The National Restaurant Association’s Restaurant Performance Index has been running a pattern of up one month and down the next. Since the index was down in December, it would be expected to be up the next month and that is what happened. The Performance Index increased 0.7 percent in January to a level of 101.8. The NRA said that the index rose as a result of same-store sales and customer traffic bouncing back from low levels in December. The Current Situation sub index rose 1.1 percent to 101.6. The Expectations sub index edged up 0.2 percent to 102.0. The NRA points out that January is the third consecutive month the Expectations Index has increased, which may be an indication business conditions will improve in the future.

 As for operators’ investment activities, 52 percent of those surveyed made a capital expenditure for equipment, expansion and/or remodeling in the last 3 months. Having half of operators spending money on their businesses is good, but this month’s finding is down from 58 percent from last month.

As for future plans, 63 percent of those surveyed responded that they plan on investing in equipment, expansion and/or remodeling in the next 6 months. This is a slight improvement from last month when 61 percent reported similarly.

Overall, this month’s report is certainly positive. Now if they can only keep them coming.

Economic News This Week

• Gross domestic product increased 2.1 percent in the fourth quarter of 2019 according to the “Second Estimate” by the Bureau of Economic Analysis. This is identical to the Bureau’s “Advance Estimate.” GDP also increased 2.1 percent the third quarter of 2019.
• Initial jobless claims rose 8,000 to 219,000 for the week ending Feb. 22 from the previous week. The 4-week moving average increased by 500 claims to 20,750. The jobless claims numbers clearly indicate there have not been any major layoffs.
• New residential home sales were 764,000 in January on a seasonally adjusted annual basis. This is up 7.9 percent over December and 18.6 percent above January 2019. This data is provided by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
• The Bureau of Economic Analysis reported January disposable personal income rose 0.6 percent in current dollars. Personal consumption expenditures in January rose 0.2 percent in current dollars.
• The National Labor Relations Board is finalizing the rule on joint employment. The new rule, in effect, reverts back to essentially the same that it was for years before the previous administration changed it to make it easier to hold two parties as employers. The effect was the franchisee and the franchising company were employers. That meant franchising companies could be held libel for labor law violations. Second, it made it easier to unionize workers. The new rule is subject to review by Congress.
• The U.S. Census Bureau reported that new orders for manufactured durable goods fell 0.2 percent in January. The Bureau noted that new orders for durable goods have fallen in two of the last three months.
• The Chicago Business Barometer declined in January. After two straight months of increasing activity, the index fell to 42.9. (Any reading under 50 shows contracting activity.) All five major components of the index fell, led by Order Backlog Index, which fell to a 4-year low of 34.6. The New Orders Index dropped to 41.5 while the Production Index declined to 42.7.
• The Conference Board Consumer Confidence Index improved slightly in February. The Index rose to 130.7 from 130.4 in January. The Present Situation Index fell from 173.9 to 165.1 while the Expectations Index rose from 101.4 in January to 107.8 in February. A spokesman for the Conference Board said consumers short-term expectations, coupled with employment growth, should be enough to support spending and economic growth in the near term.

Foodservice News This Week

• Foodservice chains’ fourth quarter last year was a bitter one according to ai, a research firm that monitors retailers’ foot traffic. Overall, the sector saw a 4.0 percent decline in foot traffic from the third quarter but some chains bucked the trend. Starbucks traffic rose 8.0 percent in the quarter while Panera Bread was up 4.0 percent and Chipotle’s traffic increased 2.0 percent. However, when compared to the fourth quarter of 2018, Chick-fil-A was the clear leader with an 18 percent jump in traffic on the year-over-year basis.
• Wendy’s new breakfast program launched last week. Wendy’s will be backing the introduction with $70 million to $80 million in advertising. To “welcome” their new competitor, McDonald’s declared March 2nd ”National Egg Mc Muffin Day” and offered a free sandwich to anyone who ordered one using McDonald’s app.
• Aramark introduced a new high school dining brand called Rally Cafe. The new concept is based on two values – real good food and an inspired community. Rally Cafe will integrate each school’s personality into to the cafe logo. Each participating school will offer inspirational messages along with health and wellness messages. There will be grab-and-go boxes as well as breakfast and lunch mobile carts offering meal options at remote locations.
• 7-Eleven is expanding its Evolution Store concept. After opening its beta store in Dallas one year ago, 7-Eleven recently opened an Evolution Store in Washington, D.C. and will add one more in San Diego in the next few months. The Evolution Stores are a testing ground for products and technology, such as mobile checkout. Evolution Stores also feature Laredo Taco Company restaurants, a concept the mega c-store retailer added to its portfolio when it acquired the Stripes c-store chain in 2018.
• Dine Brands announced fewer Applebee’s closings this year. Dine, which also owns IHOP, expects to close no more than 15 Applebee’s in 2020. The chain just completed a program that closed 200 underperforming stores. On a positive note, Applebee’s takeout and delivery business increased 22 percent last year. However, Dine has some concerns about using third-party delivery companies and as a result has not signed a national delivery agreement. Applebee’s stated that Valentine’s Day this year was the company’s busiest takeout and delivery day ever.
• Red Robin Gourmet Burgers closed 30 corporate locations last year. The company cancelled all corporate stores in Canada by closing 5 units and refranchising 12 more. The chain saw a 3.4 percent decline in guest counts while check averages rose 4.1 percent thanks to a 1.1 percent increase in menu mix, a 1.8 percent increase in menu pricing and a 1.8 percent rise due to price increases. The most controversial move Red Robin made was adding pizza to the menu. 
• Shake Shack reported its fiscal quarter ending Dec. 25 was a rough one. The hamburger chain said traffic fell more than 5.0 percent and that led to a 3.6 percent decline in comparable store sales. The company said fewer new products and promotions last year contributed to the problems. Shake Shack added that they are struggling with pickup orders at peak times and they are designing new stores for to-go operations.
• Papa John’s closed 50 Stores in China due to the Coronavirus. The chain also gave a warning that the illness may have a negative impact on future operations and financial results.
• Food delivery firm DoorDash has taken the first step toward an initial public offering. Some financial analysts question the move given the fiercely competitive nature of the food delivery business, the recent major drop in stock prices and the cool reception some recent initial offerings received. Meanwhile, Uber Eats is pulling out of some countries (including South Korea), sold their operation in India to a competitor and the top executive of Uber Eats left the company with no explanation. Investors will certainly not find any of these moves to be reassuring.
• Comparable Store Sales Reports: Applebee’s down 2.5 percent, Cheesecake Factory up 0.6 percent, Cracker Barrel up 1.3 percent, IHOP up 1.1 percent, Papa John’s Pizza (North America up 3.5 percent, company owned up 4 percent and franchised up 3.3 percent) And Potbelly Sandwich Shops up 0.1 percent.

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