Challenging economic news hits the restaurant industry. Subway loads up on slicers. Sensory-friendly dining at a suburban Chicago restaurant. These stories and more This Week in Foodservice.
The restaurant industry continues to navigate a difficult economic environment.
The restaurant industry snapped a streak of 29 consecutive months of employment growth in June. Total nonfarm payroll employment increased by 209,000 in June, the U.S. Bureau of Labor Statistics reported. Many economists had projected jobs would increase by 240,000, per a CNBC report. Eating and drinking places lost a net 800 jobs, per data from the National Restaurant Association. In contrast, employment continued to trend up in government, health care, social assistance, and construction. The unemployment rate came in at 3.6%, which is 0.1% less than the previous month.
This comes after the industry entered a period of contraction in May, per the NRA’s Restaurant Performance Index. The RPI came in at 99.6 in May, down 1.3% from April. Any reading of less than 100 indicates contraction. This was the first time since January of 2021 the index hit contraction mode, per the NRA.
The decline was attributed to operators’ softening six-month outlook on both sales growth and the economy. The study’s Current Situation Index stood at 99.7 in May, down 1.2% from April and the lowest level since February 2021. Restaurant operators reported a net increase in same-store sales in May, but customer traffic readings were in negative territory for the second consecutive month.
The Expectations Index stood at 99.5, down 1.4% from the previous month. Restaurant operators’ outlook for both sales and the economy became increasingly pessimistic in recent months.
Restaurant operators reported a downtick in capital spending activity, with 58% of them saying they made a capital expenditure for equipment, expansion or remodeling during the last three months. That was down from 70% of operators who reported similarly last month. Looking ahead, 61% of operators plan to make a capital expenditure in the coming months, up 3% from April.
Foodservice News This Week
- For some restaurants, adding one automated or robotic solution may trigger the need to add others. Take, for example, the owner of Mamma Ramona’s, a pizza restaurant in suburban San Diego. The owner added a pizza-making robot capable of producing 135 pies per hour, per a story in Forbes. Unfortunately, other aspects of production, like dough stretching and the cooking of the pizzas could not keep pace. So that led to additional purchases in terms of equipment, software and more. All in all, the owner estimates he spent $200,000.
- Subway will install new deli meat slicers in 20,000 restaurants as part of an ongoing menu revamp, the company said in a release. The slicers will support its Deli Heroes line of sandwiches. Other sandwich chains, such as Jersey Mike’s and Firehouse Subs, already have slicers on-premises to prepare ingredients for menu items.
- Workers at a South Carolina Waffle House went on strike protesting unsafe working conditions, per the newspaper The State. Striking workers are also requesting an end to the mandatory “meal deduction” — a policy of taking $3 to $6 out of employees’ paychecks to cover a shift meal, regardless of whether they eat it. Strikers are represented by the Union of Southern Service Workers, an organization that represents low-wage workers in a variety of industries that officially formed last November in Columbia, SC.
- Chipotle will close the doors on its fast-casual pizza concept, per a report in Nation’s Restaurant News. The chain had five Pizzeria Locale units remaining. This is not the first time Chipotle has tested a fast-casual concept outside of the Mexican category. It previously launched ShopHouse, an Asian-themed concept that closed in 2017.
- In an effort to provide a more inclusive atmosphere for diners of all ages and abilities, a suburban Chicago restaurant will host a sensory-friendly dining hour every Saturday in August. Starting at 3:45 p.m. each Saturday during the month, the Prairie Grass Café’s sensory-friendly hour will run from 3:45 p.m. to 5:00 p.m. and look to create “a safe and comfortable environment for people with autism, sensory input disorders, sensory sensitivities, or other physical, cognitive, or development disabilities, and their families, friends, and caretakers,” per a release. The restaurant will do this by offering limited reservations, limited contact from servers and limited noise. “Patrons can bring fidget objects, noise-reducing headphones, and other sensory tools or devices. Noise will be limited, and lights will be dimmed. Our staff will be coached to provide efficient service with minimal contact but is always available if you need extra assistance,” said Sarah Stegner, co-owner/co-chef of Prairie Grass Cafe. The restaurant will also offer a menu that eliminates long wait times. At 5 p.m., the servers will provide all customers with their checks and alert them that the restaurant opens for regular business at 5:15 pm and guests will begin arriving, lights will be turned up, and the music will go on. Guests are welcome to stay as long as they like.
Economic News This Week
- Personal income and disposable personal income both increased 0.4% in May, per the U.S. Bureau of Economic Activity. Personal outlays and consumer spending both increased 0.1% for the month.
- Consumer-facing industries helped private-sector employment increase by 497,000 jobs in June, per the ADP National Employment Report. Annual pay increased 6.4% year-over-year. Hospitality and leisure employers led the way by adding 232,000 positions. Other industries with strong growth include trade and transportation, and education and health services. Segments showing job declines include manufacturing, information, and finance.
- Initial jobless claims totaled 248,000 for the week ending July 1, per the U.S. Department of Labor. This represents an increase of 12,000 from the previous week. The 4-week moving average was 253,250, a decrease of 3,500 from the previous week.
- The number of job openings decreased to 9.8 million on the last business day of May, the U.S. Bureau of Labor Statistics reported. During May, the number of hires and total separations changed little from the previous month, coming in at 6.2 million and 5.9 million, respectively. Within separations, quits (4.0 million) increased, while layoffs and discharges (1.6 million) changed little. Some analysts interpret this data set as an indication the economy continues to hold ample opportunity for workers but may be starting to cool, as outlined in this New York Times article.
- U.S.-based employers announced 40,709 cuts in June, down 49% from the cuts announced in May, per data from global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc. The June cuts were up 25% from the same month in 2022. Employers have announced 458,209 cuts so far this year, a 244% increase from the cuts announced through June 2022. It is the highest first-half total since 2020. “The drop in cuts is not unusual for the summer months. In fact, June is historically the slowest month on average for announcements. It is also possible that the deep job losses predicted due to inflation and interest rates will not come to pass, particularly as the Fed holds rates,” said Andrew Challenger, labor expert and Senior Vice President of Challenger, Gray & Christmas, Inc.
- Economic activity in the services sector expanded in June for the sixth consecutive month as the Services PMI registered 53.9% per the Services ISM Report On Business, 6% more than May.
- Economic activity in the manufacturing sector contracted in June, per the Manufacturing ISM Report On Business. This represents the eighth consecutive month where this economic indicator contracted. The June Manufacturing PMI registered 46%, 0.9% less than May.
- New orders for manufactured goods increased 0.3% in May, per the U.S. Census Bureau. This follows a 0.3% April increase. Overall, orders for manufactured goods have increased five of the past six months. Snapping a streak of three consecutive monthly decreases, shipments increased 0.3%. Unfilled orders increased 0.8%. The unfilled orders-to-shipments ratio was 6.65, down from 6.71 in April.
- Real gross domestic product increased 2.0% in the first quarter of 2023, per the third estimate from the U.S. Bureau of Economic Analysis. GDP increased 2.6% in the fourth quarter of 2023, per the BEA.