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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Packaging Challenges Pack a Punch for Foodservice Operators

Jobs remain a center-of-the-plate issue for various reasons. Packaging challenges pack a punch for operators. Denny’s plans to upgrade its kitchens. These stories and more This Week in Foodservice.

Nonfarm payroll employment rose by 531,000 in October, the U.S. Bureau of Labor Statistics reported. The unemployment rate edged down by 0.2% for a reading of 4.6% or 7.4 million unemployed persons. While both measures have declined from their highs at the end of the February-April 2020 recession, they remain 1.1% or 1.7 million greater than their levels prior to the onset of the coronavirus pandemic in February 2020.

In October, the number of long-term unemployed, those jobless for 27 weeks or more, decreased by 357,000 to 2.3 million. While a positive step, this is still 1.2 million more than the number of long-term unemployed in February 2020. The long-term unemployed accounted for 31.6% of the total unemployed in October.

The good news is that job growth was widespread, with notable job gains in leisure and hospitality, in professional and business services, in manufacturing, and in transportation and warehousing. Employment in public education declined over the month.

Looking specifically at the restaurant industry, 119,400 net jobs were added in October. That was nearly 4 times more jobs than the net payroll growth of just 31,000 in August and September combined. However, it still fell short of the average monthly increase of nearly 200,000 jobs during the first 7 months of the year, per the National Restaurant Association. As of October 2021, eating and drinking places remained nearly 800,000 jobs – or 6.4% – less than their February 2020 pre-pandemic employment peak.

Although employment trended higher across all restaurant categories during the first 9 months of 2021, none of the major segments have returned to pre-pandemic staffing levels. Between April 2020 and September 2021, full-service restaurants added more than 3.2 million jobs but that left the segment 444,000 jobs (or 7.8%) less than pre-pandemic employment levels. In the limited-service segment, quick-service and fast-casual operators were down 111,000 jobs (or 2.4%) from pre-pandemic levels. Other segments have a much longer road to reach pre-pandemic staffing levels. Employment counts in the cafeterias/grill buffets/buffets segment (-50.8%), foodservice contractor segment (-39.4%), bars and taverns segment (-20.1%) and catering and mobile foodservice segment (-19.1%) are still significantly below their February 2020 levels.

Economic News This Week

  • Initial jobless claims totaled 269,000, a decrease of 14,000 for the week ending Oct. 30, 2021, per the S. Department of Labor. The 4-week moving average was 284,750, a decrease of 15,000. Both are the lowest levels since March 14, 2020, when they totaled 256,000 and 225,000 respectively.
  • Private sector employment increased by 571,000 jobs from September to October according to the October ADP National Employment Report. Small businesses (1-49 employees) added 115,000 jobs. Medium-sized business (50-499 employees) added 114,000 positions. Large businesses (500 employees or more) added 342,000 positions. Are these positive numbers a sign of things to come? One economist thinks that may be the case. “Job gains are accelerating across all industries, and especially among large companies. As long as the pandemic remains contained, more big job gains are likely in coming months,” says Mark Zandi, chief economist of Moody’s Analytics.
  • Economic activity in the services sector grew in October for the 17th consecutive month, per the ISM Report on Business. The October Services PMI came in at 66.7, 4.8 points more than September. It also exceeded the previous all-time high, which was 66.7 in July of this year. All four of the sub indexes reported expansion this time around. Of course, a note of caution accompanies this positive data. “However, ongoing challenges — including supply chain disruptions and shortages of labor and materials — are constraining capacity and impacting overall business conditions,” says Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, chair of the Institute for Supply Management Services Business Survey Committee.
  • Nonfarm business sector labor productivity decreased 5.0% in the third quarter of 2021, per the Bureau of Labor Statistics. Output increased 1.7% and hours worked increased 7.0%. This represents the lowest rate of quarterly productivity growth since the second quarter of 1981 when the measure decreased 5.1%. From the third quarter of 2020 to the third quarter of 2021, nonfarm business sector labor productivity decreased 0.5%. The four-quarter rate is the lowest rate since the third quarter of 2011 when the measure also declined 0.5%. Unit labor costs increased at an annual rate of 8.3% in the third quarter, reflecting a 2.9% increase in hourly compensation and a 5.0% decrease in productivity. The output index is now 1.8% greater than the fourth quarter of 2019. The nonfarm business labor productivity index is 2.9% more than in the third quarter of 2021 than it was in fourth-quarter 2019, corresponding to an average annual growth rate of 1.6 percent during the pandemic period of fourth quarter 2019 through third quarter 2021.
  • The NFIB Small Business Optimism Index increased in August to 100.1, up 0.4 points from July. Five of the ten Index components improved, four declined, and one was unchanged. The NFIB Uncertainty Index decreased 7 points to 69, its lowest level since January 2016. “As the economy moves into the fourth quarter, small business owners are losing confidence in the strength of future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The biggest problems facing small employers right now is finding enough labor to meet their demand and for many, managing supply chain disruptions.”
  • The Producer Price Index for final demand increased 0.6 percent in October, the Bureau of Labor Statistics reported. Final demand prices moved up 0.5% in September and 0.7% in August. More than 60% of the October increase in the index for final demand traces back to a 1.2% rise in prices for final demand goods. The index for final demand services moved up 0.2%, and prices for final demand construction advanced 6.6%. Prices for final demand fewer foods, energy, and trade services moved up 0.4% in October after increasing 0.1% in September.

This Week in Foodservice

  • Restaurants face a new set of challenges in the form of a shortage of items to support their off-premises business, including takeout containers, to-go coffee cups and even straws, CNBC reports. Manufacturers continue to pay more for materials, while delays at ports and labor challenges impede their ability to deliver the products to customers. As these challenges mount, so too, do the consumers’ off-premises dining occasions. In fact, off-premises restaurant orders increased 20% in September compared with the same time 2 years ago, according to NPD Group.
  • East Coast Wings + Grill has developed and tested a fast-casual prototype design that it plans to roll out to franchisees. Known as ECW 2.0, the design reduced development costs by 30%, while shrinking square footage by 27%. Tests of the new design have shown it can keep pace with larger units in terms of output.
  • As part of a plan to enhance its overall technology package, Denny’s will improve its kitchen equipment systemwide, the family dining chain announced while providing its third-quarter financial results. The chain expects the rollout to start during the first quarter of 2022 and it will be complete by the end of 2022. Also, part of this plan is a revamped company website and an app that will lead to more personalized and seamless digital experiences with upselling and cross-selling capabilities. Denny’s also intends to initiate the rollout of a new cloud-based restaurant technology platform throughout the domestic system which will allow for enhancements such as waitlist and table management, as well as lay the foundation for future technology initiatives to further enhance the guest experience.
  • Add Chipotle to the growing list of restaurant chains striving to cut greenhouse gas emissions. The fast-casual chain pledged to reduce greenhouse gas emissions by 50% by 2030, with 2019 serving as its baseline. As part of these efforts, Chipotle will continue to identify more sustainable design and development. It reports having an ongoing pilot program that explores scalable construction diversion to reclaim and recycle building materials for use in future remodels and buildouts. Chipotle also aims to reduce emissions through smart energy management systems (EMS). It also seeks to integrate more energy-efficient restaurant equipment. Several weeks ago, Panera made a commitment to become a climate-positive restaurant chain by 2050. McDonald’s also set a goal of cutting its greenhouse gas emissions to net-zero by 2050.
  • WOWorks and Noodles & Company are among the first restaurant franchise companies to adopt the Pathways to Black Franchise Ownership program developed by the Multicultural Foodservice & Hospitality Alliance. Launched in 2020 by MFHA Pathways strives to help Black entrepreneurs from all backgrounds develop and operate high-performing franchise businesses. MFHA set a goal for Pathways to create 100 new Black-owned franchise restaurants by year-end 2023. WOWorks and Noodles & Company will provide qualifying participants with specialized Pathways training, coaching, mentoring and other support to open both single and/or multiunit franchise businesses.