Restaurant operators see some hope on the horizon. Taco Bell claims the top spot on Entrepreneur Magazine’s Franchise 500 list. A legal case has been appealed to the U.S. Supreme Court that may decide if business interruption insurance covers losses due to the pandemic. These stories and more This Week in Foodservice.
Based on the strength of its forward-looking indicators, the National Restaurant Association’s Restaurant Performance Index rose 1.1 points in December for a reading of 98.6. Readings of less than 100 indicate the industry remains in contraction mode.
The study’s Current Situation Index declined by 0.2 for a reading of 94.9. The NRA chalked up the decline to “continued deterioration” of business conditions in the month with same-store sales registering its worst reading since May.
In contrast, the forward-looking Expectations Index posted a reading of 102.4, a 2.4-point improvement. The NRA believes operators are starting to see the light at the end of the COVID-19 tunnel.
Looking at operators’ willingness to invest in their businesses, 52% said they made a capital investment on equipment, expansion and/or remodeling in the past few months. This represents a 5% increase from November. In addition, 52% of operators plan to make investments in equipment, expansion or remodeling in the coming months. This marks an 11% improvement compared to the previous month.
While the industry still faces significant challenges, here is hoping the operators’ outlook for an improved future is correct.
Economic News This Week
- Real Gross Domestic Product increased 4.0% on annual basis in the fourth quarter of 2020 compared to the third quarter, per an advance estimate from the U.S. Bureau of Economic Analysis.
- Initial-jobless claims totaled 847,000 for the week-ending January 23. This represents a decline of 67,000 from the previous week. The 4-moving average rose by 16,250 to a level of 868,000. Thus, layoffs continue at near record levels which indicates a slowing economy.
- Consumers continue to save much of their stimulus money and that could aid the recovery. In the first three quarters of 2020, Americans saved double the amount of money they saved in the same period one year earlier, according to estimates from some economists estimate. One economist predicts because many more affluent households cut back on spending, they are sitting on pools of cash and there is a lot of pent-up demand for various goods and services. He projects the recovery will be in full swing by May or June and could include crowded beaches and crowded pubs.
- Real Disposable Personal Income increased 0.2% and Real Personal Consumption Expenditures decreased 0.6% in December, per the Bureau of Economic Analysis.
- The Chicago Business Barometer reached 63.8 in January, a 5.1-point increase from the previous month. This marks the highest level the Index has been at since July 2018. The Production Index shot up 9.9 points to the highest this indicator has been since January 2018. Demand also grew with the New Orders Index surging 7.9 points to the highest it has been since November 2018. The Order Backlog Index gained 6.9 points rising to a 23-month high. The negative in the survey was the Employment Index, which fell 4.5 points marking the 19th straight reading in the contraction area.
- December sales of new single-family homes came in at an adjusted rate of 42,000. This is 1.6% more than November and 15.2% greater than new home sales in December of 2019.
- Consumer confidence increased “moderately” in January, reports the Conference Board. The Index rose to 89.3 in January from 87.1 in December. The news was not all good as the Present Situation Index fell to 84.4 in January from 87.2 in December. The Expectations Index rose to 89.3 in January from 87.1 in December. A spokesperson for the Conference Board adds that one take away from the January report is that consumers see the economy improving in the not-too-distant future. Consumer Confidence Index® | The Conference Board (conference-board.org)
Foodservice News This Week
- Taco Bell topped Entrepreneur Magazine’s list of the top 500 franchise operations. The quick-serve chain was not alone in this ranking, with 5 of the top 10 franchise companies restaurant companies: Dunkin’ (no. 2), Popeyes Louisiana Kitchen (no. 4), Culver’s (no. 5) and Jersey Mike’s Subs (no. 7.)
- Lettuce Entertainment revives several of its old concepts as virtual brands. Hoping to feed off consumers’ appetites for nostalgia, the Chicago-based multi-concept operation has come up with a neat idea for launching, or relaunching, such concepts as Vong’s Thai Kitchen, Papagus Tavena, Ben Pao and Naoki Sushi. Because of their history in Chicago, these concepts return to market with some brand awareness and are available via third party delivery platforms. Lettuce uses its kitchen at Shaw’s Crab House to prepare the food.
- Are government-mandated restaurant closures aimed at stopping the spread of COVID-19 covered by business interruption insurance? We may soon find out. The U.S. Supreme Court has been asked to take a case that could resolve this issue. The case being appealed involves a Miami restaurant called Berries that was shut down due to road construction. Insurance companies have refused to pay on claims for business interruption because there was no physical damage to the restaurant. The U.S. District Court of Appeals for the Eleventh Circuit decided that Berries was not entitled to compensation. However, a federal court in Cincinnati came to a different conclusion ruling that “physical damage’ might mean being denied the use of the facility and the reason for the shut down was not the virus but rather the result of a directive by the Governor of Ohio. Question of restaurants' business-interruption coverage moves to U.S. Supreme Court.
- Food trucks remain on the road. While food trucks have been hurt by a slew of major events cancelled due to the pandemic, they have adapted, Forbes reports. Many take orders via an app or their website. Some truck operators even work with delivery services. In Chicago, some food trucks now feed essential workers. Perhaps the most unexpected development is restaurants allowing food trucks to operate from their parking lots while indoor dining is shut down.
- McDonald’s CEO described 2020 as “challenging yet inspiring.” It would be a safe bet that a lot of executives would not use such benign terms for the year. For the quarter McDonald’s global comparable-store sales were down 1.3%. System-wide sales increased 1.0%. U.S. same-store sales rose 5.5%.
- Chili’s should finish January with same-store sales just five or six percentage points less than the chain’s pre-pandemic levels. Factoring out California and Illinois, both states with very long government-mandated dining room shutdowns, Brinker’s same store sales would have been up 2.0%.
For details and same store sales of other chains Please Click Here for the latest Green Sheet.