A California law targeting fast-food restaurants draws fire from industry leaders. Starbucks takes a fresh look at everything as it welcomes a new CEO. These stories and a whole lot more This Week in Foodservice.

The Restaurant Performance Index had what the National Restaurant Association describes as a “moderate decline” of 0.5% in July. The RPI has declined five of the seven months thus far this year. Despite these challenges, the RPI remains in the growth range with a July reading of 100.8. (As a reminder, any reading greater than 100 indicates growth.)

The RPI’s Current Situation Index hit 100.5, following a 1.2-point decline due to same-store sales and customer traffic slowing compared to the same month in 2021. The Expectations Index hit 101.1, an 0.2-point increase. This represents the first increase in seven months for this part of the RPI.

Despite numerous macroeconomic headwinds, foodservice operators remain willing to invest in their operations with 67% of them reporting they made a capital expenditure in the last 3 months in equipment, expansion or remodeling. This is nearly identical to 69% of those operators who said they had made a capital investment last month. And 67% of those surveyed said they will make capital expenditures in the next 6 months. This beats the 62% answering in the affirmative for the June survey.

Economic News This Week

• Initial-jobless claims decreased by 5,000 to a level of 232,000 In the week ending August 27, per data from the U.S. Department of Labor. The 4-week moving average fell by 4,000 claims for a total of 241,500.
• U.S. private sector employment increased by 132,000 in August, per the ADP Employment Report. This represents a significant decline from the 270,000 private sector jobs created in July. The new hires were split across all sizes firms. Small companies (fewer than 50 employees) added 25,000 employees. Medium-size firms (50 to 499 employees) added 53,000 workers. Large firms (more than 500 employees) added 54,000 to their payrolls. More than 7 out of 10 of the people hired in August were in the leisure/hospitality sector. “Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy's conflicting signals,” said Nela Richardson, ADP’s chief economist. “We could be at an inflection point, from super-charged job gains to something more normal.”
• Non-farm payroll increased by 315,000 jobs in August, per the U.S. Bureau of Labor Statistics’ Employment Situation Report. The number of jobs added was significantly less compared to the 528,000 workers hired in July. The unemployment rate increased from a 50-year low of 3.5% to 3.7%. Some observers believe that the job market is finally cooling off. For the employment situation in foodservice in August, please see This Week in Foodservice below.
• The U.S. Bureau of Labor Statics’ July Job Openings & Labor Turnover Study (widely known as the JOLT Study) showed little change from June. There are still almost two job openings for every job seeker.
• World food shortages are going from bad to worse, per the United Nations. One major cause is a drought, which some describe as being of biblical proportions.

Foodservice News This Week

• A new California bill could raise the minimum wage for fast-food workers to $22 per hour by 2023. The bill, signed into law by California Governor Gavin Newsom on Labor Day, establishes an unelected 10-person board that will determine minimum wage, hours and working conditions for fast-food workers. The National Restaurant Association quickly offered its take on this development. “The irony of Governor Newsom signing away jobs on a day to celebrate our nation’s workers shouldn’t be lost on any Californian. This bill only creates walls and hurdles for both restaurant owners and workers when there are strict regulations already in place. The expected higher wage mandates alone could raise costs for California quick-service restaurants by $3 billion and that cost will likely spread to struggling independent restaurants as well. At a time when California restaurants are struggling with skyrocketing inflation in food prices and operating costs, this bill will push many owners closer than ever to shut their doors in their communities. The National Restaurant Association will review every remedy available in the state on behalf of the 100,000 restaurants proud to welcome Californians to their tables,” said Sean Kennedy, executive vice president for Public Affairs, National Restaurant Association. Prior to the bill being signed into state law, it drew criticism from a variety of restaurant industry leaders. Just last week, for example, Joe Erlinger, president of McDonald’s U.S. operations, described the bill as imposing “higher costs on one type of restaurant, while sparing another” via a piece on the chain’s website. Other restaurant companies have been fighting the bill as well, per a CNBC report. State records show that Chipotle Mexican Grill, Chick-fil-A, Yum Brands and Restaurant Brands International are among the chains that have been spending money to lobby California lawmakers to oppose the legislation. There are some who fear other states will follow California’s lead.
• Starbucks continues to re-think its entire business. In large part, Starbucks is a victim of the company’s own success. The Seattle-based coffee giant gained popularity due to its hot coffee items. In an effort to fuel its growth over the years, Starbucks expanded its menu to include sandwiches and bakery goods, but those are complex to make as are cold coffee beverages compared to hot coffee items. An article in the Wall Street Journal included a graphic depicting the necessary steps a Starbucks employee must take when making a caramel macchiato. The process takes eight steps over three minutes. Moreover, stores that were doing $1 million in revenues now generate $3 million annually. The new products require more bending and lifting and the more complex products put more stress on employees. Now one in four baristas quits in 6 months, per published reports. To help address some of these challenges, Starbucks is testing new store layouts and even different approaches to making some of its iced coffee drinks. In other words, new Starbucks CEO Laxman Narasimhan, introduced just last week, will have to hit the ground running.
• Glory Days Grill taps into its bench depth. The full-service sports-themed family restaurant was founded in 1996 by a team of three: Richard Danker, Robert Garner and Jeff Newman. With Garner and Newman retiring, Danker will retain ownership in the concept and added Bob Basham, Outback Steakhouse co-founder, as a partner. Basham, along with his business partner Jesse McPherson, is a Glory Days Grill franchisee with locations in Florida. Danker and Basham are also brothers. Glory Days Grill has 40 locations systemwide.
• Growth Chains: Salad & Go will open 7 more locations in the Dallas-Fort Worth market and will have more than 20 restaurants in the North Texas area. Pokemoto, Muscle Maker, Inc.’s poke bowl restaurant concept, will open its 11th Connecticut location with 9 more signed agreements for restaurants in the state. This is the third announced opening for the chain in the last 10 days the others being in Mississippi and Florida. With the opening of its Vermont location, Jersey Mike’s Subs now has units in 49 states.