The National Restaurant Association’s Performance Index crept up in July. Some landlords offer a clause in leases to reduce the renter’s payments if another pandemic occurs. New York City restaurant operators anxiously await a plan to reopen on-premises dining. These stories and a whole lot More This Week in Foodservice.
The National Restaurant Association’s Performance Index hit 97.1 in July, an improvement of 0.7 from June. While the moderate gain is encouraging, any reading less than 100 still indicates the industry remains in contraction territory, per the NRA.
The Current Situation component posted a 1.4-point increase in July for a final reading of 96.2. Same-store sales and customer traffic increased for the third consecutive month after hitting historic lows in April. The Expectations index, the other major component, remained unchanged from June at 98.0.
As for operators willing to invest in their businesses, 50% said they had made a capital expenditure for equipment, expansion or remodeling in the last 3 months, which is up 3% from June. Looking ahead, 44% of those surveyed plan to make a capital expenditure for equipment, expansion or remodeling in the next 6 months. This represents a 5% increase from June.
The bottom line: while operators report some improvement, they remain very concerned about the future.
Economic News This Week
- The second estimate for real gross domestic product for the second quarter was revised to a decline of 31.7%, by the U.S. Bureau of Economic Analysis. The previous estimate projected a 32.9% decline.
- Initial jobless claims declined 98,000 for a total of 1 million for the week-ending August 22. The 4-week moving average fell by 107,240 for a total of 1.07 million. While the number of claims continues to drift lower, this still is yet another week with more than 1 million Americans losing their jobs.
- Single-family home sales totaled 901,000 in July, per the U.S. Census Bureau. This is 13.9% greater than June and 36.3% more than the July 2019 estimate.
- Despite slipping a bit in August, the Chicago Business Barometer remained in expansion territory at 51.2. Any reading greater than 50 indicates growth. August was the second consecutive month where the index was exceeded 50 after being in negative territory for a year. The Production Index hit its highest level since June 2019. The New Orders Index rose to a one-year high. The Order Backlog Index declined by a point after showing a strong increase in July.
- New orders for manufactured goods increased 11.2% in July, per the U.S. Census Bureau’s advance report. This marks the third consecutive monthly increase in durable goods orders.
- Real disposable income decreased 0.1% in July, per the U.S. Bureau of Economic Analysis. Real personal consumption expenditures increased 0.3% for the month.
- Some landlords now include clauses in their leases to protect tenants in the event of another pandemic. When COVID-19 hit earlier this year, one of the first places foodservice operators turned for relief was to their landlords. Some landlords agreed but the heavily leveraged ones found it difficult to be accommodating. Now some landlords offer deferred payments as an incentive. Given the way restaurants were hammered by the pandemic such a clause has to be attractive to operators.
- Consumer confidence declined in August, per the Conference Board. Its index fell to 84.8 from 91.7 in July. The Present Situation Index showed a significant drop, declining to 84.2 in August from 95.9 in July. The Expectations Index fell to 85.2 in August from 88.9 in July. The Index is at its lowest point since May 2014.
Foodservice News This Week
- Golden Gate Capital plans to sell its stake in Red Lobster to a consortium of investors. Golden Gate Capital purchased Red Lobster from Darden for $2.1 billion in 2014. Thai Union bought a minority position in Red Lobster for $575 million in 2016. The price of this latest deal was not provided.
- New York City restaurant operators are looking to the government for direction but there doesn’t seem to be much. Governor Cuomo has been quoted as saying that New York City must be “more careful” than other places, with respect to how it reopens from the pandemic-related shutdowns. He then gave jurisdiction for reopening dining areas to New York City Mayor Bill De Blasio, who put indoor dinning on hold on July 1. De Blasio has since indicated that he might keep it that way until next year. While noting the last thing they want is another surge, restaurant operators also say no plan is being shared with them.
- Buffalo Wings & Rings Debuted a fast-casual design. Simply called Wings & Rings, the new design will open in Milford, Ohio and provide what the company describes as a club-like experience for guests.
- The pandemic presents problems and benefits to truck stops. Most of full-service restaurants at travel centers closed due to the pandemic. And the Travel Centers of America CEO said the company learned it is a poor manager of full-service restaurants and may bring in a company to run them. But the pandemic also drove sales growth when e-commerce took off and put more truckers on the road. Also of benefit was consumers choosing to take driving trips as opposed to flying vacations.
- Growth Chains: VooDoo Daddy’s Steam Kitchen will open its second unit in the first quarter of 2021. The Cajun-themed cuisine restaurant is owned by Ron Lynch, who led the growth of Tilted Kilt and Schlotzsky’s Deli. Lynch thinks VooDoo Daddy’s could have 200 locations in a decade.
- Comparable Store Sales Reports: Applebee’s down 49..4%, Baskin Robbins down 6.0%, BJ’s Restaurants down 57.2%, Chuy’s Holdings down 39.0%, Dunkin’ down 18.7%, El Pollo Loco (system wide down 9.7%, company-owned units down 8.5% and franchised units down 10.6%), IHOP down 59.1%, Luby’s (all concepts down 78.9%, Luby’s Cafeteria down 73.6%, Fuddrucker’s down 90.8%, Cheeseburger in Paradise down 96.1% and combination units down 88.2%) and Red Robin down 41.4%.
For details and same store sales of other chains, Please Click Here for the latest Green Sheet.