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jCarbonara
Joe Carbonara

Double Dose of Disruption

Business leaders often look over their shoulders trying to find the next disruptive player or event that will shake up their organizations. Well, in a matter of weeks spanning August to the beginning of September, the foodservice industry got a double dose of disruption.

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jMartinez
Juan Martinez

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Kiosk ordering seems all the rage in today’s foodservice industry. While the process seems simple and intuitive for many consumers, implementation is another story. 

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jStiegler
Jerry Stiegler

Over-Expansion May Be Hurting Restaurants, Restaurant Employment Fell in September, Coffeehouse Sales on the Rise and More

Merrill Lynch says over expansion is hurting restaurants. Restaurant employment fell dramatically in September. Premium products are driving up coffeehouse sales. Fast-casual restaurant sales growth is slowing in Canada. These stories and more This Week in Foodservice.

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Highlights

Restaurants Outperform Retail Market Again, Americans Are Cooking Less, and Much More

Restaurant sales looked good in October. The NRA says consumers spent more on food away from home but NPD says traffic is down. Godfather’s enters the chicken business. Steam grills prove their worth for an up and coming chain and a whole lot more in This Week In Foodservice.

Restaurants and bars outperformed the total retail market once again in October.

U.S. retail sales bounced back in October, rising 0.3 percent after falling by the same percentage in September. Thus, it appears that September may have been an anomaly. Retail sales were stronger than it appeared because falling oil prices drove gasoline sales down 1.5 percent. Without gas sales, U.S. retail sales were up 0.5 percent.

Total retail sales were up 4.1 percent over October 2013 and up 4 percent in the first 10 months of this year.

Restaurant and drinking place sales did far better than the total retail market, rising 0.9 percent over September, 6.8 percent over October 2013 and 5.5 percent in the first 10 months of 2014. October was an excellent month compared to most other retail segments including grocery store sales, which rose 0.2 percent.

When considering the numbers above please bear in mind that the Census Bureau surveys only restaurants and bars. Not included are hotels, resorts, clubs, retail foodservice, employee feeding, schools, colleges and healthcare. Further, Bureau characterizes the data as “advance” because it is based on a small preliminary sample. Thus, the figures are subject to revision. And, most of the numbers are adjusted for seasonal variations, holidays, weekend, etc., but not for inflation.

Economic News This Week

  • Downturn next year? While the economy is sort of bumping along most observers see at least a fair to middling improvement. But it was just a matter of time before a “gloom and doom” prophet appeared. In this case it is an outfit called the Jerome Levy Forecasting Center, which claims to have predicted market declines as far back as the Great Depression as well as the 2007 recession. Their forecast points to a number of negative factors including the U.S.’s reliance on exports and a shaky world economy, especially in Europe.
  • Initial jobless claims increased 12,000 to 290,000 for the week ending November 8. The Labor Department also said that the 4-week moving average grew by 6,000 to 285,000. The increase in claims does not seem to be of much concern as claims have stayed below 300,000.
  • Job openings fell slightly in September to 4.7 million, down from 4.9 million in August, according to the Bureau of Labor Statistics. The number of hires rose to 5 million, up from 4.7 million in August.
  • The number of people quitting their jobs rose to 2.8 million in September, which was the highest number of “quits” since April 2008. It is considered a good sign when quits increase because it shows that people have the confidence to leave a job for either a new job or have the belief they can quickly find a new position.
  • Consumer credit grew 5.9 percent on a seasonally adjusted basis in September. The Federal Reserve reported that nonrevolving credit, which includes car and student loans, grew at 7.3 percent while revolving credit — mostly credit card debt — grew just 2 percent. Consumer’s unwillingness to take on credit card debt is a sign of a weak economy.
  • The Reuters/University of Michigan Consumer Index jumped more than forecast, rising to 89.4, the highest the Index has been since July 2007. This preliminary November report was up from 89.9 in October. The Current Economic Conditions Index was 103, up from October’s 98.9, while the Expectations Index rose to 80.6 from 79.6 last month. It appears that consumers are reasonably satisfied at the present but harboring doubts about the future.

Foodservice News This Week

  • The National Restaurant Association’s latest report on consumers finds that the average household spent 2.2 percent more in restaurants last year than in 2012. Also, households with annual income of $70,000 or more make up one-third of the households in the U.S. but account for 56 percent of restaurant spending.
  • Americans are eating out less but not cooking more, according to the NPD Group’s Eating Patterns in America Report. Consumers are eating 8 out of 10 meals at home but choosing easily prepared foods like yogurt.
  • A first For Godfather’s Pizza. A new Cenex gas station in Sioux Center, Iowa, has a dual-concept restaurant featuring a Godfather’s Pizza Express but it is the second concept that makes it newsworthy — Godfather’s Chicken. Phone calls to Godfather’s regarding plans for the chicken program were not returned by press time.
  • Tom & Chee, which started this year with 7 restaurants, will end the year with 19 and may double that number by the middle of 2015. The Cincinnati-based chain said that new steam grills have speeded up production and have been a “huge game changer.”
  • McDonald’s employees are taking their protest international. McDonald’s employees from New York, Chicago and Los Angeles are heading for eight countries to enlist support of overseas employees. The press release had a headline about a global strike next week but no specific date was mentioned.
  • Pizza Hut announced major menu changes that will allow customers greater flexibility in customizing their pizza with more exotic options. In addition the chain will continue to offer their current bestselling pies and add 11 new specialty pies. Pizza Hut will tweak their logo and worker uniforms will now be jeans and T-shirts.
  • Sbarro launched a new upscale concept called Pizza Cucinova last year, and has now announced the new chain will undergo a name change to Cucinova Urban Italian along with some other changes including menu changes and a tweaked design.
  • How a restaurant chain figured in the election. Ed Gillespie, a Republican running for the U.S. Senate against incumbent Mark Warner in Virginia, was photographed in a Buffalo Wild Wings because it was determined that the chain was popular with conservative leaning independent voters. Mr. Gillespie came close, but Senator Warner was reelected.
  • Late night hours appear to be working for fast food chains. The NPD Group reported that night traffic has increased by 12 percent. Patrons in part are made up partying folks who are looking to sop up their alcoholic intake so some operators are offering special menu items at night that are high in calories. People who work late shifts are also good targets for late night meals.
  • High-end restaurants try take-out and home delivery. A recent Wall Street Journal article reported that a “handful” of upscale restaurants are offering food to go and encountering the problems that their lower priced compatriots have. The number one problem is having the food taste fresh after 30 minutes. The white tablecloth operators have also struggled to find the best containers and transportation systems.
  • Corporate Stirrings: Zoe’s Kitchen, Inc. announced it has begun a proposed secondary public offering of its common stock with some of the company’s shareholders offering 3,800,000 shares. Zoe’s will not receive any proceeds from the sale. Darden’s newly elected board of directors will try and make the company more stockholder friendly by eliminating a “poison pill” provision to protect against takeovers and require management to address topics raised by more than 10 percent of stockholders so that management cannot simply ignore stockholders’ concerns.
  • Growth Chains: Newk’s Eatery will open 25 or more restaurants in the Southeast next year. CST Corner Stores has opened 25 stores this year, will have 15 more opened by the end of 2014, and plans on opening 45 to 55 more in 2015. Schlotzky’s Deli has signed an agreement for 6 new delis in Las Vegas. King Street Grill, currently with 7 locations, will open their first place outside the Southeast in Pittsburgh. Pie Five hopes to have a total of 60 to 70 units by the end of 2015. McDonald’s will open restaurants in Kazakhstan, which will make the 120th market in which the hamburger giant operates.
  • Comparable store sales reports: COSI (down 1.5 percent), Luby’s (all concepts down 1 percent, Luby’s Cafeteria up 0.4 percent, Fuddrucker’s down 4.6 percent, and combo units up 5.7 percent), NPC International (down 0.7 percent), Papa Murphy’s (all domestic up 4.6 percent, company-owned up 8.4 percent, and franchised up 4.4 percent), and Popeye’s Louisiana Kitchen (up 7.2 percent).

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

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