrubHub. Of course, when a story says a company is considering strategic options, it is widely assumed the firm is up for sale. GrubHub vehemently denies this speculation remains the company might seek some sort of deal with DoorDash or one of its other competitors.

Meal kit purveyors also seem to be struggling. Blue Apron has been overtaken by its German rival HelloFresh, according to a Wall Street Journal article. Selling at a lower price has undercut Blue Apron, which saw its customer count decline from 1 million at its peak to 400,000. HelloFresh has about 1.5 million customers and expects to become profitable in its 2019 fiscal year.

The meal kit business faces a variety of challenges, according to various media reports. One former Blue Apron executive believes meal kits do not fit as many people’s lifestyle as originally estimated. Second, all the kit suppliers targeted the same consumers: younger, city dwellers. The companies also offered heavy discounts to attract new customers and then offered discounts to lure back customers who cancelled. Some observers also felt that Blue Apron, and others, underestimated the cost of preparing the kits. Finally, some believe the future of meal kits is in partnerships between upscale restaurants and manufacturers.

The information above is courtesy of the Wall Street Journal, the Food Institute and other sources,

Economic News This Week

• The Institute for Supply Management’s Manufacturing Index contracted in December, falling 0.9 for a reading of 47.2. Any reading less than 50 signifies declining activity. The Production Index took a significant hit, dropping 5.9 points to 43.2. The New Orders Index fell 0.4 points for a reading of 46.8. The Employment Index fell 1.5 points to a level of 45.1. The Order Backlog Index, in contrast, edged 0.3 for a reading of 43.3. This might signal an improvement in the future. Of the 18 manufacturing industries taking part in the survey, only 3 reported growth in December.
• The Institute for Supply Management’s Non-Manufacturing Index grew in December, marking the 119th consecutive month of increasing economic activity. The non-manufacturing index hit 55.0, an increase of 1.1 percent. Any reading greater than 50 indicates growth. The Business Activity/Production Index hot 57.2, an increase of 5.6 points. The New Orders Index totaled 54.2, a decline of 2.2. The Employment Index hit 55.2, a decline of 0.3. The Order Backlog Index remained in contraction territory, declining 1.0 percentage point for a reading of 47.5. Six non-manufacturing industries reported decreases in December while 11 industries, including Accommodations & Foodservices, reported growth.
• Orders for manufactured goods declined 0.7 percent in November, per the U.S. Census Bureau. Unfilled orders fell 0.4 percent while shipments of manufactured goods rose 0.3 percent for the month.
• Consumer credit increased 3.6 percent in November, per the Federal Reserve. Revolving credit, namely credit card debt, fell 2.75 percent on an annual basis. Non-revolving credit (auto loans, home improvement loans, boat loans, student loans, etc.) increased 5.8 percent on an annual basis.
• S. private sector employment grew by 202,000 jobs in December, per ADP’s National Employment Study. Small companies, those with 1 to 49 employees, added 69,000 people. Medium-sized companies, those with 50 to 499 employees, added 88,000 workers. Large firms, those with 500 or more employees, hired 45,000 new people. The report did include some negative news, too. Employment in the Leisure & Hospitality Sector, which includes restaurants, fell by 21,000 for the month.
• Initial-jobless claims hit 214,000, a decline of 9,000 for the week ending January 4. The 4-week moving average hit 224,000, a decline of 9,500. Claims remain somewhat erratic due to seasonal layoffs.
• The U.S economy added 145,000 new jobs in December, according to the Bureau of Labor Statistics. While not a huge number and moderately below some forecasts, this still represents substantial job growth. And, the unemployment rate stayed at a very low 3.5 percent. https://www.bls.gov/news.release/pdf/empsit.pdf

Foodservice News This Week

• Foodservice operations hired 15,900 new employees in December. With hiring in the private sector at 130,000, foodservice accounted for 12 percent of the economy’s new jobs for the month.
• Noodles & Company redesigned its kitchens to lower labor costs and increase throughput. The 460+ unit chain is ditching grills that were hard to clean and took up significant space. Noodles & Company will replace the grills with steamers that improve the texture and color of vegetables, two more ovens that allow for quicker heating of proteins and a holding unit that keeps proteins warm as staff prepare the rest of an order. These changes improve workflow and eliminate 5 to 10 labor hours per week resulting in annual savings of $9 million to $18 million per year for chain. The new equipment will cost about $50,000 per store and require closing for one day for installation and training. Plus, the smaller kitchen will enable the company to eventually reduce its prototype operation to 2,000 square feet from 2,400 square feet, thus lowering real estate costs.
• Little Caesars now offers delivery, having signed an agreement with DoorDash Inc. Starting this week, roughly 90 percent of Little Caesars restaurants will offer delivery. Price for menu items will remain the same as carryout plus a $2.99 delivery fee and a 10 percent service charge. Little Caesars is known for its deals including its $5.00 takeout pizza so it will be interesting to see how customers react to what some might perceive as hefty delivery charges.
• Applebee’s opened a fast-casual location in Mobile, Ala. Called Applebee’s Express, customers patronizing the 2,500 square foot restaurant order from a simplified menu at the counter. Guests can choose to consume their food off premises or in the 72-seat dining room. Customers can also place orders by phone, an app or the restaurant chain’s website.
• Muscle Maker opened a new concept. Called Healthy Joe’s, the first location is in New York City’s Tribeca neighborhood. The fast-casual restaurant offers an array of healthy meals that staff cook using a 500-degree F conveyor oven. The interior features a unique display of murals by students attending the nearby Borough of Manhattan Community College.
• Zume Pizza closed its pizza delivery business. Instead the company will focus on its packaging business. The robot made pizza company also said it is cutting 360 employees.
• Growth Chains: Sweet Green plans to double its number of units to 200 in the next 3 years. Smoky Bones, which opened one but closed four restaurants last year, expects to open three to five units this year. Walk-On’s Bistreaux, which has dropped the sports bar designation, says the company has 50 stores in the development pipeline expects to open 20 to 25 locations this year. Donato’s Pizza will open five locations in Orlando.
• Comparable Store Sales Reports: ONE Group Hospitality (STK up 8.9 percent and Kona Grill up 3.9 percent)

For details and same-store sales of other chains, Please Click Here for the latest Green Sheet.