Up to 85% of restaurants could close, according to a study from the Independent Restaurant Coalition, which formed during COVID-19 to provide a voice for smaller operators. The IRC recommends the Federal Government establish a $120 million Restaurant Stabilization Fund to save the industry. The IRC contends establishing the fund will generate $248 billion in economic returns.
The group of restaurant operators and chefs state that privately owned restaurants with fewer than 20 locations make up 76% of the industry and directly employee 11 million people. Indirectly the group claims to support another 5 million workers at small farms, fisheries, distilleries, and vineyards.
The coalition goes on to say that these restaurants had been operating and expanding for years until the pandemic hit. They now face numerous problems when trying to reopen including`22 unpaid bills and staffing up while many are restricted to a limited number of customers by government guidelines
Economic News This Week
- Total construction spending declined 2.1% in May compared to April, per an estimate from the U.S. Census Bureau.
- S. automobile sales picked up a bit in May after a miserable April. But sales were down 32% from May 2019. A Toyota spokesman said consumers were buying in May but fleet buyers, particularly car rental firms, were absent.
- The Chicago Business Barometer inched up to 36.6 in June from 32.3 in May. (Any reading less than 50 means contraction.) Of the five main indicators, production posted the biggest monthly gain with a 10.1-point increase. Order backlogs gained 5 points in June but employment fell 5.1 points for the month.
- After posting declines in March and April, new factory orders for manufactured goods rose 8.0% in May, per the U.S. Census Bureau’s full report. Shipments increased 3.1% and unfilled orders increased 0.1%.
- The private sector added 2.37 million jobs in June, per an estimate from ADP’s Employment Report. Small firms (49 or fewer employees) added 961,000 jobs. Medium sized firms (50 to 499 employees) added 559,000 new jobs. Firms with 500 or more employees added 873,000 jobs. In May, employment declined by 2.76 million jobs, per ADP. The June report said the leisure and hospitality sector added 961,000 jobs.
- Initial jobless claims totaled 1.43 million, a decline of 55,000 for the week-ending June 27. The 4-week moving average totaled 1.5 million, a decline of 117,000. While the number of new claims continues to trend downward, it remains consistently in the 1.5 million range.
- Unemployment fell to 11.1% in June, a 2.2-point improvement compared to May, per The Bureau of Labor Statistics. The number of unemployed persons remains up 7.6%, or 12.0 million people, since February.
- Employment rose by 4.8 million in June. As hiring picked up, though, so did the number of COVID-19 cases, resulting in some states reinstating dining restrictions. These results led the Wall Street Journal to wonder if this could lead to an unfortunate cycle where employment gains result in more COVID-19 cases which will, in turn, lead to employment gains being lost?
- The Conference Board’s Consumer Confidence Index increased in June. After remaining flat in May, the index increased 12.1 points for a reading of 98.1 in June. The Present Situation Index improved to 86.2 in June from 68.4 in May. The Expectations Index climbed to 106.0 in June from 97.6 in May. While the increases are certainly welcome, a Conference Board spokesman pointed out that confidence “…remains well below pre-pandemic levels.”
Foodservice News This Week
- Hiring at foodservice and drinking places came on strong in June when the industry added 1.48 million employees. Many of these slots filled were the result of layoffs and furloughs because of restaurant shutdowns in response to COVID-19. In any case of the 4.77 million hired in the private sector last month, 30% were at restaurants.
- A JP Morgan analysis of consumer spending says increased restaurant patronage may result in increases of positive coronavirus cases. After studying 30 million Chase card holders and Johns Hopkins University’s case tracker, a JP Morgan analyst concluded higher spending at restaurants predicted an increase in COVID-19 infections 3 weeks later. But, increased spending at supermarkets predicted a slower spread of the virus.
- Some restaurant chains may be bankrupt but someone still wants them. The Wall Street Journal points out a number of bankrupt chains have already found buyers. They include Krystal, Logan’s Roadhouse, Gordon Biersch, Bar Louie, Brio and Bravo and the U.S. division of Le Pain Quotidien. Meanwhile none of the major retailers in bankruptcy have been purchased. The reasoning is its easier to turn around a restaurant and restaurants with franchisee models may be less capital intensive to operate. And, restaurant companies can be significant bargains. The Bravo and Brio chains were recently purchased for around $30 million after they sold for $!00 million in 2018.
- As the economy continues to struggle with unemployment, three major chains committed to some heavy summer hiring. Denny’s plans to add 10,000 new employees. Subway plans to add 50,000 people to its franchisee staffs. And, always the leader, McDonald’s has committed to hiring 260,000 people to help with the expected summer rush.
- Uber satisfies its appetite for growth by acquiring Postmates. Uber seemed on a quest to land a delivery company since COVID-19 wreaked havoc with its ride-sharing business. Uber made a run at GrubHub last month but the deal failed due to fears of regulatory concerns and pricing disagreements. GrubHub since has been sold to Netherlands-based Just Eat Takeaway.com. Postmates has strong presence in many major cities, including Las Vegas, Los Angeles, Phoenix and Sand Diego. The all-stock deal for Uber’s purchase is thought to be worth $2.65 billion.
- GrubHub’s new owner seems to travel a different route. Just EatTakeaway.com is quite happy to let the restaurants handle delivery while it receives a cut from sales by providing advertising and taking orders from its website. The company’s founder is quoted as saying “We don’t put people on bikes.”
- Chick-fil-is America’s favorite restaurant in the latest American Customer Satisfaction Index. This is the chicken chain’s sixth consecutive year in the top spot for the index which surveys half a million consumers. Chick-fil-A scored 84 out of a possible 100 and was 4 points ahead of Chipotle.
- Growth Chains: Shake Shack ‘s licensee Maxim’s Caterers plans to have 55 Shacks in mainland China by 2030. Chick-fil-A opened a restaurant in New Jersey and will open four more in the state. The 4-year old Clean Juice chain opened its 100th unit. C-store chain QuikTrip plans to add 40 to 70 stores in the Denver area.
- Restaurant Business International provided a preliminary look at the comparable store sales for the company’s various chains. Burger King’s comps are trending flat from last year. Popeye’s comp store sales have retreated from the plus 40% to the very high 20% range, still driven by their hugely successful chicken sandwich. Tim Horton’s comparable store sales are running in the negative high teens. RBI will announce the precise numbers in early August.
For the most recent comparable store sales data, please click here for the latest Green Sheet