This Week In Foodservice

The editorial team aggregates key industry information and provides brief analysis to help foodservice professionals navigate the data.

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Consumers Continue to Spend but Confidence may be Tested by Rising Inflation

Advance U.S. retail sales show consumers continue to spend. Sales at food services and drinking places increased significantly in April. The consumer price index showed inflation is on the rise which affects consumer confidence. A survey of foodservice employees indicated many held negative feelings toward their employers. These stories and a whole lot more This Week in Foodservice.

April retail sales were flat when compared to March, per the U.S. Census Bureau’s advance estimate. Placing this in proper context, the Census Bureau revised its March projections to a 10.7% increase. Despite sales projections being flat from month to month, consumer spending continues to increase. Along those lines, during the first 4 months of this year, total retail sales have risen 22.2% from the same period last year, per the Census Bureau. Compared to April of 2020, total retail sales this year are up 51.2%.

Foodservice and drinking place sales increased 3.0% in April compared to March level sales. In the first 4 months of this year compared to the first 4 months of 2020, restaurants and bars had a 15.8% sales increase. The Census Bureau also reported April foodservice sales are up 116.8% compared to the same month in 2020.

This data always comes with some cautions and limitations. First, the Census Bureau’s advance report is based on a limited sample and may be revised with the receipt of a broader sample. Second, the survey covers only restaurants and bars. Not included are hotels, resorts, clubs, employee feeding, schools, colleges, healthcare and military. Finally, some but not all the statistics are adjusted for seasonal variations, holidays and weekends but not for menu price changes.

Economic News This Week

  • Initial jobless claims decreased by 34,000 for a total of 473,000 for the week ending May 8. This is the lowest level for initial claims since the week of March 14, 2020. The 4-week moving average totaled 534,000, a decline of 28,250. And like last week, the 4-week moving average was the lowest since the week of March 14, 2020.
  • Consumer credit increased 7.4% in March, per the Federal Reserve. Revolving credit, which is mostly credit card debt, increased 7.9%, while non-revolving credit (auto loans, student loans, etc.) increased 7.2%.
  • The April Producer Price Index increased 0.6%, per the Bureau of Labor Statistics. The index for both goods and services increased 0.6%. In the last 12 months the change in final demand grew 6.2% raising fears of inflation. Food prices were up 2.1% for the month.
  • The Consumer Price Index increased 0.8% in April, per the Bureau of Labor Statistics. In the 12 months ending in April the CPI is up 4.2%. Without food and energy prices, the Consumer Price Index was up 3.0% in the last 12 months.
  • Total industrial production increased 0.7% in April, per the Federal Reserve. The index for manufacturing rose 0.4%. The index for mining rose 0.7% and the index for utilities increased 2.6%. Capacity utilization for the industrial sector rose 0.5% in April to 74.9%, a rate that is 4.7% less than its long-run (1972-2020) average.
  • The University of Michigan Index of Consumer Sentiment took an unexpected dip in the final May report. The Index fell to 82.8 in May from 88.3 in April. The Current Economic Conditions Index declined to 90.8 in May from 97.2 in April. The Consumer Expectations Index declined to 77.6 in May from 82.7 in April. The University spokesman put the blame squarely on rising inflation.

Foodservice News This Week

  • The Restaurant Revitalization Fund has been accepting applications for a couple of weeks and, somewhat surprisingly, there have been few complaints thus far. Operators have praised the program for its flexibility. For example, the new grants allow operators to use their own point-of-sale data, which can make filing an application easier. Plus, the program gives the operators more flexibility in how they spend the funds. Two criticisms of the Revitalization Fund is there have been a lack of communication to eligible companies and the $6 billion fund will likely be inadequate to meet the needs of all the operators. And there is some merit to the latter point. As of May 12, the Small Business Administration reports having received more than 266,000 applications requesting $65 billion in funds.
  • Food at home prices rose 0.4% while food away from home prices increased 0.3% for April, per the Bureau of Labor Statistics. In the last 12 months, food prices have risen 2.4% with food at home prices up 1.2% and food away from home prices up 3.8%.
  • Despite government support, the restaurant industry will continue to suffer. That was the findings from a study by Florida Atlantic University. Labor will represent the biggest challenge the industry faces. The survey revealed employees feel companies were too quick to fire or furlough them. The study also shows employees feel employers cared more about their stock prices than their workers. One third of the employees said they will seek employment outside the industry.
  • The parent company of Muscle Maker Grill acquired Pokemoto, a 13-location concept known for its take on the traditional Hawaiian poke classic. The acquisition of Pokemoto is Muscle Maker Grill’s second acquisition in 2021; the first being SuperFit Foods, a fresh-prepared meal prep service that produced more than 220,000 meals in 2020. Pokemoto’s locations span four states: Connecticut, Rhode Island, Massachusetts and Georgia.
  • With the need for additional employees being measured in the tens of thousands, major restaurant chains try to solve the problem by throwing money at it. The reason for people not returning to the workforce varies greatly, but the fact remains restaurants need people to run their businesses. McDonald’s and a dozen of other major companies plan significant wage increases. In the case of Big Mac, the increases apply to company-owned units but not necessarily to franchised stores. The change will probably mean a minimum rate of around $11 per hour with top a top of $17. Eventually, they will have a minimum hourly wage of $15. Chipotle Mexican Grill has taken to advertising to prospects that they can earn $100,000 after 3 years of working at the fast-casual chain.
  • Growth Chains: With about 400 restaurants in the Middle East, CKE has plans to reach 700 in the region. Chipotle Mexican Grill will open about 200 stores this year. Teriyaki Madness will open five locations in Chicago in the next five years. Shake Shack plans to open 45 to 50 locations in 2022. In early May, Shake Shack still had 16 stores closed due to the pandemic. Freddy's Frozen Custard & Steakburgers signed 4 multi-unit agreements that will result in the addition of a total of 29 units. The regions involved include Southern California, Central Florida, Texas and Ohio.
  • Comparable Store Sales Reports: Arcos Dorados up 2.1%, Bloomin Brands (combined up 3.3%, Outback up 4.1%, Carrabba’s up 8.9% and Bonefish Grill down 2.9%) Denny’s down 20.0% and Papa John’s Pizza (all North American units up 26.2%, company-owned locations up 23.3% and franchised units up 27.1%)

For details and same store sales of other chains, Please Click Here for the latest Green Sheet.