Market research firm Mintel Group made some very specific predictions about the foodservice business as the industry’s struggles due to COVID-19 continue.
Mintel’s forecast that 2020 industry sales will decline 30% compared to 2019 appears to be a worse case scenario. Sales at limited-service restaurants, which include fast-casual and quick-service concepts, will decline 13% to 18%, per Mintel. Sales at full-service restaurants will decline 39% to 42%, per Mintel.
Consumers will continue to have concerns about dining rooms so food safety and sanitation will be critically more important than ever. “Transparency” about safety will help operators win back diners, Mintel notes.
Continued restrictions regarding on-premises dining means off-premises will continue to play a larger role in restaurants’ success. Along with curbside pickup, no-contact delivery, secure cubby pickup options and walk up windows can all play a role in reassuring customers about safety.
Finally, the good news: Mintel predicts total market sales will rebound to pre-pandemic levels by 2023.
Economic News This Week
- Initial-jobless claims totaled 1.19 million, a decline of 249,000 for the week ending August 1. This marks the first significant movement in claims in weeks and represents the fewest number of claims since the start of pandemic in March. The bad news: more than 1 million people still lost their jobs. The 4-week moving average was 1.33 million, a decline of 31,000.
- S. non-farm payroll employment grew by 1,763,000 in July. The number of unemployed persons totaled 16.3 million, a decline of 1.4 million. As a result of these changes, the unemployment rate stands at 10.2%. Employment at foodservice and drinking places increased by 502,000. The Bureau of Labor Statistics attributes the improvement in the labor market to “continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it.”
- Real disposable personal income declined 1.8% in June, per Bureau of Economic Analysis. The bureau attributes the decline to a month to month reduction in benefits paid out as part of the CARES Act of 2020. Personal consumption expenditures rose 5.2% In June.
- New orders for manufactured goods increased 6.2% in June following a 7.7% increase in May, per data from the Census Bureau. Shipments rose 9.8% in June. This comes after a 3.0% May increase.
- The Institute for Supply Management’s Manufacturing Index rose to 54.2 in July from 52.6 in June. (Any reading greater than 50 indicates expansion.) The New Orders Index increased to 61.5 in July from 56.4 in June. The Production Index rose to 62.1 in July form 57.3. The Backlog of Orders Index increased to 51.8 from 45.3 in June. Of the 18 manufacturing industries included in the survey, 13 reported growth in July.
- Consumer credit decreased at a seasonally adjusted annual rate of 6.75% in the second quarter, per the Federal Reserve. Revolving credit, primarily credit card borrowing, decreased at annual rate of 31.75%. Non-revolving credit (car loans, student loans, etc.) increased at an annual rate of 2.0%.
- The Institute for Supply Management’s Services PMI grew slightly in July. (This report was formerly called the Non-Manufacturing PMI.) The Services Index totaled 58.1 in July, a 1-point increase. (Any reading greater than 50 indicates increasing activity.) The Business Activity Index increased to 67.2 in July from 66.0 in June. The New Orders Index totaled 67.7, an increase of 6.1 points. The Backlog of Orders Index grew by 4.0 points
- Private construction spending declined 0.7% in June compared to May. June residential construction spending was down 1.5% from May.
Foodservice News This Week
- Breakfast sales slump due to consumers changing their routines, according to Business Insider. McDonald’s share of the breakfast market has actually grown during the pandemic, but breakfast traffic has declined so much it is bringing down overall sales. Further, many people working from home means fewer consumers stopping to grab a cup of coffee on the way to their jobs. Both Starbucks and Dunkin’ report sales now peak later in the day.
- Nathan’s Famous teamed up with REEF Kitchen to expand its delivery business. The program will launch in Manhattan and then look at markets like Miami, Los Angeles and Minneapolis. REEF Kitchens is a national network of 70+ neighborhood kitchens across 18 cities that allows restaurants to open and expand their delivery businesses.
- Checkers Drive-In Restaurants saw the chain’s revenue increase even though the number of customer visits declined. Sales rose 4.0% as the size of orders increased. According to the NPD Group, Checkers was trailing nine other burger chains earlier this year. In March, though, the trend reversed as Checkers’ losses were smaller than its competitors. In April Checker s pulled further ahead as sales rose 10% to 20% compared to the same periods in 2019. Same-store sales rose 7.3% at company stores and 9.7% at franchised locations. During that time, company stores experienced a 15.1% decline in traffic, but the average check size increased 26.2%. Some speculation as to why Checkers has been outperforming the competition, is that customers perceive the double drive through design as saving them time.
- Thompson Hospitality may purchase Matchbox, a restaurant company that filed for bankruptcy. Thompson owns 51% of the 12-unit Matchbox chain and offered $14 million for the rest of the company. The deal requires court approval.
- Mulino II’s parent company filed for bankruptcy for seven of the chain’s 16 units. The company received roughly $2.3 million from the Paycheck Protection Plan but the company’s co-owners claims one its lenders, Benefit Street Partners, plans to take over the company by wiping out all the stakeholders in a debt to equity conversion paly.
- Comparable Store Sales Reports: Cheesecake Factory down 56.9%, Jack in the Box (system wide units up 6.6%, company owned units up 4.1% and franchised units up 6.6%.), Noodles & Company (system wide units down 30.9%, company owned units down 30.1% and franchised units down 35.4%), Wendy’s down 4.0% and Wingstop up 31.9%.
For details and same-store sales of other chains, Please Click Here for the latest Green Sheet.