The Restaurant Performance Index managed to stay in positive territory at 100.2 even though both major components of the Index fell. The Current Situation Index dropped 1.7 in July leaving it below 100 for the first time in nine months at 99.8. While 53 percent of the operators surveyed reported their same store sales increased the biggest block of operators (46 percent) said traffic declined.
The Expectations Index in July fell by 0.6 percent to 100.7. While in June 50 percent of operators expected to have higher sales in six months, only 43 percent of those surveyed in July thought their sales would increase. Just 22 percent of operators thought economic conditions would improve in six months, which is the lowest number in 10 months.
A bright spot in the report was capital spending. Forty six percent of operators said they made a capital expenditure for equipment, expansion or remodeling in the past three months, which is just 2 percent fewer than reported such expenditures in June. Likewise, 49 percent of the operators in the study are planning on making capital expenditures in the next six months, down slightly from 51 percent in June.
Economic News This Week
- The Housing Market, as reported last week, continues to show signs of life. The National Association of Realtors reported that the number of pending home sales rose 2.4 percent in July to 101,700, which is the highest since April 2010 and 12.4 percent higher than July of last year. Note the numbers are for contracts written, not for actual closings.
- The Gross Domestic Product estimate for the second quarter was revised up slightly to 1.7 percent. At least some experts see this growth rate as too low to boost job growth significantly.
- Personal Income rose 0.3 percent in July.
- Personal Spending, a major driver of the economy, rose 0.4 percent last month. This is the fastest rate since February.
- Major Retailers reported their best sales month since March. Despite economic headwinds, consumers put their fears aside and opened their wallets. Costco, Gap, Macy's, Target and Kohl's all reported strong same-store sales in July. The Census Bureau numbers for the month are due out on Friday, September 14.
- First Time Jobless Benefit Claims held steady for the week ending August 24 at 374,000. The revised number of claims for the previous week was identical.
- The Chicago Fed's Production Manufacturing Index dropped to 53 from 53.7 in June. Any number above indicates production expansion. New orders increased but not enough to offset a steep decline in order backlogs.
- Factory Orders rose 2.5 percent in July, according to the Commerce Department. Non-durable goods orders rose 1.5 percent.
- The Final Reuters/University of Michigan Consumer Index for August came in slightly above the preliminary August number of 73.6 at 74.3.
Foodservice News This Week
- International Foodservice Traffic was mixed according in the first quarter of the year. The NPD Group says Canada, Japan, China, and France saw their customer counts rise. Germany was flat while traffic dropped in Spain, Italy, the United Kingdom and Australia.
- Americans Are Dining Out in Greater Numbers according to the Chase Freedom Lifestyle Index. The research says that fast food was up 15 percent and general restaurants up 10 percent.
- Count Benihana as another chain taken private. The company was purchased by the private equity group of Angelo, Gordon & Co. and is now delisted by the NASDAQ.
- Household Size plays a major role in food away from home spending, according to the US Department of Agriculture. Based on 2010 data, the USDA reports that persons living alone spent $1,573 per year out side their home. Per person spending for two person households was $1,239 while three person households spent $975, four person households spent $890, and five person or more households spent just $667 per person. Thus, one and two person households are major targets for restaurants. And this raises a question from years ago: What do restaurants do to attract and hold single diners?
- Cutting Calories can be accomplished with soft music and dimmer lighting, according to a study by Cornell University that adjusted the music and lighting in part of a fast food restaurant in Illinois. Patrons ate 18 percent fewer calories and were happier and more satisfied than those in the unmodified section.
- Major Events that are supposed to increase restaurant sales sometimes don't. Restaurants in London complained that business actually fell during the recent Olympics. Tampa restaurants that were expecting a boom during the Republican convention found that neither people in town for the convention nor their regular customers were showing up. Some restaurateurs described the town as "dead" and others as a "ghost town."
- Hurricane Isaac sent foodservice delivery business skyrocketing as customers didn't want to venture out in the storm ordered food instead. People who lost power and couldn't cook probably drove a lot of business, too.
- Growth Chains: Go Loco, a new upscale taco fast-casual concept that pairs their restaurants with a gas station and car wash has two units open in Texas, plans three more by the end of the year, 25 by next year and has an ultimate goal of 150. McDonald's plans on opening two restaurants in Vietnam in the next two years. Denny's has an agreement that will bring 10 restaurants to Chile over the next 15 years. Dunkin' Donuts has an agreement with four franchise groups to open 29 units in Houston and Waco Texas over the next several years. Dunkin's Western NY franchisee plans eight additional stores in the next year, bringing the total number to 22. Ruth's Chris Steakhouse will be opening restaurants in Singapore and San Salvador. Del Taco has a franchise agreement to develop 20 units in Alabama and Northern Florida.
- Just one report of Comparable Store Sales this week – Dave & Busters comps rose 2.4 percent.
For detailed same-store sales data on the Green Sheet, click here.