Plus, an inside look at a new QSR prototype, a fast-casual chain files for bankruptcy and plenty of mixed economic news. 

Many restaurant chains continue to move toward more of an asset-light model. Generally speaking, that means they are moving away from company-owned units and plan to drive their growth via franchising.

But that approach to doing business could be in jeopardy, according to McDonald’s CEO Chris Kempczinski, who declared, “our business model is under attack,” per a Restaurant Business report. Kempczinski made these remarks while speaking at the International Franchise Association’s convention in Las Vegas.

His comments came in response to regulatory efforts underway both at the state and federal levels that aim to establish joint franchisor-franchisee liability for quick-service restaurants.

The latest piece of legislation in this area is known as California’s Fast Food Franchisor Responsibility Act, which Restaurant Dive does a good job of explaining. Ironically, the legislator that introduced this latest California bill is a former Subway franchisee.

The Fast Food Franchisor Responsibility Act would make the franchisor, which in this case is any restaurant chain with more than 100 units nationwide, would share legal responsibility and liability for violations of laws and regulations made by franchisees. And if this sounds familiar, it should. This bill is similar to earlier versions of the previously released Fast Food Recovery Act. The National Restaurant Association remains opposed to his legislation.

Indeed, it would seem that joint-employer legislation will remain a hot topic for the foreseeable future as both sides continue to plead their cases.

Foodservice News This Week

• Quick-service restaurant chains continue to lead the restaurant technology evolution. Case in point is the Taco Bell Defy unit developed by franchisee Border Foods, which expects this location can handle up to four times the volume of a traditional Taco Bell unit, per this video news clip. When first announced in 2020, the design of this prototype turned heads. The unit opened in June of 2022 and features no dining room. Instead, the kitchen sits above the four drive-thru lanes. The unit features plenty of proprietary technology, including vertical pneumatic delivery tubes and digital displays that depict a variety of performance-related data, per a story by The Food Institute. While the prototype’s performance has been very good, about half of what staff knew from working at other Taco Bell locations did not apply. So, there are some tradeoffs but so far, they seem worth it.
• Look no further than Corner Bakery for a sobering example of the impact of workers’ slow return to downtown and central business areas on restaurants. The fast-casual restaurant chain filed for Chapter 11 bankruptcy last week in an attempt to keep creditors from taking over the company. Corner Bakery has 138 locations, many of them in downtown areas, Chicago-based Technomic told Crain’s Chicago Business. Corner Bakery was founded by Lettuce Entertain You Enterprises in 1991 and has since been owned by a variety of companies, including Brinker International and Roark Capital. Pandya Restaurant Group acquired Corner Bakery in October of 2020.
• A growing number of restaurants are turning to subscriptions as a way to help even out their revenue streams and customer traffic levels. National chains like Panera and P.F. Chang’s are doing this but so are some local restaurants, per an Associated Press Report in the Chicago Sun Times. Some of the subscription programs offer perks like free delivery or unlimited drinks. Other programs will offer to provide specific meals for takeout, such as a three-course dinner for two.
• The new way to customize coffee is by adding … olive oil? Starbucks is rolling out olive oil as an ingredient in some coffee drinks and as an optional add-on in its stores in Italy. This will eventually make its way to the U.S. later this year. During a trip to Italy, outgoing Starbucks CEO Howard Schultz noted people were drinking olive oil every day. This led him to decide to try pairing olive oil with coffee.
• A Chicago Shake Shack location will give a portion of its dining room a fine-dining makeover, per a report in Crain’s Chicago Business. This chain refers to this initiative as The Truffle Table and it is doing this to promote a trio of truffle items on its menu. The table will be set with china, white tablecloths and more,
• Dué Cucina has a growing appetite for, well, growth. The self-described “casual-gourmet Italian restaurant chain” based in Seattle has secured a $2.5 million direct investment from Mac Haik Restaurant Group. MHRG Is a Houston-based restaurant investment company. Due Cucina will use the funding to expand into the Texas market, opening three locations in the Lonestar State within the next two years. Dué Cucina and MHRG will also form a joint venture to launch 10 additional units in the state by 2031. Specific locations for the new units have not yet been selected.
• Contract feeder Sodexo was recognized as a 2023 America’s Top Corporation for Women’s Business Enterprises by the Women's Business Enterprise National Council. The 2023 America's Top Corporations for WBEs award honors those corporations “that have demonstrated a continuous and growing commitment to creating business opportunities for women-owned businesses within their supply chains.” This is the third year Sodexo has won this prestigious award.
• A private investment group has purchased a majority share ownership of International Carbonic, Inc. ICI is affiliated with Crysalli Beverage Systems and is a manufacturer of beverage dispensing equipment for juice, soda, water, beer and liquor controls.
• Growth Chains: The Habit Burger opened restaurants in the following locations: Cathedral City, Calif.; Laveen Village, Ariz. and Monroe, N.C. Krystal inked a multi-unit franchise deal with new partner Argus Wiley. Through this partnership, Wiley has purchased 21 existing Krystal locations and will develop 15 new locations. Wiley will focus on growing its brand in the Southeast market with a special emphasis on Florida. First Watch opened a unit in Conroe, Texas. Fazoli’s opened a location in Phoenix’s Sky Harbor International Airport. VIVA Chicken opened a location in Alpharetta, Ga. The fast-casual chain now has 17 units spread across 4 states systemwide.

Economic News This Week

• Consumer confidence ticked downward again in February, per The Conference Board. The organization’s February Consumer Confidence Index came in a 102.9, down from 106.0 in January. The Present Situation Index, consumers’ assessment of current business and labor market conditions, increased to 152.8 from 151.1 last month. The Expectations Index — consumers’ short-term outlook for income, business, and labor market conditions — fell to 69.7 from 76.0 in January. Notably, the Expectations Index has now fallen to significantly less than 80, the level which often signals a recession within the next year, per The Conference Board. The Expectations Index has been less than 80 for 11 of the last 12 months.
• New orders for manufactured durable goods declined 4.5% in January, per the U.S. Census Bureau. This comes on the heels of 5.1% December increase. As seems to be the case with all economic news of late, the data included some mixed results. Transportation drove the increase, while core durable goods orders exceeded expectations and posted their strongest results in five months. Excluding transportation, new durable goods orders actually increased 0.7% for the month.
• The U.S. economy grew less than originally thought in the fourth quarter of 2022. Real gross domestic product increased 7% in the fourth quarter of 2022, per the second estimate from the U.S. Bureau of Economic Analysis. This is 0.2% less than the initial estimate. Some believe this is an indication that U.S. Federal Reserve’s interest rate hikes aimed at slowing inflation are working better than thought.
• Personal income increased 0.6% in January, according to the U.S. Bureau of Economic Analysis. Disposable personal income increased 2.0% and personal consumption expenditures increased 1.8%. The PCE price index increased 0.6% in January. Excluding food and energy, the PCE price index also increased 0.6%. Real DPI increased 1.4% and Real PCE increased 1.1%; goods increased 2.2% and services increased 0.6%. These increases paired with low unemployment rates have led many to observe the U.S. is not as close to a recession as was widely projected last year, per a Reuters report.
• Initial jobless claims declined 3,000 for the week-ending February 18, 2023, per the U.S. Department of Labor. Claims for the week totaled 194,000. This was lower than expected and shows that the labor market remains tight, per various observers. The 4-week moving average was 191,250, an increase of 1,500 from the previous week's revised average.
• Sales of new single‐family houses increased 7.2% in January 2023 compared to the previous month, per the U.S. Census Bureau and the Department of Housing and Urban Development. Many attribute this increase to the easing of rising interest rates. The sales of 670,000 homes in January 2023 are 19.4% less than January 2022.
• January sales of existing homes declined 0.7% compared to December 2022, per the National Association of Realtors. This marks the 12th consecutive month that saw sales of existing homes decline, per the NAR. Sales declined 36.9% compared to January 2022. The sale of 4 million homes in January 2023 was the lowest level since October 2010.