How did restaurant sales fare in March? What are some ways restaurants are using AI to their advantage? How are c-stores becoming more direct competitors to quick-service restaurants? Answers to these questions and more This Week in Foodservice.

Sales among the top 500 restaurant chains are expected to grow to $453 billion in 2024. That will be an increase of roughly 7%, per Technomic’s annual Top 500 Chain Restaurant Report. Driving that growth will be new stores as well as the lingering impact of restaurant inflation, the study notes.

Other key points from the study include:

• The domestic footprint of Top 500 chains increased 1.8% in 2023, marking the highest rate of new location growth since 2016.
• Sales among limited-service restaurants in the top 500 grew by 8.5% in 2023, while growth among full-service restaurants was only 5.0%.
• Beverage concepts continue to enjoy a period of growth, with Tropical Smoothie Cafe and Smoothie King experiencing double-digit sales growth. Chains such as HTeaO and Swig made an appearance on the list for the first time. 

Foodservice News

• As the minimum wage goes up in California, so do menu prices. Earlier this month, the state raised the minimum wage to $20 an hour for any chain with at least 60 locations nationwide. That led to some reports of reduced hours for employees and some locations have even closed. At the same time, restaurants in California have raised menu prices at a rate faster than anywhere else in the country, per a report from Datassential. For example, in the six months leading up to the law taking effect, menu price inflation grew by 7% among limited-service restaurants, per Datassential. Full-service restaurants saw menu price inflation increase by 3.3% in California compared to 2.4% on a national basis.
• Artificial intelligence remains a hot topic but what are some ways restaurants are using this technology to their advantage? A Restaurant Dive article highlighted four ways AI is making a difference: drive-thru support, integration in digital kiosks, forecasting customer and product demand as well as employee assistance with food prep. Looking specifically at food prep, some restaurants now use employee-assist voice technology, which provides instant answers to questions over a headset or tablet, such as how to prep a particular item or information about a product’s ingredients or allergens.
• The first quarter was not kind to quick-service restaurants. Traffic declined 3.5% and sales grew by only 0.8%, per a Restaurant Business story citing data from Restaurant Management Solutions. Prices were up 4.0% compared to the first quarter of 2023. A variety of economic headwinds could have contributed to these results, including higher prices and bad weather, the story notes.
• Go locations continue to take flight for Buffalo Wild Wings. With the opening of its New York City location, the chain now has 100 Go units system-wide, per CNBC. At 1,500 square feet, these units are significantly smaller than the chain’s 6,000-square-foot prototype. That smaller footprint also means a smaller investment: roughly $560,000 vs. $1.05 million. Plus, it allows franchisees to move into new and different geographic locations.
• Digital sales channels will only grow in importance for most quick-service restaurants. Take, for example, Jack in the Box. The chain set a goal of having digital sales account for 20% of the chain’s revenue by 2026, per a Nation’s Restaurant News story. That would require 8% growth over the next two years. The company is working on a new app and seeks to own its tech capabilities moving forward.
• Restaurants and foodservice-related concepts accounted for 36 of the 50 fastest-growing chains in the U.S., per a study from Yelp! The top three were Cava, Scooter’s Coffee and Longhorn Steakhouse. A closer look at the study revealed a few other interesting restaurant industry trends. Specifically, food courts are making a comeback as evidenced by the fact that concepts that one normally associates with these venues were strongly represented on the list (think: Wetzel’s Pretzels, Cinnabon, Panda Express and Charleys). Americans’ appetite for comfort food is far from satiated as evidenced by the sturdy growth story for such chains as Culver’s, Panera and Freddy’s Frozen Custard.
• Are c-stores becoming more direct competitors with quick-service restaurants? Thanks to menu innovation that may be the case. Once considered the place for “smokes and Cokes,” c-stores continue to add new and innovative menu items at a variety of price points, notes a C-Store Dive story. Operators like TXB and Dash In now focus on fresh ingredients and made-to-order menu items, while other concepts continue to push the efficiency envelope by looking for ways to incorporate robotics.

Economic News

• Retail and foodservice sales increased 0.7% in March compared to February, per data from the U.S. Census Bureau. This was 0.4% greater than most economists had projected, per CNBC. Sales were also 4.0% greater than the same period in 2023. Closer to home, eating and drinking places registered total sales of $93.7 billion. That represents a 0.4% increase from February and represented the second consecutive monthly gain, per an analysis from the National Restaurant Association. Despite the recent uptick, monthly eating and drinking place sales volume remained less than November’s recent seasonally adjusted high of $94.2 billion, the NRA notes. That was followed by declines in both December and January.
• The Consumer Price Index increased 0.4% in March, the U.S. Bureau of Labor Statistics reported. Economists had projected a 0.3% increase for the month, which means inflation is not slowing as fast as anticipated, per CNBC. It also means that any interest rate cuts will likely come in the third or fourth quarter of 2024, instead of earlier. Over the last 12 months, the CPI increased 3.5%. Food-away-from-home prices continued to grow at a faster rate than food-at-home prices, with rates of 0.3% compared to 0.1%.
• The Producer Price Index for final demand grew 0.2% in March, per the U.S. Bureau of Labor Statistics. This is less than 0.3% that some economists had projected, per the Associated Press. March’s results were also less than February and January’s increases of 0.6% and 0.4%.
• Initial jobless claims decreased by 11,000 for a total of 211,000 for the week ending April 6, 2024, per the U.S. Department of Labor. The 4-week moving average was 214,250, a decrease of 250 from the previous week.
• It appears as if the housing market’s recovery has stalled. Building permits issued declined 4.3% in March compared to the previous month, per the U.S. Census Bureau. In addition, housing starts and housing completions declined by 14.7% and 13.5% compared to February. Builder expectations for lower interest rates in 2024 have faded, one economist told Reuters. And without more supply, expect homeward prices to be on a more upward trend.
• Industrial production increased 0.4% in March but declined at an annual rate of 1.8% in the first quarter, per the U.S. Federal Reserve. Manufacturing output increased 0.5% in March, boosted in part by a 3.1% gain in motor vehicles and parts; factory output excluding motor vehicles and parts moved up 0.3%. The utilities index grew by 2.0%. At 102.7% of its 2017 average, total industrial production in March was unchanged compared with its year-earlier level. Capacity utilization moved up to 78.4% in March, a rate that is 1.2 percentage points less than its long-run (1972–2023) average.