How are Starbucks' latest results indicative of the industry? Is 2024 Really the Year of the Snack? Did the restaurant industry add jobs in January? Answers to these questions and more This Week in Foodservice.

In many respects, Starbucks’ first quarter of its 2024 fiscal year is a microcosm of the overall foodservice industry. Like so many operators out there, addressing factors like technology, maintaining traffic levels across multiple dayparts, and menu innovation remain ongoing challenges that can make or break an organization’s success.

As many industry observers continue to wonder when the use of robotics would become more widespread in back-of-house applications, operators continue to focus their technology investment on customer-facing products and with good reason. Starbucks reported membership in its loyalty program increased 13% over the three-month period. As occasional customers cut back their visits, it was the regulars who played a prominent role in the chain’s fiscal success, underscoring the importance of loyalty programs and their rewards as well as the frictionless ordering process these platforms can provide.

Customers enrolled in the chain’s loyalty program visited Starbucks locations with greater regularity and spent more money when they did, as this Restaurant Business story notes. Overall, loyalty members represented 59% of the revenue generated at Starbucks corporate units during the reporting period.

One way customers were spending more was on the customization of their drinks. Indeed, the entire beverage portion of the industry remains one that’s rife with innovation given its ability to enhance customer traffic. It should come as no surprise that Starbucks plans to launch three new beverage platforms over the next six months to help jumpstart sales over the afternoon daypart, which is where the chain saw a traffic decline in the recent quarter.

Starbucks is not alone in trying to amp up its afternoon appeal through beverage-focused menu innovations. McDonald’s made headlines in December with the launch of CosMc’s, a new concept looking to capitalize on the afternoon snack and beverage occasion.

In addition, Starbucks cited ongoing challenges with unions trying to negotiate contracts at some of its stores. Last November, for example, workers at more than 200 Starbucks locations walked off the job in protest of a lack of progress on a contract, as the Associated Press reports.

Foodservice News This Week

• Eater has declared 2024 The Year of the Snack. That’s due, in part, to the fact that a series of Portland, Ore., chefs are embracing the single-serving, one-to-three-bite snack, encouraging diners to pop in between meals for something small. This approach can help operators somewhat overcome higher food prices and generate higher foot traffic.
• Apparently consumers love a good sidekick. Or at least they do when visiting Subway. The sandwich chain reports selling more than 3.5 million items from its Sidekicks menu. These items are footlong snack items such as Footlong Cookies, Cinnabon Footlong Churros and Auntie Anne’s Footlong Pretzels. In fact, Subway’s Footlong Cookies have been so popular the chain temporarily removed the item from digital ordering to manage demand better, per Restaurant Dive.
• Restaurant Industry performance slid into contraction mode in December, according to data from the National Restaurant Association. The Restaurant Performance Index came in at 99.8% in December, which is 0.3% less than November. Any reading greater than 100 signals the industry is in a period of growth. Although restaurant operators continued to report a net increase in same-store sales in December, customer traffic readings trended lower. Looking ahead, restaurant operators’ outlook for both sales growth and the economy remained uncertain. Interestingly, 56% of restaurant operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months. That was up from 40% of operators who reported similarly last month.
• Restaurant industry hiring dipped in January. Payrolls at eating and drinking places shrunk by a net 2,400 jobs in January on a seasonally adjusted basis, per the National Restaurant Association. That followed a combined increase of only 5,700 jobs in November and December. A deceleration from the rapid pandemic-recovery hiring of the past few years was inevitable, the NRA points out adding that operator surveys suggest a healthy demand for employees. Still, the news was not all bad on the labor front as the U.S. economy added an impressive 353,000 positions in January, per the U.S. Bureau of Labor Statistics. This was significantly more than the 185,000 jobs most economists had projected, per Yahoo! Finance. The unemployment rate remained at 3.7%. Job gains occurred in professional and business services, health care, retail trade, and social assistance.

Economic News

• Private employers added 107,000 jobs in January, per the ADP National Employment Report. This was less than the 158,000 positions added in December and less than the 150,000 positions Dow Jones had estimated for the first month of 2024, per a CNBC article. Service-providing businesses added 77,000 positions and goods-producing businesses added 30,000 jobs. Leisure/hospitality companies led the way by adding 28,000 positions. Medium-sized businesses (50 to 499 employees) added 61,000 positions followed by large businesses which added 31,000 positions and small businesses which added 25,000.
• The cost of labor compensation declined slightly in 2023, per data from the U.S. Bureau of Labor Statistics. Compensation increased 4.2% for the year ending December 2023, which is 0.9% less than the 2022 increase. This also represents the smallest annual increase in this metric in two years, per a Reuters report. Benefit costs increased 3.8 percent over the year and increased 4.9 percent for the 12-month period ending in December 2022.
• U.S.-based employers announced 82,307 cuts in January, a 136% increase from the 34,817 cuts announced one month prior, per data from Challenger, Gray & Christmas, Inc. In contrast, this represents a 20% decline from the cuts announced in the same month in 2023. With the exception of last January’s total, this is the highest number of job cuts announced in January since January 2009. Companies in the financial and tech segments played key roles in driving the January 2024 increases.
• Initial jobless claims totaled 224,000 for the week ending January 27, 2024, per the U.S. Department of Labor. This represents an increase of 9,000 claims from the previous week. The 4-week moving average was 207,750, an increase of 5,250.
• Labor productivity increased 3.2% in the fourth quarter of 2023, the U.S. Bureau of Labor Statistics reported. Output increased 3.7% and hours worked increased 0.4%. From the same quarter a year ago, labor productivity increased 2.7%.