This Week In Foodservice

Jerry Stiegler aggregates key industry information and provides brief analysis to help foodservice professionals navigate the data.

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This Week in Foodservice

Ghost Kitchens Attract Some Heavy Hitters, Dunkin’ to Replace its Coffee Brewers. Employees and Hours are Being cut in Response to Minimum Wage Increases

Foodservice Equipment & Supplies Magazine has followed and reported on the ghost kitchen phenomenon for some time. The Wall Street Journal now weighs in on the topic. The WSJ ghost kitchen article relates that retail property developer Simon Property Group and Accor, owner of 5,000 hotels, are working with hospitality company SBE Entertainment Group to develop 200 commissary kitchens to provide restaurant-quality food for customers at malls and hotels. The thrust of the article is ghost kitchens have emerged as one use for empty mall space.

Ghost kitchens, also known as dark or remote kitchens, can reduce real estate costs for a foodservice operator while expanding the business’ reach for delivered food. According to the Journal, Wendy’s, Chick-fil-A and Sweetgreen are some of the chains most interested in using ghost kitchens. SBE plans to utilize available space in shopping malls. The group plans to open 85 kitchens this year and at least 100 more by the end of 2021.

Some chains continue to test delivery only kitchens out of existing restaurants. Fat Brands is preparing and delivering food for its Hurricane Grill & Wings brand out of some existing Fat Burger restaurants.

It appears that FE&S Magazine’s observation that ghost kitchens are here to stay is correct.

Economic News This Week

  • Initial-jobless claims hit 202,000, a dip of 15,000 for the week ending February 1. The 4-week moving average totaled 211,000, a decline of 3,000.
  • Private sector jobs grew by a hefty 291,000 from December to January, per the ADP National Employment Report. Small businesses (1 to 49 employees) added 94,000 jobs. Medium-size businesses (50 to 499 employees) added 128,000 jobs. Large businesses (500+ employees) added 69,000 jobs. The leisure and hospitality sector, which includes restaurants, added 96,000 employees.
  • S. employment increased by 225,000 in January, per the Department of Labor. This surprised many given that forecasts were in the range of 140,000 to 150,000 jobs. For the 2019, the calendar the monthly average was approximately 175,000 new jobs. The unemployment rate remains near a 50-year low at 3.6 percent after hitting 3.5 percent in previous months. The Department also revised November employment up by 5,000 and December by 2,000.
  • Consumer credit increased by 4.75 percent in 2019, according to the U.S. Federal Reserve. Revolving credit, which is mostly credit cards, rose 4.25 percent. Non-revolving credit (auto loans, student loans, etc.) increased 4.75 percent.
  • Manufacturing sector labor productivity decreased 1.2 percent in the fourth quarter of 2019, reports the U.S. Bureau of Labor Statistics. Output dipped 1.0 percent and hours worked increased 0.2 percent. Unit labor costs increased 5.9 percent in the fourth quarter of 2019 and 5.3 percent from the same quarter a year ago.
  • The Institute for Supply Management’s Production Manufacturing Index improved in January, rising 3.1 percent for a final reading of 50.9. (Any number greater than 50 indicates growth.) This was the first time since July of last year the PMI showed growth. The New Orders Index hit 52.0, up 4.4 percent from December. The Production Index leaped 9.5 points for a reading of 54.3 in January. The Order Backlog Index rose 2.4 percent for a final reading of 45.7. The same situation exists with the employment index which grew 1.4 percent but stayed negative at 46.6. Only 8 of the manufacturing industries surveyed reported growth for the month.
  • The Institute for Supply Management’s Non-Manufacturing Index inched up 0.6 percent in January for a reading of 55.5. (Any reading greater than 50 means increasing activity.) The Business Activity Index, which is equivalent to production for the Institute’s PMI, rose 3.9 percent for a reading of 60.9 for January. The New Orders Index hit 56.2, an increase of 0.9 percent. But the Order Backlog Index slipped 2.0 percent to a level of 45.5. The Employment Index retreated 1.7 percent but stayed in growth mode at 53.1. Thus, the Non-Manufacturing Sector grew in January for 120th consecutive month. Of the 18 non-manufacturing industries surveyed by the Institute, 12 reported growing in January, including accommodation and foodservices.

Foodservice News This Week

  • Dunkin’ will Invest $60 million in new brewing equipment for all its locations. The new “smart brewers” are intended to improve coffee quality and consistency. In addition, the new equipment will offer more variety, reduce waste and are easier for employees to use.
  • Foodservice and drinking places added 24,400 employees in January, according to the U.S. Department of Labor. Given an increase of 206,000 jobs in the private sector for the month, foodservice employers accounted for more than 11 percent of all the hiring in the US last month.
  • An outside-the-box approach to managing labor costs? One response to mandatory wage increases is cutting employee hours. Taking this line of thought one step further is 7-Eleven. The c-store chain is testing a cashier-less store in Irving, Texas. This location uses a mix of algorithms and predictive technology to separate customers and their purchases.
  • Customer brand loyalty increased an average of 20 percent from 2019 to 2020. Consumers have become more “complex, connected and complicated,” according to the research firm Brand Keys. Restaurants gaining the most loyalty year-over-year are Chick-fil-A (+28 percent), Dunkin’ Restaurants (+22 percent), Domino’s Pizza (13 percent) and Five Guys (12 percent).
  • Subway to reduce its corporate staff. The cuts will be spread over various departments. Subway has experienced a decline in units over the last few years.
  • Growth Chains: California Pizza Kitchen plans to enter the Canadian market with a partnership to open five locations in Edmonton in the next eight years. The chain also plans to expand into Vancouver and Toronto. Pizza Inn will open six restaurants in Oklahoma and Kansas. Nitrogen ice cream Chill-N hopes to have 25 stores in its development pipeline by the end of this year. Primo Hoagies will open nine locations across Bergen and Middlesex counties in New Jersey.
  • Comparable Store Sales Reports: Baskin Robbins up 4.1 percent, Burger King up 0.6 percent, Chipotle Mexican Grill up 13.4 percent, Dunkin’ up 2.8 percent, Tim Horton’s down 1.4 percent, YUM Brands (KFC up 1.0 percent, Pizza Hut down 4.0 percent and Taco Bell up 4.0 percent)

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

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