Is the threat of a recession on hold? Which consumer packaged goods company is testing a pizza vending machine? Did another chain just file for bankruptcy? Do consumers want truth in restaurant advertising? Which two celebrities tried their hand at foodservice this week? We answer these questions and more This Week in Foodservice.
Wages for restaurant workers remain a hot political topic.
The latest chapter in this ongoing saga comes in the form of the “Raise the Wage Act of 2023,” which is legislation that would increase the federal minimum wage from the current $7.25 per hour to $17 per hour and eliminate the tip credit over five years. This legislation comes during a time when restaurant operators continue to contend with still-evolving customer traffic and consumption patterns and increased operating expenses across the board, including food costs.
Given this legislation has the potential to impact operators’ already delicate financial balance, the National Restaurant Association has some thoughts on the matter.
“The National Restaurant Association and our members welcome a conversation about how additional wage changes fit into this reality. We look forward to discussing with Congress the unique challenges of restaurant operators and how to plan changes, so they don’t threaten business viability or damage the economies of the communities where restaurants drive job creation and tax growth,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association. “But eliminating the tip credit as a compensation model is a non-starter. This would have the perverse effect of lowering the take-home pay for countless workers who have tipped restaurant jobs. Their median income is $27 an hour, far above the proposed changes, so we’ll fight for them to keep the current system of tipping and that high earning potential.”
Foodservice News This Week
- Count frozen pizza maker DiGiorno as the latest company to begin selling its pies via a vending machine. The Nestle-owned brand continues to test a pair of kiosks that takes its pizzas from cold to cooked in a matter of a few minutes. One kiosk is in a Walmart, and another is on Nestle’s campus. Selling cooked pizzas is something new for DiGiorno, which until now only sold frozen pizzas. The vending machines house a commercial-grade oven as well as frozen, premade, 10-inch, thin-crust pizzas currently available in cheese and pepperoni options, per a Food & Wine report. This is yet another example of how food companies, including restaurant operators, continue to try to meet their customers where they are.
- McDonald’s is the latest restaurant chain to test a small footprint prototype. The company’s CosMc’s concept will still feature the burger giant’s DNA but will have its own personality, per a CNBC report. The company will test the prototype in a handful of sites starting next year. The name for the new brand comes from CosMc, a McDonaldland mascot who appeared in advertisements in the late 1980s and early 1990s. CosMc is an alien from outer space who craves McDonald’s food.
- Celebrities and other high-profile individuals continue to make cameo appearances in foodservice. Following last week’s news of Cher planning to open her own gelato business, two other celebrities dipped their toes in the foodservice waters. Prior to his show at Chicago’s Soldier Field, singer Ed Sheeran made a brief stop at the city’s infamous Wieners Circle restaurant, where he dished out hot dogs to the masses. Sheeran’s approach to service seemingly lacked the usual colorful language for which the Wieners Circle is known but the staff there promised to whip him into shape. Not to be outdone, fellow Brit Prince William hopped on a food truck to serve veggie burgers to stunned customers. The meat-free burger was the winner of the Prince’s 2022 Earthshot competition, which seeks to promote environmentally friendly innovation.
- The National Restaurant Association Educational Foundation will look to grow its Hospitality Sector Registered Apprenticeship program by 5,000 participants. In doing so, the NRAEF will use the proceeds from a five-year $12.2 million contract it was awarded by the U.S. Department of Labor. With a special focus on addressing barriers to historically underrepresented populations, the HSRA program will enroll 1,000 new apprentices annually across the hospitality industry over the next five years. Apprentices will receive on-the-job training.
- Restaurant operators’ outlook remains, well, complicated. The National Restaurant Association’s Restaurant Performance Index showed the industry returned to a growth phase in June after spending one month in contraction mode. The June RPI came in at 100.2, up 0.6 from May. This positive news came despite the fact that operators reported mixed results in the all-important areas of sales and customer traffic. Looking ahead. 39% of operators expect sales volume to be higher in six months than it was during the same period in the previous year. That’s a 10% increase from May. And 22% of operators think sales in six months will be lower than they were during the same period in the previous year – down from 32% last month. Restaurant operators remained pessimistic about the direction of the overall economy, with 34% saying they expect economic conditions to worsen in the next six months compared to the 10% who said they expect economic conditions to improve during that time frame. Despite all of the uncertainty, operators plan to continue to invest in their businesses, with 68% saying they will make a capital expenditure for equipment, expansion or remodeling during the next six months.
- Apparently, some consumers still expect truth in advertising. Take, for example, a New York consumer who is suing Taco Bell alleging that the quick-service restaurant chain is “deceiving consumers by falsely advertising its Mexican Pizza, Veggie Mexican Pizza, Crunchwrap Supreme, Grande Crunchwrap and Vegan Crunchwrap as containing "at least double" their actual content,” per a Reuters report.
- Back Yard Burgers has filed for bankruptcy for the second time in its history, per various published reports including this one from Nation’s Restaurant News. The 34-unit fast-casual chain first filed for bankruptcy in 2012 and appeared to have turned a corner, which led Axum Capital partners to purchase the concept. This is the second bankruptcy this summer for Axum Capital Partners as its Wild Wing Café business filed for bankruptcy protection in July for pandemic-related challenges. The filing, which was made under the name Tantum Companies, said the business has between $1 to $10 million in assets and $10 to $50 million in debts and liabilities.
Economic News This Week
- Is it time to put the talk of a recession in the U.S. on hold? The Federal Reserve thinks so. Last week, U.S. Federal Reserve Chair Jerome Powell said the central bank’s staff no longer forecasts a U.S. recession and said the economy has a chance for inflation to return to target without high levels of job losses, per a Reuters report. Powell cautioned there was "a lot left to go to" see such a soft landing. “So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession,” he said.
- Real gross domestic product increased 2.4% in the second quarter of 2023, per the U.S. Bureau of Economic Analysis. This increase was 0.4% greater than the first quarter’s growth rate. The Q2 results were better than the 1.8% growth most economists predicted, according to multiple published reports including this one from CNBC. According to an analysis done by The Conference Board, the Q2 results had some mixed results. For example, growth in consumer spending on goods and services both cooled for the quarter. The GDP data also showed a stronger-than-expected increase in non-residential investment in Q2. A spike in business investment in equipment (transportation equipment in particular) was a major driver of the strength.
- Personal income and disposable personal income both increased 0.3% in June, per the U.S. Bureau of Economic Analysis. Personal consumption expenditures increased 0.5%. The PCE price index increased 0.2%. Excluding food and energy, the PCE price index also increased 0.2%. Real DPI increased 0.2% in June and real PCE increased 0.4%.
- Sales of new single‐family houses in June 2023 totaled 697,000, which is 2.5% less than in May, per data from the U.S. Census Bureau and the Department of Housing and Urban Development. June’s sales were 23.8% greater than the same month in 2022. The seasonally adjusted estimate of new houses for sale at the end of June was 432,000, which represents a supply of 7.4 months at the current sales rate.
- New orders for manufactured durable goods increased 4.7% in June, per data from the U.S. Census Bureau. This follows a 2.0% May increase. Excluding transportation, new orders increased 0.6%. Excluding defense, new orders increased 6.2%. Transportation equipment led the increase with a 12.1% growth rate.
- Initial jobless claims totaled 221,000 for the week-ending July 22, 2023. This represents a decrease of 7,000 from the previous week, per the U.S. Department of Labor. The 4-week moving average was 233,750, a decrease of 3,750 from the previous week.