Independents are on the rise. Darden plans to build and remodel restaurants. DQ, White Castle and Noodles & Company all prepare to change their appearances. These stories and a whole lot more This Week in Foodservice.

Data shows independent restaurants and small chains are challenging the big players. Technomic Inc. spokesman Darren Tristano calls it nothing less than the “dawning of the era of the independent.”

To support this theory, Technomic notes the Top 500 U.S. chains saw sales rise 3.6 percent in 2016 while total industry sales rose 3.9 percent. Further, a quick glance at the Green Sheet shows that comparable store sales are down at half of the publicly held chains. Suppliers are also seeing the shift. US Foods reported that sales growth with independents in the last quarter “was very solid.”

If in fact small chains and independents are in the ascendency, will it require manufacturers, dealers and other members of the supply chain to examine their go-to-market strategy and work closer with foodservice dealers?

Economic News This Week

• Existing homes sold at the highest pace in a decade during the first quarter. The National Association of Realtors reported that single family home sales rose 1.4 percent to a seasonally adjusted annual rate of 5.6 million, a number that has not been seen since the first quarter of 2007. This was despite low inventory, rising interest rates and higher home prices. The national median existing home price increased 6.9 percent from the first quarter of 2016. As is always the case, both home sales and prices varied significantly from market to market.
• Privately owned housing starts declined 2.6 percent in April from March but increased 0.7 percent over April 2016. Single-family housing starts were up 0.4 percent over March. Building permits for privately owned housing in April fell 2.5 percent from March but rose 5.7 percent over April last year. Permits for single family homes fell 4.5 percent from March.
• Initial-jobless claims declined by 4,000 to a final level of 232,000 for the week ending May 13. The 4-week moving average declined by 2,750 to a final level of 240,750. As has been the situation this year, jobless claims remain near historical lows when adjusted for population growth.
• The Federal Reserve reported industrial production advanced 1.0 percent in April. This was the third consecutive monthly increase and the largest gain since February 2014. Industrial production was up 2.2 percent over April 2016. Capacity utilization for the industrial sector rose 0.6 percentage point in April to 76.7 percent, a rate that is 3.2 percentage points below its long run (1972-2016) average.
• The Empire State Manufacturing Survey flattened out in May. After 6 straight months of positive readings, the Federal Reserve Bank of New York reported that general business conditions dropped 6 points to minus 1.0. The new orders index dropped to minus 4.4 and the unfilled orders index fell by 16.1 points to minus 3.7. Shipments declined by 3.1 points but stayed positive at 10.6.
• Philadelphia Federal Reserve Manufacturing Business Outlook Survey increased in May. The Index jumped from 22 in April to 38.8 in May. The Index has now been positive for 10 straight months. (Any reading that exceeds zero indicates increasing activity.) The New Orders Index fell from 27.4 to 25.4 in May. The Shipments Index rose sharply from 23.4 to 39.1. The Unfilled Orders Index rose from 6.6 in April to 9.0 while the Average Work Week Index increased from 18.9 to 21.7.
• The Conference Board Leading Economic Index increased 0.3 percent in April. This follows a 0.3 percent rise in March and a 0.5 percent increase in February. The Index now stands at 126.9 (2010 = 100). The Conference Board states that the data points to a growing economy and “… perhaps even a cyclical pickup.” The Conference Board further says that the weak gross domestic product in the first quarter may be a “temporary hiccup.”

Foodservice News This Week

• Darden is going on a building kick. The company had virtually stopped expansion as it dealt with financial and other issues but now plans to spend $360 million to $400 million building and remodeling restaurants. The company did not provide many details except to say it plans to build 30 to 35 restaurants of which 6 will be Bahama Breeze locations that will open in the next 2 years.
• Dairy Queen focuses on its Grill & Chill concept. The chain feels this type of quick service is its best way to attract consumers to its food menu. Thus, DQ has been redesigning and readjusting the appearance of the brand which it first introduced in 2001. Part of the plan is to convert Dairy Queen Braziers to the Grill & Chill format.
• Noodles & Co. is testing a slew of different ideas. One is a name change and different logo. In the Kansas City, Kan., area new signs are going up using the name Noodles World Kitchen. Other changes include new menu items, digital menu boards to draw attention to promotions, rapid pick-up, a rewards app, and new staff uniforms.
• White Castle will introduce a new prototype next year. The new design will feature outdoor seating and flexible indoor-outdoor convertible seating. In addition, the prototype will enhance mobile POS ordering and provide an interactive drive-thru experience. A spokesperson said the new model will honor the chains nearly 100 years of history.
• Legislation has been introduced in San Francisco to ban food delivery robots. Proponents of the bill claim robots will take jobs from people and are likely to injure pedestrians. The manufacturers of the robots say that the bots have built-in safety features and are operating without problems around the world.
• Consumers 25 to 34 years old spent $3,097 eating out last year according to Bureau of Labor Statistics data as presented by the Food Institute. This is $89 more than the average American and $305 more that people aged 35 to 54.
• McDonald’s expands delivery program using UberEats. McD’s started testing delivery in several Florida cities in January and now offers the service at 300 locations in Los Angeles, 144 in Phoenix, 59 in Columbus, Ohio, and nearly 270 in the Chicago area. While there is risk in food quality deteriorating, almost 75 percent of Americans live within 3 miles of a McDonald’s. The burger giant believes that younger consumers will willingly pay the UberEats $5.00 delivery fee.
• Corporate Stirrings: Famous Dave’s plans to close underperforming restaurants but did not provide any information on how many or where. The chain also said it is developing a smaller restaurant that may be half the size of the typical plan the company now uses. Qdoba may be put up for sale. Jack in the Box, Qdoba’s parent company, has hired Morgan Stanley & Company to assist in evaluating “potential alternatives” regarding the Mexican chain. The Fiesta Restaurant Group is eliminating 49 corporate positions. The company announced the move will save $1.8 million net of severance and other transition costs. An industry consultant said that the Dallas-Ft. Worth (DFW) area has become the chain restaurant HQ focal point in the U.S. as well as a major market for chains moving east or west. Thus, DFW has too many stores. NASDQ has informed Jamba Inc. it is not in compliance with exchange rules. Specifically, the company failed to file its 10-Q form with the SEC by April 4. Jamba states its failure to file was due to “significant changes in the company’s business model, leadership, key personnel and relocation of corporate offices.” Jamba also said the company will fully gain compliance.
• Growth Chains: Church’s Chicken has signed the largest development deal in its history with the Goalz Restaurant Group. The deal calls for opening 20 restaurants a year for the next few years in Colorado, Florida, Kentucky, Ohio, North Carolina and South Carolina. Pollo Campero, with 73 units now open, plans to add 14 more stores this year. Capriotti’s Sandwich Shops will open 3 locations in the Hampton Roads, Virg., area.  A&W Root Beer has opened 7 restaurants this year and has 11 more in development.
• Comparable Store Sales Reports: Jack in the Box (system down 0.3 percent, company owned down 2.4 percent  and franchised down 0.4 percent, One Hospitality Group (owned STK down 1.8 percent and owned and managed up 2.7 percent), Pollo Campero down 0.3 percent, Qdoba (system down 3.2 percent, company owned down 5.9 percent and franchised down 0.3 percent), and Red Robin down 1.2 percent.

For details and same-store sales of other chains, Please Click Here for the Green Sheet.