Delivering restaurant food doesn’t seem to be high tech nor exciting nor financially spectacular. Despite this, almost overnight some investors became infatuated with food delivery, something pizza and Chinese restaurants had been doing for decades.

Never mind that some restaurants did not want to partner with third-delivery firms. In some cases, the foodservice operators said the delivery fees were onerous while others found the service lacking. Almost weekly a different financial guru would remind anyone who would listen profits remained elusive in the food delivery business.

This narrative has served as the backdrop for an interesting saga that’s been playing out of late between two of the bigger names in third-party delivery. GrubHub initially tried to sell the company to Uber Eats. The two companies could not agree on a price then GrubHub wanted Uber Eats to pay a breakup fee if the deal was challenged by government regulators.

GrubHub’s next move was to agree to be purchased by Just Eat Take Away, a large European food delivery firm. The move avoids the regulation problems in the U.S., but the financial analysts at the Motley Fool claim that European investors don’t like deal at all. So, the drama continues.

Economic News This Week

• S. retail sales increased 17.7% in May, the U.S. Commerce Department reported. This came after record-setting declines in March and April. To put the growth in context, this is more than twice the rate forecast by a variety of economists. All categories reported gains in May, with clothing and accessories (188%) and sporting goods, hobby, musical instrument, and bookstores (88%).
• The U.S. officially entered a recession in February, according to the National Bureau of Economic Research. At one time the U.S. was in a recession if Gross Domestic Product was negative for two consecutive quarters. Given the situation the economy is currently in, the country should have no problem meeting that standard this year.
• Consumers slammed on their borrowing breaks in April as consumer credit decreased by 19.%, per the U.S. Federal Reserve. Revolving credit, which is mainly credit card debt, fell at an annual rate of 65.0%, the largest decline on record. Non-revolving credit (auto loans, boat loans, student loans, etc.) decreased at an annual rate of 4.0%.
• Initial-jobless claims decreased by 355,000 for a final reading of 1.54 million for the week-ending June 6. The number of claims was in line with forecasts. The 4-week moving average was 2 million, which represents a decrease of 286,250 claims.
• The Producer Price Index for Total Final Demand increased 0.4% in May. In the 12-months ending in May the PPI fell 0.8%. The Producer Price Index for Food rose 6.0% in May.
• The May Consumer Price Index for All Items declined 0.1%. This comes after declines of 0.8% in April and 0.4% in March. This is the first time ever the CPI has declined for three consecutive months. In the last 12 months ending in May the consumer price index has increased 0.1%. Without food and energy prices, the index has increased 1.2% in the past 12 months.
• New home sales increased 21% in May compared to the same month in 2019. This is according to a survey of 300 builders by John Burns Real Estate Consulting, LLC.
• The preliminary reading of the June University of Michigan Index of Consumer Sentiment showed improvement. The index rose to 78.9 from 72.3 in May. The Current Economic Conditions Index increased to 87.8 in June from 82.3 in May. The Index of Consumer Expectations increased to 73.1 from 65.9 in May. A spokesperson for the University attributes the gains primarily to a better employment situation.

Foodservice News This Week

• Restaurant sales increased 29% in May, per the U.S. Department of Commerce. This came after a near 40% decline in April.
• Food prices increased 0.7% in May, per the Consumer Price Index. Food at home prices increased 1.0% for the month while the price of food away from home increased 0.4%. In the 12-month period ending in May, food at home prices increased 4.8% while the food away from home prices increased 2.9%. This is a complete reversal from the last few years when menu prices increased much faster than grocery store prices.
• Starbucks plans to close 400 stores while adding more “convenience-led formats.” These stores will feature curbside pickup, drive through service, and make mobile ordering easier. The first Starbucks pickup store has been successfully operating in New York City since November 2019.
• Alexander Holdings had been exploring a potential sale of the company since the summer of 2019. In March, the parent of J.Alexander’s, Redland’s Grill and Stoney River Steakhouse & Grill had talked to more than 125 possible buyers and had an offer at a premium over at was then market price. After the coronavirus pandemic hit the potential buyer reduced its offer twice. The then would be purchaser added other conditions and the deal fell apart. J.Alexader’s management started reopening stores at the end of April and has pushed back the potential sale to next year.
• BurgerFi plans to go public. As an interim step, the fast-growing restaurant chain will merge with the financial firm of Opes Acquisition Corp.
• Chili’s aggressive reopening strategy seems to be working. As of now, Chili’s seems to be outpacing its competitors, many of whom are taking a slower approach to reopening. As a result, Chili’s says the company is generating positive cash flow, is current in rent payments, has opened 900 of its dining rooms and recalled thousands of employees.
• Wendy’s comparable store sales fell 3.3% in May from May 2019. Same-store restaurant sales in the U.S. declined 1.9% in May while international sales dipped 15.7%. The hamburger chain uses only fresh beef and there was shortage of fresh beef due to production problems.
• Nearly 2 in 10 New Jersey restaurants closed due to COVID-19 will likely not reopen. That is the message Marilou Halvorsen, president of the New Jersey Restaurant Association, delivered to that state’s Senate. There are reports of restaurant owners dropping their keys on the doorstep and walking away. One ray of sunshine for the Garden State is the reopening of New Jersey restaurants for outdoor dining.
• Rubio’s Costal Grill has permanently closed 7% of the company’s 170 restaurants. The fast-casual Mexican chain will pull out of Colorado and Florida, which will result in the closing of six stores in each of those states. The chain intends to focus on its core markets of California, Arizona, and Nevada.
• Multiconcept operator Earl Enterprises has acquired the assets of BRIO Italian Grille and BRAVO! Italian Kitchen.
• Comparable Store Sales Reports: J. Alexander’s Holdings (Alexander’s down 12.8% and Stony River Steakhouse down 14.6%.), Jack in the Box up 5.0% and Red Robin Gourmet Burgers down 20.8%

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