The National Restaurant Association’s performance index showed a sharp increase in March but the organization urged caution in evaluating the results. Double-digit growth in personal income may have set an all-time record. Fast feeders now dominate the restaurant market. NAFEM members discuss supply chain issues. These stories and more This Week in Foodservice.

The National Restaurant Association’s Restaurant Performance Index jumped 5.0 points in March driven in large part by increases in same store sales and customer traffic. The index went up to 105.1 in March from 100.1 in February.

Tempering the good news, the NRA points out the comparisons are against weak March 2020 numbers. With that in mind, the 9.4% jump in the Current Situation Index may not be as positive as it appears. Further, the NRA states that while the trendline is encouraging with operators reporting higher sales and traffic in March, both remain less than pre-pandemic levels. The Expectations Index hit 105.7, a 0.9-point increase, indicating restaurant operators remain convinced that prosperity is right around the corner.

As for investing in their operations, 58% of those surveyed said they had made a capital expenditure for equipment, expansion or remodeling in the last 3 months. This is up from 49% last month and is the highest reading since February 2020. Looking ahead, 64% of operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months. This is unchanged from last month and remains the highest level in two years.

While not a great report, there are some positive aspects in this month’s RPI.

Economic News This Week

• Real gross domestic product increased 6.4% on an annual rate in the first quarter, per the Bureau of Economic Analysis’ first estimate. As a point of reference, in the fourth quarter of 2002 GDP increased 4.3%. The U.S. economy is now within one percentage point of where it was when the pandemic struck last year. Many economists are surprised at the fast recovery and attribute it to consumer spending on big ticket items like cars and furniture. Government spending on stimulus to consumers, vaccines and aid to business helped, too.
• Initial jobless claims decreased 13,000 for a total of 553,000 for the week ending April 24. The 4-week moving average fell by 44,000 to a level of 611,750. The drop in claims, while small, was at least moving in the right direction.
• Personal income increased 21.1% in March, while personal outlays increased 4.2%, per the Bureau of Economic Analysis. Personal income is at a record high going back at least to 1946. The $1.9 trillion stimulus package from the federal government certainly helped drive this increase.
• The Chicago Business Barometer hit a 38-year high in April. The index increased 5.7 to a level of 732.1. The New Orders Index rose 9.9 points to near a 7-year high. The Order Backlog Index rose an impressive 16.2 points. The Employment Index inched up only 1.7 points, but it was the second successive month in expansion territory.
• The University of Michigan April Index of Consumer Sentiment’s final reading improved more than what was forecasted. The final reading of 88.3 in April was up from 84.9 in March. The Current Economic Conditions Index finished April at 97.2, up 4.2 points from March. The Index of Consumer Expectations came in at 82.7 compared to 79.7 in March.

Foodservice News This Week

• Fast food came to dominate the restaurant market during the pandemic, per the NPD Group. For the 12 months ending in March, fast food took 70.2% of dollars spent eating out and 82.9 % of all restaurant traffic, per NPD. Fast food gained 7.1% of the market share by dollars that full-service restaurants lost. Moreover, NPD believes fast feeders will gain more market share if consumers stick with the mobile ordering habits they picked up during the pandemic.
• The pandemic had a major impact on where people work and live and eat. For example, employees who were told to work from their homes were no longer patronizing the coffee shop or buying lunch at the bar and grill across the street from their office building. But they may hit the drive-thru window at a fast-food place near their homes. Then there are the people who were happy living in a one bedroom apartment in the city. Suddenly both spouses are working from home and stumbling over one another. Then a house in the suburbs offering more than twice the space as the apartment costing not much more than the apartment rental didn't look so bad.
• The National Restaurant Association and ServSafe released an updated version of its COVID-19 Operating Guidance. The update incorporates new information on best practices to train staff on risk mitigation regarding the spread of COVID-19. It incorporates the latest information from sources including the Centers for Disease Control and Prevention (CDC), U.S. Food & Drug Administration (FDA), Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OHSA), and the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE).
• Foodservice equipment and supplies manufacturers continue to wrestle with supply chain issues. The North American Association of Food Equipment Manufacturers surveyed its members and 60% of respondents said they are experiencing metal supply issues, with steel and aluminum being the most prevalent challenges (52%). Those responding also are impacted by shortages of plastics (42%) and semi-conductor chips (33%), lumber, wire and wire harnesses. These supply issues impact respondents in a variety of ways, including their ability to control costs. In response, these manufacturers are sourcing new vendors both within (68%) and outside (45%) the countries where they currently source the various items that go into their products. More than half of the respondents also said delays and cost increases in air and intermodal shipping are having a negative impact on their businesses. Regarding imports from China, 60% of respondents report experiencing supply issues, like metals shortages, that are forcing them to shift supply chains by sourcing new vendors both in China (41%) and in other countries (56%), including India, Malaysia, Mexico, South Korea, Taiwan, Thailand, Turkey and Vietnam. Supply issues with imports from China also are impacting respondents’ abilities to compete (62%), grow (64%), control costs (100%) and their need for employees (50%).
• The strong demand for chicken – sandwiches, tenders, nuggets, wings or whatever – has resulted in a genuine shortage of this protein. Several chicken chains, including KFC and Bojangles, admit they are struggling to keep up with demand.
• McDonald’s reported strong financial results for the first quarter of 2021. Systemwide sales increased 12%. On a global basis, same-store sales increased 7.5%. Results were even stronger domestically, where same-store sales increased 13.6%. The burger giant said new menu items, especially chicken sandwiches, increased sales volume. McDonald's reported a net income of $1.54 billion. McD’s was able to accomplish this with dining rooms closed and other restrictions in many countries.
• Tim Hortons closed its lab store. Located in the base of the iconic brand’s headquarters in downtown Toronto, the chain hoped the store would serve as a test site for innovative concepts, products and equipment. In fact, the store frequently had patrons lined outside when it opened in 2019. A spokesman for Restaurant Brands International, Hortons' parent company, blamed the closing on the pandemic which drove the coffee drinkers out of the surrounding buildings.
• Growth Chains: Chicken Salad Chick will open its fourth Indiana restaurant. Noodles & Company said the majority of the 10 to 15 restaurants the chain will open this year will be company locations. The company anticipates opening two to four franchised units.
• Same store sales reports: Burger King up 0.7%, Noodles & Company (systemwide up 10.7%, company-owned units up a10.5% and franchised units up 11.7%), Popeyes Louisiana Kitchen up 1.5%, Starbucks up 9.0%, Texas Roadhouse up 18.5%, Tim Hortons down 2.3% and YUM Brands (Habit Burger up 13%, KFC up 8.0%, Pizza Hut up 16%, and Taco Bell up 16%), YUM China (KFC up 5% and Pizza Hut up 38%)

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