Lots happening on the restaurant front with respect to COVID-19. Here are a few updates worth noting:
- It appears it is a lot easier to shut down a dining area in a restaurant than to restart one. Case in point is McDonald’s, which issued a 59-page guide to reopening. Cleansing is not just complicated but requires substantial costs as well.
- A lot of restaurants, including Starbucks and the Cheesecake Factory, have asked landlords for rent cuts. As many operators quickly found out, asking for relief is quite different form getting a better deal.
- Lettuce Entertain You Enterprises now adds a 4.0% surcharge to delivery and takeout orders. The charge is necessary given the government restrictions on dining rooms, costs for enhanced sanitation practices and the greatest increase in food prices since 1974, company president RJ Melman told Crain’s.
- The pandemic even had an impact on financial reporting. It probably started with McDonald’s quarterly report when the chain broke out sales by month to underline the hit the company took in March from the COVID-19. This came after McD’s posted strong sales in January and February. Other companies followed this example. Some went one better by breaking out off premise sales on a monthly or even a weekly basis to show how well they adapted to the situation.
Economic News This Week
- Initial jobless claims declined by 249,000 for a total of 2.44 million for the week-ending May 16. The 4-week moving average was 3.04 million, a decline of 561,000 from the previous week. While the number of claims continues to fall every week, the U.S. still loses millions of jobs every week. Up until March the economy had been adding a couple hundred jobs most months for years.
- The Conference Board’s Leading Economic Index fell by 4.4% in April. This followed a 0.2% decline in February and a 7.4% decline in March. A spokesman for the board said the sharp decline in the Index suggests “… the U.S. economy is now in recession territory.”
- April existing home sales fell 17.8% from March to a seasonally adjusted annual rate of 4.33 million. The National Association of Realtors also said sales were down 17.2% from April of 2019. While low interest rates are likely to be available for the rest of this year, an association spokesman noted the number of existing homes for sale is down 19.7% from April last year.
- New residential construction took a dive in April with the S. Census Bureau reporting building permits issued for privately owned housing units declined by 20.8% from March. Housing starts in April fell by 30.2% from March.
- The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey may offer a glimmer of hope. While the current indicators remain deep in negative territory, they improved in May from April. For example, the General Business Activity Index was at a depressing -43.1 this month yet this represents a 13.5 point increase from April.
Foodservice News This Week
- Starbucks tells of problems and plans. The coffee giant revealed a 35% to 40% decline in U.S. comparable store sales from the same period last year. Less than half of the chain’s U.S. stores were open last month. Meanwhile Starbucks’ same-store sales in China are down 20% from last year. Starbucks expects 90% of its stores to be open in June. The company had a plan in place to add more drive thru widows and “to go” stores in the next 3 to 5 years but now will advance that to 12 to 18 months.
- Starbucks’ CFO asks landlords for rent concessions for at least one year. The company stressed changes had not been confirmed and that conversations were “ongoing.”
- Will Boston Market’s new owner and new president spark a growth spurt? Engage Brands purchased Boston Market in April, providing an infusion of capital to the long struggling chain. Boston Market veteran Randy Miller was named president. He plans to expand the chain by growing in areas where it is strong.
- Taco Bell plans to hire at least 30,000 employees this summer. The chain will use some of new staff to meet the demand generated by the increase in off-premises business. Taco Bell will train some of the new hires to signal customers their order is being properly and safely prepared. The overall goal is to enhance speed and efficiency.
- It’s a simple fact: a lot of people who enjoy eating seafood do it when they eat out but seldom eat seafood at home. As a result, foodservice accounts for the bulk of fish sales. With so many restaurants closed for on premise dining the distributors processors and fishermen are hurting. Seafood purveyors are focusing on sales to retailers, but it remains a struggle and the captains are parking their boats.
- CFRA Holdings, a 49-unit IHOP franchisee, has filed for bankruptcy protection. The Pinellas County, Florida-based company operates IHOP restaurants in North Carolina, South Carolina, Tennessee and Virginia.
- Growth Chains: Travel Centers of America plans to open eight franchised locations the first six months of this year and six franchised locations in 2021. Rise Southern Biscuits & Righteous Chicken signed an area development agreement for the state of Virginia that calls for the opening of a minimum of 25 Rise locations in the next 9 years.
- Comparable Store Sales Reports: BBQ Holdings (Famous Dave’s company-owned locations down 6.8% and franchised units down 13.1%) and Texas Roadhouse (company-owned locations down 8.4% and franchised units were down 8.5%.)
For details and same-store sales of other chains Please Click Here for the most recent Green Sheet.