A California law focuses on restaurant pricing. Potbelly has plans to drive traffic. Consumer sentiment declines. We cover these stories and more This Week in Foodservice.

Driving guest visits and revenues will require a multifaceted approach for restaurants in this operating environment.

Take, for example, Potbelly. The Chicago-based fast-casual sandwich chain saw its sales dip 2% in its first fiscal quarter. To help spur sales, the company will lean more heavily into digital engagement and focus on its regular customers, per a Nation’s Restaurant News story.

In addition, Potbelly will test a smaller prototype. The 1,800-square-foot unit is 500 square feet smaller than its traditional units. The unit will be more digitally focused and will include new pickup shelves for digital orders. Right now, digital channels account for 41% of Potbelly’s sales, per a Restaurant Dive story. The smaller design will allow Potbelly to go into new and different locations. The chain plans to open its first smaller prototype later this month.

Potbelly also plans to speed up its menu innovation, including limited-time offers. “LTOs work well because people like new things, and it gives some of our regular customers the chance to explore new flavor options,” said a Potbelly spokesperson.

Foodservice News

• Twin Peaks and Smokey Bones may go public. Multiconcept operator FAT Brands, which owns the two chains, has confidentially filed the paperwork with the Securities Exchange Commission to become a standalone public reporting company, per a release. This is still subject to the approval of the FAT Brands board of directors and several other conditions, the release notes. Fat Brands acquired Twin Peaks in October 2021 and Smokey Bones in September 2023. This comes on the heels of federal prosecutors changing Fat Brands Chairman Andy Wiederhorn with inappropriate use of company funds, per Restaurant Business.
• Cookie concepts remain out-of-the-oven hot. For proof, look no further than Chip City Cookies, which has received a $7.5 million Series B investment from Enlightened Hospitality Investments, a firm co-founded by legendary restaurateur Danny Meyer. The gourmet cookie concept will use the funding to continue add brick-and-mortar locations, per a release. Chip City Cookies has more than 35 locations spread across eight states.
• Red Lobster will close dozens of restaurants, according to multiple published reports. There have been reports of Red Lobster’s financial challenges for weeks and now a liquidator is conducting an online auction of Red Lobster restaurant inventory, such as kitchen equipment, furniture, tables, and chairs. The auction begins Monday, May 20, 2024, per a CNN story.
• Portillo’s will make changes in its drive-thru to help enhance the speed of service, which has fallen behind the chain’s 2019 times, per a Restaurant Dive story. These efforts will focus on employee training and make sure they are properly deployed along the drive-through lane. The chain will also focus on marketing, menu innovation and digital engagement. The chain discussed these steps in an earnings call during which it reported that same-store sales declined by 1.2% in the first quarter of 2024.
• Kappus Company has acquired the assets and operations of Kreiser Distributing Company, which is based in North Huntingdon, Pa. Kappus is a Cleveland-based distributor of commercial foodservice equipment and parts.
• A California law aims to enhance transparency in restaurant prices. During the pandemic, restaurants and other hospitality venues started charging surcharges for assorted reasons. That often led to sticker shock at the end of a meal when the surcharges were layered onto the menu prices. As NPR reports, a California law will require operators to bake those surcharges into their menu. Not surprisingly, consumer advocate groups love the deal while restaurant operators are less than enthusiastic about this.

Economic News

• For the 12 months ending in April 2024, the Producer Price Index for Final Demand rose 2.2%, per the U.S. Bureau of Labor Statistics. It is the largest increase since rising 2.3% for the 12 months ending April 2023. Economists polled by Reuters projected a 0.3% increase. In other words, inflation remains stubborn.
• Initial jobless claims increased by 22,000 for a total of 231,000 for the week-ending May 4, 2024, per the U.S. Department of Labor. This represents the highest number of claims since August and 17,000 more than Dow Jones analysts had projected, per CNBC. The 4-week moving average was 215,000, an increase of 4,750 from the previous week.
• NFIB’s Small Business Optimism Index rose by 1.2 points in April to 89.7, marking the first increase of this year but the 28th consecutive month at less than its 50-year average of 98. Inflation remains the top challenge for small business owners, with 22% reporting it was the single most important problem for their businesses.
• Consumer sentiment dipped to its lowest level in six months, according to data from the University of Michigan. Coming in at 67.4 for the May 2024 preliminary reading, the University of Michigan’s Index of Consumer Sentiment is down 12.7% on a month-for-month basis. Consumer perception of both the current economic conditions and expectations for the future took significant hits. It should come as no surprise that inflation played a key role in shaping consumers’ outlook, as this Yahoo! Finance story