Operators face higher costs of doing business. Subway opens a new headquarters in the Sunshine State. Operators’ issues with organized labor span multiple segments. These stories and more This Week in Foodservice.

It comes as no surprise that operators today find themselves in a particularly dynamic business environment. But the National Restaurant Association’s 2023 State of the Industry Report helps bring into clearer focus the higher cost of doing business operators must address.

Along those lines, 88% of operators say they spent more to run their businesses in 2022 than they did in 2019, per the NRA’s data. Not surprisingly, 88% say total food and beverage costs were higher and 86% say labor costs were higher. What was interesting to note, though is the fact that 94% says other operating costs, such as supplies, G&A, etc., were higher. In addition, 80% say utility costs were higher and 65% say occupancy costs were higher.

As is the case with most data sets, the impact of such cost increases will vary a little by segment, but these are all items operators must address. For example, the 93% of family dining operators say food costs are a significant challenge for their business is 4% greater than operators in the coffee and snack segment. Either way, food costs are a big deal for all operators.

The bottom line is this: while food and labor costs tend to generate most of the attention, operators continue to battle higher costs of doing business across the board.

Subway recently opened a new headquarters in Miami, Fla. Image courtesy of Subway

Foodservice News This Week

• Foodservice operators challenge with organized labor continue to span multiple segments. Case in point: the concession workers at Chicago’s United Center staged a one-day walkout this past weekend and have authorized a strike if concessionaire Levy Restaurants does not meet their demands. All of this is happening as the United Center prepares to host the Big Ten men’s basketball tournament this weekend. Of late, organized labor’s sparring matches with chain restaurants such as Starbucks has garnered much of the headlines of late. Speaking of the Seattle-based coffee giant…
• Apparently, Starbucks’ labor woes extend beyond the union. A group of at least 83 corporate workers have signed a petition urging the company to pull back from its return-to-office policies and sign a fair election agreement with Starbucks Workers United, Restaurant Dive reports. The workers feel the company’s mandate for some employees at Seattle headquarters and regional offices to spend three days a week in the office would hurt job satisfaction, productivity and diversity and inclusion. The policy impacts 3,750 corporate employees who live within 60 miles or 90 minutes of Starbucks offices, according to the company.
• Subway opened a second headquarters. Located in Miami, Fla., this location features an innovation kitchen and a mock restaurant. The company says these two features can serve as a “think tank” to help with “continued food innovation.” The opening comes as the ubiquitous sandwich chain prepares to move to a new Connecticut headquarters. Also, several large private equity firms are showing an interest in adding Subway to their portfolios, per a Restaurant Business report.
• Growth Chains: Black Rock Coffee opened a location in Scottsdale, Ariz., its sixth in the state. Epic Wings opened a location in Orland Park, Ill., its first in the state. Fresh & Co. opened a location in Westfield, N.J., running its unit total to 15 systemwide and the first restaurant in the Garden State.

Economic News This Week

• New orders for manufactured goods decreased 1.6% in January, per the U.S. Census Bureau. This comes after a 1.7% December increase. Shipments increased 0.7% percent to $547.8 billion. This followed a 0.6% December decrease. Unfilled orders, up 29 consecutive months, increased $0.3 billion. This followed a 1.1% December increase. The unfilled orders-to-shipments ratio was 6.07, up from 6.06 in December.
• Initial jobless claims declined by 2,000 for the week-ending February 25, per the U.S. Department of Labor. The 4-week moving average was 193,000, an increase of 1,750 from the previous week.
• In 2022 productivity posted its biggest decline in 48 years, per data from the U.S. Bureau of Labor Statistics. Nonfarm labor productivity increased 1.7% in the fourth quarter of 2022. This is 1.3% less than originally projected. Output increased 3.1% and hours worked increased 1.4%. Compared to the fourth quarter of 2021, labor productivity decreased 1.8%, reflecting a 0.7% increase in output and a 2.6% increase in hours worked. Overall, annual average productivity decreased 1.7% from 2021 to 2022. This is the largest annual decline in the measure since 1974 when productivity also decreased 1.7%.
• Economic activity in the manufacturing sector contracted in February for the fourth consecutive month, per the Manufacturing ISM Report On Business. This comes after 28 consecutive months of growth. The February Manufacturing PMI registered 47.7%, down 0.3% from the previous month. Four manufacturing industries reported growth in February: apparel, leather and allied products; transportation equipment; petroleum and coal products; and electrical equipment, appliances and components.