Starbucks opens a cashier-less location. Papa John's delivers a new identity. A haunting amount of ghost kitchen news. These stories and more this week in foodservice.
As 2021 moves forward, restaurants and foodservice operators from all segments continue to deal with a perplexing three-headed monster: labor, supply chain woes and inflation.
Labor is scarce and assuming an operator can hire someone, it comes at a fairly high cost. Operators also report food costs continuing to rise quickly and some operators do not feel they can pass along the increases to their customers, thus straining already thin margins. Food-related supply chain issues are well documented, too.
The Census Bureau's Advance Estimate for October put total retail sales up 1.7% but foodservice sales were projected to be flat from September, which surprised some. “We would have expected it to pick up but it hasn't, I suspect it's a sign that the recovery and branch from dining have kind of run its course,” Michael Pearce, Senior US economist at Capital Economics, told Yahoo Finance in an interview. “The problem is that we know restaurant prices are going up, so we would have at least expected the nominal dollar value of spending at restaurants and bars increasing, the indication is that the trend is no longer going upward.”
As the restaurant industry strives to move forward, some chain operators find their growth plans stuck in neutral, too, in some cases due to equipment-related supply chain issues. For example, Buona Beef, a 25-store fast-casual restaurant chain based in Berwyn, Ill., told Crain’s Chicago Business it has finished construction on its latest location but can’t open. The owners continue to wait for a delivery of fryers, a walk-in cooler and a charbroiler that are all running months late. “We’ve been advised by our suppliers not to start construction on any more restaurants for at least another six months,” said Carlo Buonavolanto, Buona’s chairperson. “All equipment manufacturers appear to be running far behind.” This news comes as some publicly traded foodservice equipment manufacturers report record-setting order backlogs.
As Thanksgiving approaches, the industry still has a few things to be thankful for, including the fact that restaurant sales are up more than 30% for the first 10 months of 2021. Indeed, as we enter the holiday season it is easy to see that much progress has been made year over year but there is still a lot more to do.
Economic News This Week
- Initial jobless claims totaled 268,000 for the week ending Nov. 13, 2021, per data from the Department of Labor. This represents a decrease of 1,000 claims from the previous week. The 4-week moving average totaled 272, 750, a decrease of 5,750 from the previous week.
- Privately‐owned housing starts totaled 1.65 million in October, per data from the Census Bureau. This marks a 4.0% increase compared to September and 3.4% more than October 2020. Single‐family housing starts totaled 1.07 million in October, 2.7% more than September. Starts for units in buildings with 5 units or more were at a rate of 528,000 in October.
- The Conference Board Leading Economic Index for the U.S. increased 0.9% in October. This came after increases of 0.1% in September and 0.7% in August. The index stood at 118.3 in October. “The U.S. LEI rose sharply in October suggesting the current economic expansion will continue into 2022 and may even gain some momentum in the final months of this year,” said Ataman Ozyildirim, senior director of economic research at The Conference Board. “Gains were widespread among the leading indicators, with only the average workweek and consumers’ outlook making negative contributions. However, rising prices and supply chain bottlenecks pose challenges to growth and are not expected to dissipate until well into 2022. Despite these headwinds, The Conference Board forecasts growth to remain strong in the fourth quarter at around 5.0% (annualized rate), before moderating to a still historically robust rate of 2.6% in Q1 2022.”
- Starbucks opened one of its pickup cafes in New York City that uses Amazon’s cashier-less technology to make it easier for guests to purchase coffee or snacks. The Amazon partnership marks the latest in Starbucks’ efforts to adapt to its customers' changing habits and preferences. This CNBC article provides a good overview of the ordering process and more.
- Pizza chain Papa John's is preparing to roll out a new restaurant design, graphic identity and more. The new layout promotes transparency and efficiency in food prep and more.
- Diners in Los Angeles ordering food for off-premises consumption now must ask for disposable plastic items as local ordinance prohibits restaurants from simply providing them with a nudge from a guest. The ordinance, which applies to restaurants with more than 26 employees, also says operators cannot hand out napkins unless customers ask for them. Set to take affect April 22, 2022, which not coincidentally is Earth Day, strives to reduce waste and lower costs for operators.
- Fogo de Chão plans to become a publicly-traded company once again. In filing the necessary paperwork for a public offering, the Brazilian steakhouse says it hopes to generate $100 million. Due to the COVID-19 pandemic in March 2020, Fogo furloughed most of its staff after closing the dine-in portion of its restaurants in the U.S. and Brazil. It began reopening stores in May 2020 and was nearly fully staffed by October 2020.
- Jersey Mike’s Subs ain’t afraid of no ghost – kitchen, that is. The sandwich chain paired with Kitchen United to open its first ghost kitchen last week in New York City.
- Multiconcept operator Inspire Brands opened a ghost kitchen in Atlanta that features five of its restaurant chains. Known as Alliance Kitchen, this location includes Arby’s, Buffalo Wild Wings, Jimmy John’s, Sonic Drive-In and Rusty Taco. Customers can order from both third-party delivery platforms and the brands’ apps. Its debut comes as Inspire’s digital sales have more than doubled since 2019 to more than $6 billion, a brand spokesperson said in a CNBC interview.