The National Restaurant Association’s Restaurant Performance Index hit a historic low of 94.9 in April. Essentially, the RPI changed little from the March reading of 95.0.

The Current Situation Index hit 92.8, a decline of 0.3. Not surprisingly, just 3.0% of the operators surveyed in April reported an increase in same-store sales. Considering the lockdowns, it would have been surprising if anyone reported an increase in same-store sales.

The other major component of the RPI, the Expectations Index hit 97.1 in April, a 0.1 increase compared to March. Only 17.0% of the operators expect sales to increase in 6 months. The sales outlook is the most negative recorded in the history of the survey.

While the RPI has bounced around, operators have been fairly consistent when it comes to making capital investments in their businesses. While half of those surveyed said they made capital investments for equipment, expansion and/or remodeling in the previous three months, the NRA rightly points out that three-month period included February, which was before the industry’s lockdown.

As for future investment plans, 31% of operators plan to make an expenditure in the next 6 months. This is about half of the average for the previous 6 months.

With restaurants reopening starting in May, next month’s report should provide some critical insight about what the future may hold for the industry. Did the industry bottom out in April? Only time will tell.

Economic News This Week

• Payroll processing company ADP reported the U.S. shed 2.76 million jobs in May. Since a lot of estimates have been far greater than the 2.7 million job loses ADP reported, the U.S. Bureau of Labor Statistics employment report will come under careful scrutiny when it is published Friday morning.
• The Bureau of Labor Statistics Monthly Employment Situation Report was surprising. Unlike most of the surprises thus far in 2020, this report was surprisingly good. The bureau reported unemployment checked in at 13% in May, a decline of 1.4%. This represents employment rising by 2.5 million jobs in May. Leading into this jobs report, countless predictions called for substantial increases in unemployment, with some predicting the jobless rate would hit 20% or more. The numbers were so much better than most estimates there was some speculation the findings were not valid. If so, expect the U.S. Department of Labor to issue revisions. In the meantime, accept the good news as a sign that recovery is underway. (Specific information regarding foodservice employment is below.)
• April new factory orders declined 13% compared to March, per the U.S. Census Bureau. Shipments and unfilled orders also declined for the month.
• Initial jobless claims totaled 1.8 million for the week-ending May 30, per the U.S. Department of Labor. This represents a decrease of 249,000 from the previous week. The 4-week moving of average hit 2.28 million, a decline of 324,750 claims. The number of claims filed continues its significant downward trend. Still, more than 1 million people continue to lose their jobs every week.
• The Institute for Supply Management’s Production Manufacturing Report continued to show contraction in May. (Any reading greater than 50 indicates contracting activity.) The Production Manufacturing Index was 43.1 for the month, a 1.6-point increase compared to April. In effect, the index continued to contract but at a slower rate. The New Orders Index rose 4.7 points for a reading of 31.8. The Production Index increased 5.7 points for a reading of 33.2. The Order Backlog Index hit 38.2, a 0.4-point increase. The May report shows the production sector remains deeply troubled but at least the rate of decline has slowed.
• The Institute for Supply Management’s Non-Manufacturing Report contracted in May. Despite rising 3.6 points, the index stayed in the contraction range with a final reading of 45.4. (A reading less than 50 means declining activity.) The Production Index increased 15 points yet it remained in the contraction territory with a reading of 41.0. The New Order Index increased 9.0 points but stayed in contraction mode with a 41.9 reading. The Order Backlog Index hit 46.4, a dip of 1.3 points. Of the 18 industries covered in the survey, 14 reported decreasing business including Accommodations and & Foodservices.
• Nonfarm business productivity decreased 0.9% in first quarter of 2020, per the Bureau of Labor Statistics. Output decreased 6.5% and hours worked decreased 5.6%. Unit labor costs in the total manufacturing sector increased 6.9% in the first quarter of this year.
• April private construction spending fell 3% from March, per the U.S. Census Bureau. Residential construction spending fell 4.5% from March.

Foodservice News This Week

• The Bureau of Labor Statistics’ May Employment Situation Report provided some good news for the foodservice industry. After losing more than 400,000 jobs in March and roughly 5.5 million jobs in April, the BLS reported foodservice jobs rose by 1.3 million in May. While there was speculation the findings were too optimistic, it has been pointed out that many restaurants started reopening last month so an increase in employment is quite realistic.
• One trend COVID-19 continues to accelerate? Food delivery. But that comes as no surprise. What is surprising, though, is the increasing demand to have fine-dining food delivered. Once the domain of pizza and Chinese food, it now seems delivery will be a significant player in all segments moving forward, in many cases supported by ghost kitchens.
• Cracker Barrel is encouraged by the volume of customers returning as its dining rooms reopen. Same-store sales during the week-ending May 29 were down 76% at units that offered only takeout and delivery. In contrast, locations with dining rooms open reported a 32% decline in same-store sales. It appears that Cracker Barrel has a lot of loyal customers that have quickly come back given the opportunity. To help boost sales, Cracker Barrel will test selling alcohol in some of its locations, too.
• Luby’s is for sale. A special committee made up of the company’s board members said it believes selling represents the best way to maximize shareholder value. The company is open to a variety of scenarios, including selling its operating divisions, which include Luby’s Cafeterias, Fuddrucker’s and Culinary Contract Service; selling its real estate, or selling the entire company.
• Some Starbucks employees have to choose from a menu of unhappy alternatives. They can keep working, but for fewer hours. This would conform with the coffee giant’s pared back operations. Or they can apply for unemployment benefits and hope that Starbucks gears up its operations and calls them back soon. A third alternative is to apply for other jobs in what is obviously a miserable job market.
• BarFly Ventures files for bankruptcy. The Michigan-based organization is the parent company of HopCat, Stella’s Lounge and Grand Rapids Brewing Company. While the company is moving through bankruptcy it is executing a plan to reopen all locations.
• CEC Entertainment, parent company of Chuck E. Cheese, is negotiating with its lenders. The goal of the talks to raise money in order to avoid filing for bankruptcy.
• Growth Chains: Travel Centers of America will open locations in Florida, South Dakota, and Texas.
• Comparable Store Sales Reports: Casey’s General Store down 13.5% and Cracker Barrel down 41.7%.

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