From inflation to inflated labor rates to consumers feeling the pinch, well, everywhere, operators faced no shortage of business challenges during the first part of 2024. Yet the results were far from universal. Some chains had success while others struggled to generate customer traffic and some restaurant chains even filed for bankruptcy.
What separated the chains that did well from those who struggled a bit? It wasn’t pricing, necessarily, since chains that resorted to discounting schemes and promotional campaigns didn’t see a significant shift in sales and traffic, as Restaurant Dive reports.
Rather, the successful operators took a multifaceted approach that included new menu items, enhancing operational efficiencies and an understanding that value means more than price. And that’s a lesson that many emerging concepts continue to embrace.
No doubt, operators will need to use multiple tools to help drive success as the rest of the year plays out.
Foodservice News
- restaurant development + design points out in this story. Food trucks can represent a cost-effective way to test the ideas behind an emerging restaurant. By starting with a food truck, Wild Pie was able to get a better idea of who its audience is, and how to market the concept and build awareness before opening the concept’s first brick-and-mortar location, as
- Some fast-casual chains continue to target smaller towns for their expansion plans. Pandemic-related dining restrictions forced many independent restaurants to shut down thus creating an opening for some national players in smaller towns, as CNBC reports. Fast-casual chains like Canva and Panda Express are moving into markets smaller than they might normally consider. Cheaper costs of doing business in such markets can help offset the lower sales.
- Circle K’s parent company turned the c-store world on its ear this week. That’s because Couche-Tard submitted a bid to acquire fellow c-store giant 7-Elevent in a deal involving the two largest players in the segment. Couche-Tard also announced that it has acquired GetGo’s 270 c-store units, as C-Store Dive reported.
- Callaway Brands is considering strategic alternatives for its Topgolf eatertainment brand, per multiple published reports. The chain has been dealing with slower traffic and lower same-store sales, per this FSR report. The alternatives under consideration include potentially spinning off Topgolf so it functions as a separate entity.
- Denny’s plans to expand virtual brand Banda Burrito to approximately 1,000 locations by the end of August, per a company release. The move aims to increase Denny’s appeal to “dinner-and-late-night feasters and party prowlers” via a menu featuring “Cali-Mex” flavors. The chain sees Banda Burrito as a growth opportunity in such markets as Arizona, Florida, Illinois, New Mexico, Nevada, Maryland, Pennsylvania, Texas, and Washington state.
- Artificial intelligence remains an oft-discussed topic in today’s foodservice industry. Texas-based rep firm Forbes, Hever & Wallace invited me and Antunes’ Dan Hartlein to offer our two cents about the state of AI, automation and more as part of its podcast. In light of Dan’s expansive knowledge on the topic, this turned out to be a very engaging give and take.
- In an all-cash deal valued at $2.1 billion, broadline distributor Performance Food Group Co. plans to acquire Cheney Brothers. Based in Riviera Beach, Fla., Cheney Brothers is a broadline distributor with annual revenues of $3.2 billion, per a release announcing the deal. This transaction will strengthen PFG’s presence in the Southeast.
- Service company Tech24 came in at no. 1,544 on the 2024 5000 list. This list tracks the fastest-growing privately held companies in America. This is Tech24’s second time earning such recognition.
Economic News
- U.S. retail and foodservice sales increased 1.0% in July, per the advance estimate from the U.S. Census Bureau. July’s performance represents a 2.7% increase compared to the same period in 2023 and it beat the 0.3% estimate economists had projected, per CNBC. Total sales for the May 2024 through July 2024 period were up 2.4% from the same period a year ago. Sales at eating and drinking places showed a moderate increase of 0.3%, per an analysis from the National Restaurant Association. This marks the fourth consecutive month of moderately rising sales, as May and June each posted increases of 0.1%. The NRA attributes this moderate growth largely to rising menu prices. In total during the last 4 months, eating and drinking place sales were up 1.1%. That was slightly above the 0.8% gain in non-restaurant retail sales during the same period.
- The Conference Board’s Leading Economic Index for the U.S. declined 0.6% in July for a reading of 100.4 This comes on the heels of a 0.2% June decline. For the six months ending July 2024, the LEI declined 2.1% which is less than the 3.1% rate of decline for the six-month period of July 2023 to January 2024. Despite the declines, The Conference Board no longer projects a recession for the U.S. economy. The Conference Board projects U.S. gross domestic product to grow 0.6% in the third quarter of 2024 and 1% in the fourth quarter of 2024.
- The Consumer Price Index for increased 0.2% in July, per the U.S. Bureau of Labor Statistics. A 0,4% increase in the cost of shelter accounted for 90% of the increase. This came after a 0.1% decline in June. July was the first time in more than three years that the annual rate of inflation was less than 3%, per Reuters. For the 12-month period ending in July, the CPI increased 2.9%. Restaurant prices (food away from home) increased 0.2% for the month compared to a 0.1% increase for grocery store (food at home) prices. For the 12 months ending in July, restaurant prices increased 3% more than grocery prices.
- Industrial production dipped 0.6%, per data from the U.S. Federal Reserve, which attributes some of the decline to early July shutdowns in the petrochemical and related industries due to Hurricane Beryl. Manufacturing output stepped down 0.3% as the index for motor vehicles and parts fell nearly 8%; manufacturing excluding motor vehicles and parts rose 0.3%. At 102.9% of its 2017 average, total industrial production in July was 0.2% less than its year-earlier level. Capacity utilization moved down to 77.8% in July, a rate that is 1.9 percentage points below its long-run (1972–2023) average.
- Initial jobless claims declined by 7,000 for a total of 227,000 for the week ending August 10, 2024, per the U.S. Department of Labor. This is the lowest level of initial claims in five weeks and less than the 235,000 claims economists polled by Reuters had anticipated. The 4-week moving average was 236,500, a decrease of 4,500 from the previous week.
- The housing market continues to feel the impact of higher interest rates. Building permits for privately owned housing units declined 4.0% in June compared to the previous month, per data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development. July’s rate of 1.4 million permits was 7.0% less than the same period in 2023. July housing starts were 6.8% less than June and 16% less than July of 2023.