This Week In Foodservice

Jerry Stiegler aggregates key industry information and provides brief analysis to help foodservice professionals navigate the data.

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Supply Chain Issues Complicate School Foodservice Operations

Labor remains in the spotlight for all the wrong reasons. Supply chain issues make school foodservice operations more complex. Ghost kitchens come to a U.S. Walmart location. One multiconcept operator has a big appetite for Middle Eastern expansion. These stories and more This Week in Foodservice.

In a unique stroke of timing, jobs and unemployment were the center of the plate economic issues as the U.S. celebrated Labor Day.

Total nonfarm payroll rose by 235,000 positions in August, per data from the U.S. Bureau of Labor Statistics. This is the fewest number of jobs the economy created in seven months. Many economists had projected job growth to be two to three times this level. Further, August’s performance is in sharp contrast to July, when job growth totaled 1.05 million.

One sector considerably slowing job growth was leisure and hospitality, which remained unchanged after gains averaging 377,000 per month over the prior three months. Restaurants and bars’ payrolls fell 42,000 and hiring at hotels and motels decreased 34,600, offsetting a 36,000 gain in arts, entertainment, and recreation jobs.

August represented the first monthly decline in restaurant jobs since December 2020, and followed a 7-month period in which the restaurant industry added nearly 1.4 million jobs, per the National Restaurant Association. Despite the solid gains in recent months, eating and drinking places remain at nearly 1 million jobs – or 8% – less than their pre-pandemic employment peak.

Still, the news was not all bad. The U.S. unemployment improved slightly at 5.2% for August compared to 5.4% in July. “It is important to keep the right perspective,” Brian Bethune, professor of practice at Boston College, told Reuters. “Given the supply chain constraints and the ongoing battle to lasso COVID-19 to the ground, the economy is performing exceptionally well.”

The surprising jobs report comes as roughly 9 million Americans lost their unemployment benefits and another 3 million saw the aid they receive decline by $300 a week, due to the expiration of Federal benefits. These benefits were part of the CARES Act that took effect in March of 2020 and was twice extended by the U.S. Congress. Already 26 states moved to end some or all the Federal benefits back in June and July.

Economic News This Week

  • Initial jobless claims totaled 340,000, a decrease of 14,000 for the week ending Aug. 28, per the U.S. Department of Labor. This is the lowest level for initial claims since March 14, 2020, when it was 256,000. The 4-week moving average was 355,000, a decrease of 11,750 from the previous week. This is the lowest level for this average since March 14, 2020, when it was 225,500.
  • Nonfarm business sector labor productivity increased 2.1% in the second quarter of 2021, the U.S. Bureau of Labor Statistics reported. Output increased 8.1% and hours worked increased 6.0%. Manufacturing sector labor productivity increased 8.0% in the second quarter of 2021, as output increased 5.5% and hours worked decreased 2.3%.
  • New orders for manufactured goods increased 0.4% percent for a total of $508.1 billion in July, per S. Census Bureau data. This follows a 1.5% June increase. Shipments 1.6% for a total of $508.5 billion in July. This follows 1.9% June increase. Unfilled orders, up six consecutive months, increased 0.3% for a total of $1,225.6 billion. This comes after a 0.8% June increase. The July unfilled orders-to-shipments ratio was 6.79, down from 6.90 in June. Inventories increased 0.5% for a total of $744.4 billion. This follows a 1.0% June increase.
  • Economic activity in the manufacturing sector grew to 59.9 in August, a 0.4 increase from July, per the ISM Report on Business. The New Orders Index came in at 66.7, a 1.8-point increase from July. The Production Index scored a 60, a 1.6-point increase from July. The Prices Index came in at 79.4, a 6.3-point decline. Employment came in at 49.3, 3.9 points less than the previous month.
  • Economic activity in the services sector grew to 61.7, just 2.4 points less than the all-time high recorded in July, per the ISM Report on Business. This marks the 15th consecutive month of growth for the services sector, per the ISM. The Supplier Deliveries Index registered 69.6, a 2.4-point decline from July. The Prices Index came in at 75.4, down 6.9 points from July.

Foodservice News This Week

  • Ghost Kitchen Brands expanded its relationship with Walmart by opening its first U.S. location in the big box retailer’s Rochester, N.Y., store. As part of this Ghost Kitchens will make one-stop meal pickup or delivery available from up to 25 restaurant concepts. Newer concepts to Ghost Kitchen Brands operations include Costa Coffee, Kraft Mac & Cheese, Dickey’s Barbecue Pit and Shaquille O’Neal’s Big Chicken. Ghost Kitchen Brands has already opened operations in Canadian Walmart locations. The plan calls for adding operations in Walmart units in Texas, California, Illinois and Georgia, among others.
  • FAT Brands Inc. struck a deal to open 136 brick and mortar restaurants across 5 countries in the Middle East. This comes roughly one week after FAT Brands agreed to acquire Twin Peaks. Over the next five years, master franchisee Kitopi will open restaurants for the following six FAT Brands concepts: Fatburger, Johnny Rockets, Buffalo’s Cafe, Great American Cookies, Elevation Burger, and Yalla Mediterranean. The FAT Brands concepts will become available within the next year through Kitopi’s existing footprint of more than 70 managed cloud kitchens, otherwise referred to as ghost kitchens throughout the region. Target markets for FAT Brands Middle Eastern expansion include the United Arab Emirates, Kingdom of Saudi Arabia, Bahrain, Qatar and Kuwait.
  • Shake Shack has hit “pause” on offering managers a four-day workweek, a perk the chain began testing in 2019. The decision was clearly influenced by the ongoing pandemic and the challenges all restaurant operators face in trying to recruit and retain employees. Shake Shack, which is in the midst of trying to hire more hourly workers, said there’s always a possibility this program could return in the future.
  • Add supply chain issues to the growing list of challenges schools face this fall as they welcome students back to their classrooms. As if dealing with the latest surge in COVID-19 cases and all the fallout that accompanies it were not enough, school foodservice operators must contend with food shortages and the fact that some suppliers do not have enough labor to make regular deliveries. That was the reality that one school foodservice operator in Palatine, Ill., had to deal with one Friday afternoon, per the Chicago Tribune. To make matters worse, when the operator called their secondary supplier, the message was the same. These changes come as school foodservice operators anticipate having to feed a record number of students and face their own labor challenges.
  • How will a vaccine mandate impact restaurant employment? That’s what the Hawaii Restaurant Association wanted to know. Vaccine mandates are designed to make employees and guests feel safer, yet they could cause other unintended labor challenges. In an informal survey of 120 restaurant operators, 60% believe they will lose 25% of their employees because they would rather quit than get vaccinated, the Hawaii Restaurant Association reported.
  • The Federal Trade Commission is investigating the performance of McDonald’s ice cream machines, according to various published reports. The FTC wants to know how McDonald's reviews suppliers and equipment, including the ice cream machines, and how frequently franchise owners work on their own machines. The investigation into the machines comes after the Biden administration in July opened a probe into products across a wide swath of industries, investigating whether or not manufacturers obstruct consumers from fixing the projects themselves. "Nothing is more important to us than delivering on our high standards for food quality and safety, which is why we work with fully vetted partners that can reliably provide safe solutions at scale. McDonald's has no reason to believe we are the focus of an FTC investigation," said McDonald’s in a statement.
  • Growth Chains: Little Caesars wants to add 35 units in the St. Louis market, opening at least 10 locations by the close of 2024. Brews Taphouse Inked a development deal to expand in the Florida market with five additional locations. The chain expects to open a location in Venice, Fla., in the spring of 2022. Mr. Brews opened its first Florida location in April. Press Waffle Co., a concept that generated national attention on the television show Shark Tank, opened a location in Little Rock, Ark. Press specializes in customizable authentic Belgian waffles, in both sweet and savory varieties. This marks the seventh location systemwide. Sweet Paris Creperie & Café plans to will bring seven new restaurants to Dallas and Miami. Sweet Paris already has 10 Texas locations: 8 in Houston, 1 in Austin, and 1 in San Antonio. Dallas will be a new hub for the brand. And the Florida locations will mark the chain’s first foray outside of the Lonestar State.