This Week In Foodservice

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


McDonald’s Heads to the Metaverse, and More Foodservice News

White Castle expands its use of robots. McDonald’s plans to explore the metaverse. Wow Bao comes to Canada. A California law looks to give fast-food workers more power. These stories and more This Week in Foodservice.

The California legislature passed a bill that has the stated intent of giving fast-food workers more power, but the new law may have important implications for the entire foodservice industry. Called the Fast Food and Accountability and Standards Recovery Act (also known as the FAST Recovery Act) this piece of legislation establishes fast-food franchisors as joint employers of the employees at fast-food restaurants along with franchisee owners and managers. For decades, the accepted principle was that franchisors bore no responsibility for managing the franchisees’ staff. While the idea made sense to some, unions have always hated it because this approach makes unionizing a company extremely difficult since it required the union to go franchisee by franchisee with its organizing efforts.

The new law, which applies to fast-food chains with 30 locations nationally, will create an 11-person board in charge of state standards for fast-food restaurants across a variety of areas such as wages, safety and more. Some major criticisms of the legislation were Democrats who believed it usurped the power of the California Assembly by having an appointed board setting rules and regulations rather than people in elective office. The law was changed before final passage to allow the assembly to override the board’s decisions, but critics of the legislation think that is unlikely to happen.

Some have questioned what the legality of the law is since only applies to the fast-food sector. Legal or not it is a safe bet there will be battles over what is fast food and what is not. There are also those that this could cause some companies to end franchising,

Economic News This Week

  • Initial-jobless claims totaled 223,000, a decline of 16,000 for the week ending Feb. 5, 2022, per data from the U.S. Department of Labor. The 4-week moving average declined by 2,000 claims for a total of 253,000.
  • Inflation reached a 40-year high in January as the Consumer Price Index increased 0.6% for the month, per the U.S. Bureau of Labor Statistics. For the 12-months ending in January 2022, the index increased 7.5%. Without food and energy prices, the index is up 6:0% over the past 12 months.
  • Industrial production declined 0.1 % in December, per the U.S. Federal Reserve. The manufacturing sector fell by 0.3%, while utilities production dropped 1.5%. These declines were mostly offset by a 2.0% increase in mining production. For the entire fourth quarter of 2021 total production rose 4.0% on an annual basis. Capacity utilization for the industrial sector edged down 0.1% in December for a reading of 76.5%. That rate is 3.1% less than its long-run (1972-2020) average.
  • Consumer borrowing increased by 5.1% in December, per the U.S. Federal Reserve. Revolving credit, primarily credit card debt, rose 2.4% and non-revolving credit, such as auto loans, student loans, etc., increased by 6.0%.
  • Consumer sentiment continued to slide in February, per data from the University of Michigan. The February preliminary reading of the University of Michigan’s Index of Consumer Sentiment declined 8.2% from January. Overall, the index declined 19.7% from February of 2021. With a reading of 61.7, the index has reached its lowest point in a decade. The Current Economic Conditions Index declined to 68.5 in February from 72.0 in January. The Index of Consumer Expectations dipped to 57.4 in February from 64.1 in the previous month. Inflation was a key factor in fueling these declines, per a university spokesperson, who also projects a “sustained downturn in consumer spending.”

Foodservice News This Week

  • Food prices increased 0.9% in January, per the U.S. Bureau of Labor Statistics’ Consumer Price Index. For the 12-month period ending in January food prices increased 7.0%. Food-at-home prices increased 1.0% for the month and 7.4% in the last 12 months. Food-away-from-home prices rose 7.0% for the month and 6.4% in the last 12 months. Historically food prices at home rise slower than in foodservice operations.
  • White Castle will expand its use of robots at the chain’s fry station to 100 more restaurants, per a published report. In a filing with the Securities and Exchange Commission, the manufacturer of the robots claims these units will not replace jobs and can lead to new positions such as “chef techs.” White Castle began experimenting with these robots in 2020.
  • McDonald’s is preparing to open a restaurant in the metaverse. The burger giant filed at least 12 applications with the U.S. Patent & Trademark Office for “virtual food and beverage products,” “operating a virtual restaurant” and other online goods and services that point to the increasingly buzzy virtual reality, per Crain’s Chicago Business. McD’s may tie its virtual restaurant to home delivery of actual food, several of the applications indicate. Not sure what the metaverse is? Well, Wired offers a great overview of the metaverse and more. The short of it is the metaverse is a virtual reality platform where people can enter via their VR headsets and interact in a digital world through their avatars, spending money on outfits or food for their digital selves.
  • Wow Bao is now available in Canada thanks to a deal with Ghost Kitchen Brands. The restaurant chain’s bao and bowls are available via third-party delivery platforms including SKIP, UberEats and DoorDash via eight Ghost Kitchen locations in Ontario and in some Walmart stores. Ghost Kitchen Brands will extend Wow Bao to other Canadian locations, with more planned in Alberta, by the end of the first quarter.
  • It’s time for some breakfast-based chains to rise and shine, so to speak. Chains with less than 50 units that seem poised for growth include Grumpy’s (4 units), Hash Kitchen (25 units), Turning Point (21 units), Huckleberry (15 units), The Toasted Yolk (19 units) and Flip’d (2 units).
  • FAT Brands completed the purchase of Native Grill & Wings. FAT Brands paid $20 million for the 23-unit chain to Cybeck Capital Partners, the previous owners. This is Fat Brands third wing chain.
  • Growth Chains. Chipotle Mexican Grill opened 215 locations last year and expects to open 225 to 250 more in 2022. Little Caesar’s expansion plans include adding units in Denver, Minneapolis and New York City as well as New England and the Pacific Northwest. Outside of the U.S., the pizza chain will target such markets as Brazil, France, Malaysia, Netherlands, Philippines, and United Arab Emirates. Chicago-based Portillo’s set a goal of growing to more than 600 units in the future. The chain currently has 67 restaurants systemwide and is raising capital to meet its goals.
  • Comparable Store Sales Reports: YUM! Brands (KFC up 4.0%, Pizza Hut up 1.0%, Taco Bell up 8.0% and Habit Burger up 11%) and YUM! China (China system-wide down 3%; individual brands KFC down 3.0% and Pizza Hut down 2.0%)

For comparable store sales of other chains, please click here for the latest Green Sheet.