Changes made to deal with deep societal crises are not always temporary and can reshape our beliefs and behaviors. This was a key observation in a Boston Consulting Group paper on the COVID-19 pandemic.
BCG cites two examples. First, the Black Death which killed as many as 30 million Europeans in the 14th century is held by historians for ending feudalism and serfdom. There was a shift in power as the result of scarce labor resources.
The second example given is World War II, which raised the participation of women both as civilians working on assembly lines to support the war effort and in uniform by flying war planes from the factories to the war zones. This involvement paved the women to be included in more professional roles outside of the home after the war.
The authors of the paper said it is too soon to know what if any of the new behaviors will become firmly established but number one on the authors list of possibilities is an increased frequency of working from home. While not exactly a revolutionary new concept, there have been numerous articles of major expansion of the practice. Employees have been virtually forced to do it while employers have been required to permit the practice and had to invest in the necessary technology.
And next on the list is eating at home with the one option being delivery service for meals.
It would indeed be ironic if the COVID-19 tragedy gives a permanent lift to food home delivery.
Economic News This Week
- Initial jobless claims decreased by 261,000 to a level of 6.67 million for the week-ending April 4. Claims for the week-ending March 28 were revised up by 219,000. The 4-week moving average totaled 4.26 million, an increase of 1,598,750. One economist called the data “hideous.”
- The number of bankruptcies could reach record-setting levels in the next 12 months. Three Federal Reserve Bank economists say coronavirus-related bankruptcies could rise by 200,000 to reach almost 1 million unless the government programs offset the increase.
- Total final demand from the March Producer Price Index declined 0.2%, per the Bureau of Labor Statistics. Total final demand grew 0.7% in the last 12 months. Without food and energy in the index was up 0.2%. The Index for food was flat in March.
- The March Consumer Price Index declined 0.4%, per the Bureau of Labor Statistics. Pulling down the CPI in March was a steep 10.4% decline in gasoline prices. In the last 12 months the all item index rose 1.5%. Food prices in March rose 0.3% and increased 1.9% in the last 12 months. In March Food at Home prices increased 0.5%. Food Away from Home prices rose 0.2%.
- The University of Michigan’s preliminary April Index of Consumer Sentiment tumbled to 71.0 in April from 89.1 in March. This marks the largest one month decline in the history of the Index. The Current Economic Conditions Index fell from the final March reading of 103.7 to 72.4. The Index of Consumer Expectations dropped from 79.7 in March to 70.0 this month.
Foodservice News This Week
- The National Restaurant Association fields a survey of food service operators every month called the Restaurant Performance Index. The NRA’s purpose is to determine the health of the restaurant industry. The most recent February RPI report standing by itself is nothing remarkable. Some numbers moved up while others moved down. The report described the industry’s performance as relatively steady. However, the time the February Restaurant Performance Index was published on March 31st the world had turned upside down. This demonstrates how quickly things can turn. There are some knowledgeable people who are saying the tipping the peak of the infections are here or very near. To quote Winston Churchill “This may not be the beginning of the end but it is the end of the beginning.” We can all hope.
- Welbilt has issued guidance regarding the company’s actions to deal with COVID-19. The multi-line foodservice equipment manufacturer has temporarily closed some plants while board members, executives and other employees have taken pay reductions. Some salaried and hourly office and production employees have or will be furloughed for various periods. Welbilt is also having discussions with their senior secured revolving credit facility bank group to amend financial covenants. The company is encouraged by the discussions to date. Welbilt is also exploring tax-based opportunities available under the recently passed federal law.
- Restaurants continue to have a complicated relationship with third-party delivery companies. The Chicago Tribune weighed in on the subject mainly focusing on Gruhub. While restaurant operators marvel at the reach companies like this have, but they remain frustrated with high fees. Operators also expressed dissatisfaction with a lot of the drivers, claiming they have no respect for the food and not properly trained. One operator said it took three weeks to get Grubhub to drop his restaurant from its service. Both sides need each other and would be better served finding a way resolve their problems.
- DoorDash will reduce commissions for local restaurants by 50%. The delivery service company will also not charge a delivery fee on Saturdays. The price reduction will apply to restaurants with five or fewer locations.
- McDonald’s first fiscal quarter of the year was a wild ride. In the first 2 months of this year comparable store sales in U.S. were up 8.1%. In March comparable store sales in the U.S. declined 13.4%. For the first quarter, U.S. comparable store sales were up 0.1%. For the total McDonald’s system comparable store sales were up 7.2% for the first 2months of 2020, down 22.2% in March and down 3.4% for the quarter. The company has deferred the collection of certain rents and royalties from franchisees around the world.
- Starbucks’ sharp sales slowdown due to operating changes from coronavirus may not improve until September. Starbucks said its experience was like that of McDonald’s in that both companies were doing well until Mid-March when the bottom dropped out. By the end of the month sales declined 60% to 70%. Starbucks, however, says its experience in China shows the financial suffering is temporary and can be reversed.
- The Paycheck Protection Program was supposedly for businesses with 500 or fewer employees. But there is a major exception. Hotels and restaurant chains are eligible regardless of the number of their employees. The National Restaurant Association lobbied for the exception arguing the restaurant industry was the first one shut down and is unique. But small businesses are concerned that big operators will get all the funds and there will be nothing for the little guys.
- Breakfast and lunch chain First Watch has temporarily closed all 300+ corporate locations. Per a note on its website, the chain’s CEO said the decision was made to keep its personnel and customers safe. No target date was given as to when First Watch might re-open.
- Chuy’s Holdings transitioned 92 of its restaurants to off-premises operations. The chain describes its nine remaining locations as being temporarily closed. Chuy’s continues to work with its on-line ordering system and national delivery partner DoorDash. The chain also works with some other local delivery services in some markets including Grubhub, BiteSquad, Waitr and others.
- The owner of The Sand Bar in Tybee Island, Ga., found a unique way to help her unemployed staff. For almost 15 years patrons at the bar would leave their mark on the establishment by writing their name on a dollar bill and stapling it to the walls or ceiling. Jennifer Knox, the owner of The Sand Bar and five volunteers took three and a half days to gently remove the bills. The process was slow because some bills had a dozen or more staples in them and needed to be cleaned as well. The bills totaled $3,714 and were distributed to the former employees.
- Comparable Store Sales: McDonald’s up 0.1%.
For details and same store sales of other chains, Please Click Here for the latest Green Sheet.