Published on Tuesday, 07 January 2014
Written by Jerry Stiegler
The National Restaurant Association kicks off 2014 with positive industry news, the Wall Street Journal looks for an improving jobs picture in the New Year, white table cloth restaurants hire only the best for wait staff and much more in This Week in Foodservice.
The National Restaurant Association's November Restaurant Performance Index provided virtually all good news. The overall Index rose 0.3 percent to 101.2 for the month with both of the component indices up as well. The Current Situation Index rose 0.3 percent with operators reporting increased same-store sales on a year to year basis. Customer traffic was also up.
The Expectations component showed a nice increase as well, rising 0.2 percent compared to October and now stands at 101.1. With the Current Situation Index at 101.2, the study shows slow but solid expansion for the industry in 2013.
Given operator results, it is not surprising that they continue to invest in their businesses. Fifty-four percent of those surveyed said they had made a capital investment in equipment, expansion and/or remodeling in the past 3 months. This is the seventh straight month where more than half of the operators said they had made a capital investment. Moreover, foodservice executives plan to keep investing, 55 percent saying they will spend on equipment, expansion and/or remodeling in the next 6 months.
Economic News This Week
- The "Jobless Recovery" may be improving according to a recent Wall Street Journal article. The paper surveyed economists who predicted the U.S. will add 198,000 jobs on average each month. If this forecast holds true, employment should be back to pre-recession levels by July. While the author of the story acknowledges the decline in the unemployment rate is due to a drop in people looking for work, the Federal Reserve appears to believe that the job picture will continue to improve and has announced it will trim their stimulus efforts in the coming month. Economists see a cycle where pent-up demand requires businesses to increase hiring. Then the newly hired spend their earnings, creating still more demand. We can all certainly hope this theory works and that the foodservice industry benefits from it.
- Initial jobless claims fell to 339,000, a decline of 2,000, for the week ending December 28. The previous week's claims dropped by a near-record 42,000. The less volatile 4-week average of claims filed rose to 356,700, an increase of 8,000. Labor experts caution that seasonal layoffs can distort first-time jobless claims this time of year and it may take until mid-January for a realistic picture of layoffs to emerge.
- Pending home sales crept up by 0.2 percent in November, the first increase in 6 months. The National Association of Realtors says increasing interest rates and a low inventory of homes for sale continues to trouble the market.
- Home prices continued to rise in October but Case-Schiller remains cautious about price activity in 2014, noting that forecasters think prices will increase but only in the low single digits this year. Meanwhile, Zillow reported that prices were back at their pre-recession peaks in 10 of the 50 largest markets.
- Construction spending increased 1 percent in November over October according to the U.S. Department of Commerce. Construction Spending is up 5.9 percent over November 2012.
- The U.S. population grew just 0.7 percent last year, according to the U.S. Census Bureau. As noted in this blog a few months ago, declining population will have serious economic consequences for the U.S. and other countries.
- The Institute for Supply Management's Manufacturing Index fell slightly in December to 57.0 from November's 57.3. The hiring index rose. The ISM's Non-Manufacturing Index retreated slightly in December to 53.0 from 53.9 in November.
- The Chicago Area Production Manufacturing Index dropped to 59.1 in December from 63 in November. New orders plummeted to 43.9 in December from 68.8 in November.
- Domestic car and light truck sales increased 7.6 percent in 2013 over the previous year, its highest level since 2007. Some manufacturers reported lower sales in December but this may have been the result of strong sales at the end of November. While some observers think 2014 maybe a tougher year for auto producers, the average age of cars on U.S. roads continues to grow older, which may indicate stronger future demand.
- Consumer confidence, as studied by the Conference Board, rose to 78.1 in December from 70.4 in November with both the Current Situation and the Expectations indices rising. The Gallup Organization's U.S. Economic Confidence Index climbed to minus 17 last week and showed a 22 point increase in the last two and a half months. Gallup measures the difference between consumers who think that conditions are good vs. those who do not. Since its inception in 2008, the study has never been in positive territory.
Foodservice News This Week
- Upscale restaurants are hiring culinary school and Ivy League school graduates who know not just food but ingredients and who "establish trust before the food arrives," according to a Wall Street Journal article. The Culinary Institute of America reports 20 percent of its graduates go into front-of-the-house jobs now vs. just 5 percent 15 years ago. The article also notes that pay and hours may be better for wait staff than it is for an apprentice chef or line cook.
- Americans consumed more chicken than beef last year, according to NPR. Chicken consumption was about 60 pounds per person last year, up from 20 pounds in 1909. Beef consumption per capita hit a peak of 80 pounds in the 1970s and fell to less than 60 pounds in 2012. Beef prices hit a record high last week making it doubtful consumption will increase soon.
- Christmas is becoming a day to eat out. More independent restaurant operators and chain restaurants now stay open on the holiday and experience good traffic as well as filling takeout orders according to marketwatch.com.
- Roark Capital group completed its acquisition of CKE Restaurants, which operates such concepts as Carl's Jr. and Hardees. Roark and its affiliates also own Arby's, Auntie Anne's, Cinnabon, Carvel Ice Cream, Corner Bakery, McAlister's Deli, Miller's Ale House, Moe's Southwestern Grill, Schlotzky's and Wingstop.
- The Cracker Barrel vs. Steak 'N Shake battle continues. Cracker Barrel's chairman has rejected the recent demand from Sardar Biglari that the company commence a sales process. Biglari's firm controls the Steak 'N Shake chain. Cracker Barrel board stated that Biglari has lost three previous proxy fights in his attempts to take over the family chain. At least one Wall Street analyst notes that Cracker Barrel's recent financial performance was better than Steak 'N Shake's.
- The Hy-Vee Grocery chain will open restaurants in 50 of its stores this year. The West Des Moines, Iowa, firm plans to open 10 of its Market Grille locations, which offer full menus, a full bar and waiter service. The company will open 40 Market Café concepts that have smaller menus and serve beer and wine but not cocktails.
- Growth Chains: Buffalo Wild Wings expects franchisees in Mexico to open nearly 30 restaurants in the next few years. Steak 'N Shake has franchise agreements for 50 restaurants in Saudi Arabia. Kona Grill has leases signed for six new restaurants. Sbarro plans on opening 20 franchised restaurants in Brazil during the next decade. Chicken Salad Chick has agreements to add 12 future franchised locations in the Georgia markets of Atlanta and Athens.
- Comparable Store Sales Reports: Darden (Bahama Breeze up 6.2 percent, Capital Grille up 6.7 percent, Edie V's up 5.7 percent, LongHorn up 5.0 percent, Olive Garden down 0.6 percent, Red Lobster down 4.5 percent, Seasons 52 up 1.2 percent, and Yard House up 1.2 percent), Dave & Busters (up 2.4 percent), Morgan's Foods (down 3.0 percent), and Sonic Drive Ins (system up 2.2 percent, company owned up 1.9 percent, and franchised up 2.3 percent.)
For details and same store sales of other chains, please click here for the Green Sheet.