As industry performance struggles, the National Restaurant Association asks the Small Business Administration to release more aid. McDonald’s last quarter sales outperformed stock analysts’ expectations. These stories and more This Week in Foodservice
The National Restaurant Association’s Restaurant Performance Index fell 1.3% in June to a reading of 101.3, the study’s lowest level in 16 months. While operators did report higher same-store sales compared to a year ago, customer traffic counts turned negative for the first time since February 2021. More telling, operators’ outlook for sales growth and the economy continues to deteriorate.
The Current Situation Index totaled 107.7, a decline of 1.8%, and the Expectations Index hit 100.9, a decline of 0.7%.
Over the past 3 months, 69% of operators reported making an investment in equipment, expansion or remodeling. This is the sixth consecutive month where 60% or more of operators report investing in their businesses. Looking to the future, 62% of operators plan to make a capital expenditure for equipment, expansion or remodeling in the next 6 months. This is a 3% increase compared to May.
Economic News This Week
- Gross domestic product came in at negative 0.9% in the second quarter, per the advance estimate from the Bureau of Economic Analysis. This follows a 1.6% decrease in GDP in the first quarter. Some economists describe a recession as a decline in GDP for two consecutive quarters. Even if this definition is simplistic there is no doubt that falling GDP is a definite sign of a weakening economy.
- Initial-jobless claims totaled 256,000, a decline of 5,000 for the week-ending July 23, per the U.S. Department of Labor. The 4-week moving average increased by 6,250 claims for a total of 249,250.
- The Chicago PMI fell to 52.1 in July from 56 in June. This also represents a 20-point decline from June of 2021. The U.S factory sector is clearly slowing as new orders dry up.
- Real disposable personal income decreased 0.3% in June, per data from the U.S. Bureau of Economic Analysis. Real personal consumption expenditures increased 0.1%; goods increased 0.1% and services increased 0.1%.
- Sales of new single-family homes fell 8.1% in June compared to May, per data from the U.S. Census Bureau. New single-family home sales declined 17.4% from June 2021.
Foodservice News This Week
- The National Restaurant Association has requested the Small Business Administration release $180 million in unobligated Restaurant Revitalization Fund money to applicants who did not receive initial funding. The availability of the funds first came to light in a Government Accountability Office (GAO) report on the Restaurant Revitalization Fund, released on July 14, 2022. “The potential for replenishing the RRF remains uncertain at best, thus the efficient disbursement of the existing funds is of critical importance to our industry. Restaurants remain battered with worker shortages, runaway food costs, and an uncertain level of customer confidence in the coming months. The need for relief has not abated. We urge the SBA to take every step to disburse all remaining funds in a fair and timely manner,” said Sean Kennedy, executive vice president for Public Affairs for the NRA. This news comes at a time when the restaurant industry continues to struggle mightily with labor issues while wholesale food costs have risen more than 13% in the last 12 months. According to the NRA’s June 2022 Operator Tracking Survey, 43% say they think economic conditions will worsen in 6 months. This is the highest level of economic pessimism since 2008.
- Uber’s latest restaurant industry foray focuses on delivering equipment parts. In a deal with Parts Town, Uber will provide two-hour delivery of restaurant equipment parts to Chicago-area foodservice operators and service technicians. The parts will come from Parts Town’s Addison, Ill., distribution center.
- McDonald’s reported mixed results in its second fiscal quarter. Systemwide sales increased 4%. Global same-store sales rose 9.7%, including a 3.7% increase in U.S. locations and a 13.0% increase in the company’s internationally operated markets segment. McDonald’s attributes the increase in U.S. same-store sales to strategic menu price increases and value offerings both on their everyday menu and digital offerings. Other results were not that impressive, though. Consolidated operating income decreased 36% and diluted earnings per share fell 46%.
- Chipotle is retraining its staff as a result of customers returning to in-store dining, per published reports. The chain has found some of its customers are migrating away from digital ordering toward on-premises dining. As a result, the fast-casual chain needs to “retrain crew on “the fundamentals of our business,” including having food prepared and ready to serve, improving order accuracy and throughput for the in-store business.
- To help offset supply chain challenges and rising costs, a Richmond, Va., the restaurant has added a 3.5% “inflation fee” to guest checks. “We had to do something,” the owner said. The restaurant has struggled to consistently source ingredients like seasoning and supply items like 16-ounce cups. The restaurant even had to remove a few sandwiches from its menu because it could not source certain ingredients.
- Growth Chains: Snooze, a 52-unit breakfast chain will open 8 restaurants in less than a year. Salad & Go will open 3 restaurants in the Dallas – Ft. Worth market which will give the chain 20 stores in Texas. Fat Burger Express is opening the first of three co-branded units in the Wichita, Kans., market. The Angry Crab Shack will open in Everett, Wash., making this the chain’s first restaurant in the greater Seattle area. Noodles & Company is in the final stages of what the company describes as a large area of development in the South. Five Iron Golf, the golf simulation eatertainment operator, will open locations in Cincinnati and Detroit. Pizza Guys has targeted San Diego and other areas of Southern California as well as Oregon, Nevada and Texas as expansion markets. In addition, Pizza Guys will have units in the California markets of Pacific Beach, Santa Teresa and Fontana this year.