As the first half of the year comes to a close, now is a good time to take inventory of the state of the U.S. economy and how the foodservice industry has fared compared to other industries to date.
We are almost half way through the year so it might be a good time to take stock of where the business stands. Probably the best news is that the most dire predictions have not come to pass. Gas is not at five or six bucks a gallon. Iran has not attempted to close the Straights of Hormuz. There does not appear to be anyone (or at least many experts) predicting the United States will slide back into a recession this year.
The bad news is that the only certainty is uncertainty. Consumers are nervous. The housing market remains extremely weak while the automobile business is decent. No one is sure what will happen with the healthcare initiative. Tax policy is a puzzle. And we have a national election later in the year, further clouding the outlook.
With respect to the foodservice industry, a number of other businesses might be envious of the food prepared away from the home segment. While comparable store sales represent but one metric by which to judge the industry's performance, an examination of the Green Sheet shows a lot more plus signs than minus signs. Yes, fast feeders and fast-casual operators continue to fare better than the family dining and casual restaurants but overall it appears that Americans are opening their wallets to go out to eat. Let's face it: Foodservice is a mature market in general and days of "real" growth of 5 percent or better are long behind us but consumers seem to enjoy the little luxury we can all afford.
While food prices remain high by historical records, the rate of increase seems to have leveled off. A weak labor market weighs on the entire country, including the restaurant business, but this means operators find help more readily available and there is limited upward pressure on wage expenses. Many operations, both large and small, have ambitious plans for expansion. It would be naive to think that all these plans will come to fruition, but there is still a lot of enthusiasm for growth in our market. Reuters News reported that, as a group, restaurant stock prices are up about 20 percent in the past year.
Economic News This Week
- The Producer Price Index (or Wholesale Prices as some still call them) fell 0.1 percent. Gasoline prices fell 9 percent. Without the volatile food and energy segments, overall prices rose 0.2 percent. For the year, Producer Prices are up 0.9 percent.
- Initial jobless claims rose to 386,000, which one economist called a "somewhat elevated level." Gallup reported that Americans' perception of the job market is weak but improved from where it was the last three years.
- The New York Federal Reserve's manufacturing survey tumbled from 17 in May to just slightly more than two in June, barely staying in positive territory. The U.S. Commerce Department said May industrial production fell 0.1 percent but remains up 4.7 percent compared to May of 2011.
- The Reuters/University of Michigan consumer sentiment index fell in line with the Conference Board's similar index, dropping from 79.3 in May to a preliminary 74.1. Gallup's Economic Confidence Index also fell but Gallup Poll's "Life Ratings" improved.
Foodservice News This Week
- Reuters noted a number of initial public stock offerings from restaurant firms planned for this year including Burger King, CKR (parent of Hardee's & Carl's Jr.), Chuy's Holdings, Bloomin' Brands (Outback), and Del Frisco's Restaurant Group. Ignite Restaurant Group, owner of Joe's Crab Shack, successfully went public last month.
- Fresh & Easy Neighborhood Markets, owned by retail giant Tesco, is offering over 150 prepared meal bowls, appetizers, side dishes, and entrees under the name Kitchen to Go. Prices range from $1.99 to $9.99 and all are prepared in a central company-owned kitchen and delivered to Fresh & Easy's 190 stores daily.
- The Winnipeg Free Press reported that foodservice sales in Canada have grown 5.4 percent between March of 2011 and March this year. Included are bars, lounges, full- and limited service restaurants, as well as foodservice contractors, caterers and mobile foodservices.
- Vending machine story No. 1: A company called Fresh Healthy Vending Café has announced a rather ambitious goal of becoming Starbuck's biggest competitor by offering high-tech vending machines that serve organic coffee, specialty drinks, and organic and natural snacks. The company expects to have 500 of the eight-square-foot kiosks in offices, universities, grocery, drug, and mass merchandisers by the end of this year.
- Vending machine story No. 2: Netherlands-based A1 Concepts is introducing a vending machine call Let's Pizza, which the company says makes and dispenses a made from scratch pizza in two and half minutes. The machine is connected to the Internet to control stock and uses an infrared oven.
- Anybody remember the French fry vending machines from the 1980s?
- Ground Round's plans on opening nine more restaurants including five in New Jersey in the next three to five years. Krispy Kreme reached a development agreement that will result in 80 units in India. Russo's New York Pizzeria announced plans to open 20 to 25 restaurants in New York and New Jersey over the next seven years. Kona Ice, which features brightly colored, calypso playing trucks serving shaved ice, expects to have 300 franchise trucks on the road by the end of this year and 1,000 by 2016.
- Comparable store sales data for this week:
- Country Style Kitchen up 1.1 percent
- Dave & Buster's flat
- Luby's up 1.1 percent
See comp store details and complete listings on the Green Sheet by clicking here.
Equipment Supplier Financial Data is available by clicking here.