Keeping the foodservice equipment marketplace up to date with the latest menu and concept trends.


Real Restaurant Growth Eking out Positive, Delivery Worthy of Design Spec, McD’s Holds on to No.1 Spot

Real restaurant industry growth to date is barely positive according to one estimate. Restaurant design of the future may center on take out service. The Nielsen Company sees c-stores as having both challenges and opportunities. McDonald’s remains the world’s largest restaurant company. These stories and a whole lot more This Week in Foodservice.

The Food Institute estimates that through the first 4 months of this year restaurants and bars saw “real” sales growth of 0.83 percent.

The Food Institute uses the U.S. Census Bureau’s retail sales data then adjusts sales figures using the Bureau of Labor Statistic’s Consumer Price Index for food away from home i.e., menu price changes, to come up with what it terms as “real” growth. Some economists and others question the legitimacy of marrying statistics from two different studies across different sample bases using different methodologies.

Getting back to The Food Institute data, the real sales growth for the first 4 months of 2016 was +5.18 percent. For all of 2016, the institute reports real growth at +3.16 percent. Thus, the real sales estimate for January through April of 2017 coming in at less than +1.0 percent is obviously a significant slowdown.

The surveys cited above include only eating and drinking places. Hotels, resorts, clubs, retailers, or any of the “institutional” segments are excluded.

For comparison, the Food Institute reports real grocery store sales for the first 4 months of this year at +1.16 percent, +2.4 percent for the first 4 months of 2016 and +2.47 percent for calendar year 2016.

Economic News This Week

  • U.S. Gross Domestic Product for the first quarter was revised up to +1.2 percent on an annual basis in the second estimate from the Bureau of Economic Analysis. The Bureau’s first estimate was +0.7 percent. The consensus forecast for the second estimate was 0.8 percent. If the second estimate holds up, it is positive news. GDP has been +2.1 percent since the recession ended in mid-2009.
  • Initial jobless claims totaled 234,000, an increase of 1,000 for the week-ending May 20. The 4-week moving average was 235,250, a decline of 5,750. This is a 44-year low for the 4-week moving average; it has not been this low since April 4, 1973.
  • Sales of new homes in April were estimated to be 569,000 on a seasonally adjusted annual basis. This is a decrease of 11.4 percent from March but up 0.5 percent from April 2016. Sales had been up the first three months of this year and the overall trend has been up, aided by a lot of first-time buyers entering the market.
  • April existing home sales fell by 2.3 percent from March to a seasonally adjusted annual rate of 5.57 million. The National Association of Realtors said the decline was due to “stubbornly low supply levels,” noting that the average house sold was only on the market for 29 days. “Demand is easily outstripping supply in most areas of the country,” the NAR said in a statement.
  • The U.S. Department of Commerce’s Advance Report for durable goods sales declined 0.7 percent in April after 3 consecutive months of increases. The volatile transportation sector led the decline with a drop of 1.2 percent. Excluding transportation, durable goods sales declined 0.4 percent. Durable goods shipments declined 0.3 percent but unfilled orders for durable goods rose 0.2 percent.
  • The University of Michigan’s final Consumer Sentiment Index for May barely moved but stayed at what a university spokesman called a “high plateau,” as it has been since last year’s election. The May Index was 97.1 versus 97.0 in April. The Current Economic Conditions component of the index was 111.7 in May, down from 112.7 in April. The other component, the Index of Consumer Expectations, was also nearly identical to April’s reading of 87.0 versus 87.7 in May. The “partisanship” factor in the Expectations Index also remained from earlier months as well as Democrats’ bearish view of the future of the economy and Republicans’ bullish.

Foodservice News This Week

  • Delivery will shape restaurants in the future according to Michael Schaefer of Euromonitor International. Schaefer, who spoke during the National Restaurant Association Show in Chicago, likened delivery to the impact of drive-thru windows, saying that restaurants will be specifically designed for delivery service. He says consumers will also insist on sustainability and experience-focused dining.
  • Nielsen sees c-stores as well positioned but with some challenges. The report states that more men than women patronize c-stores, which runs counter to most retail channels. Most c-store sales come from households with annual incomes less than $70,000. The Nielsen Company also states that convenience stores are highly relevant to consumers’ on-the-go lifestyles and equipped to meet their immediate needs. The study notes that c-stores’ sales of ready-to-eat meals enjoyed double-digit sales growth last year.
  • Big Mac is still the No.1 restaurant company in the world as reported by the Forbes Global 2000. McDonald’s came in at No. 215 on the overall list as ranked by sales. This a drop from the 2016 study when McDonald’s was 189th overall. Starbucks came in second in the restaurant sector and was No. 370 overall. That followed in order by: Compass Group (486), YUM! (729), Restaurant Brands, International (1066), YUM China Holdings (1224), Aramark (1237), Darden (1264), and Whitbread (1529).
  • Ex McDonald’s CEO’s firm invests in PizzaRev. Don Thompson, who left McDonald’s in 2015, said his company Cleveland Avenue LLC bought a majority stake in the fast-casual, build-your–own-pizza operation because it offers “potential for scale and growth.” PizzaRev has about 50 stores with as many as 200 more in development. PizzaRev was aided in its initial growth by a minority investment from Buffalo Wild Wings. The article did not reveal the dollar amount of the investment.
  • Corporate Stirrings: Ruby Tuesday is charged with age discrimination in a suit filed by the Equal Employment Opportunities Commission. The suit alleges that a job applicant with 20 years’ restaurant experience was rejected and told that company was looking for an employee that would “maximize longevity.” The Fiesta Restaurant Group issued an extremely strongly worded rebuttal to critical comments made by the activist investor group headed by the Pappas group. Shares of Bagger Dave’s Burger Tavern Inc. have begun trading on the over-the-counter market.
  • Growth Chains: Marco’s Pizza will open up to 12 locations in central Florida this year. Bruster’s Real Ice Cream has signed a franchise agreement for five units in the Phoenix area. Capriotti’s Sandwich Shop will open three locations in Las Vegas. Black Bear Diner leased space in Katy, Texas, and Midwest City, Okla. Starbucks will open 15 stores in low to moderate income neighborhoods this year. Fuzzy’s Taco Shop will open three restaurants in Wichita, Kan. Jerry Lawlor’s Memphis BBQ, which has 1 restaurant now, plans to have 5 locations in the next 18 months. Taco Bell plans to grow from its current 6,650 units to 9,000 by 2022 with most of the increase coming from Brazil, Canada, China and India.
  • Comparable Store Sales Reports: Cracker Barrel down 0.4 percent, Famous Dave’s (company owned down 3.3 percent and franchised down 4.8 percent), Ignite Restaurant Group (Joe’s Crab Shack down 14.3 percent and Brickhouse Tavern down 12.6 percent), and Zoe’s Kitchen down 3.3 percent.

For details and same-store sales of other chains, please click here for the Green Sheet.