Commerce Dept.'s Surprisingly Positive Advance Sales Numbers, Obama Administration Reviewing Overtime Rules and More

This Week In Foodservice covers the Department of Commerce's positive advance sales numbers for February, looks at higher food prices, reports on strong hiring trends in the foodservice industry and much more.

Despite ice and snow, a weak labor picture and an overall limping economy, the Department of Commerce's advance retail sales figures for February found an increase of 0.3 percent, marking the first increase in 3 months. Total retail sales were up 1.5 percent over February 2013.

Restaurant and bar sales were also up 0.3 percent over January and increased 2.6 percent over February 2013. These sales numbers fly in the face of a constant, almost daily, barrage of surveys and reports stating that bad weather torpedoed restaurant sales.

The limitations and caveats on the report have to be considered when reading this good news. The data is based on a limited sample and are termed to be "advance" sales numbers. As such, they are subject to revision. The numbers shown above are adjusted for the number of trading days, holidays, weekends, and seasonal variations but not for inflation. The study covers bars and restaurants but not other foodservice segments such as hotels, resorts, clubs, C-stores, schools, etc.

Economic News This Week

  • Food prices jumped in February. While overall Producer Prices fell 0.1 percent, wholesale prices for food increased 0.6 percent. Consumer Prices rose just 0.1 percent last month but prices for food at home rose 0.5 percent. The index for meats, poultry, fish and eggs rose a steep 1.2 percent and is up 4 percent in the last 12 months. Coffee prices are also up significantly. 
  • Initial jobless claims for the week ending March 8 fell to 315,000, the lowest number of claims in 3 months. The less volatile 4-week moving average fell by 6,250 to 330,500. 
  • The U.S. payroll to population rate moved up to 43.1 in February from 42 in January. The Gallup Poll measures the percentage of the population 18 year old and older who are employed at least 30 hours a week. The Payroll to Population Rate average for 2013 was 42.8 percent and 44.4 percent in 2012. 
  • The number of Americans who believe it is a good time to find a quality job rose to 27 percent last month according to the Gallup Poll. The range of results for the research go from a low of 8 percent in November 2009 and November 2011 to a high of 48 percent in January 2007. 
  • Mortgage applications continue to fall as mortgage rates increase according to the Mortgage Bankers Association.
  • The U.S. economic confidence index edged down last week to minus 20. Gallup says this is the lowest score since mid-December and the 3-point drop from the previous week is biggest decline so far this year. 
  • The Reuters/University of Michigan Consumer Sentiment Index fell to 79.9 in the preliminary March report. This is the lowest the Index has been since November. Consumer expectations dropped to 69.4 from the final 72.7 reported in February. But the current economic conditions index improved a bit from February's 95.4 to 96.1. 

Foodservice News This Week

  • Hospitality job openings are at a six-year high. The NRA's chief economist reported that the Bureau of Labor Statistics shows 534,000 job openings in the restaurants and accommodations sector. At the end of January. Restaurant jobs are not broken out separately from lodging jobs. This is the first time the number of available jobs topped the half million mark. The good news is that hiring shows the industry to be expanding. At the same time the NRA points out that recruiting new employees will be more challenging this year.
  • Consumers paid more for eating out last month. The Labor Department reported that the index for Food Away From Home increased 0.3 percent, the largest increase in 3 months. In the last 12 months the price for Food Away From Home is up 2.2 percent. www.bls.gov
  • Winter weather may affect restaurant sales even into May. This was one of the takeaways from the Bank of America Merrill Lynch Consumer & Retail Conference. While the 13 chains at the conference exhibited high sales confidence there was some caution expressed regarding the effect on customers from high heating bills and the potential cancellations of school breaks to make up snow days.
  • McDonald's labor practices were in the news with seven lawsuits being filed around the country charging various wage law violations such as failure to grant work breaks and not paying for overtime. One suit filed in New York alleged that employees were not reimbursed for time spent cleaning their uniforms. According to the Wall Street Journal, attorneys representing the workers said the plaintiffs were referred to them by the Service Employees International Union. This union has been active in organizing work stoppages against McDonalds and other restaurant chains and demanding a $15 an hour minimum wage for restaurants employees. The Journal article also said that the plaintiffs' lawyers declined to say who was paying their retainers.
  • http://online.wsj.com/article/SB10001424052702303546204579437253853035172.html
  • The Obama administration is reviewing overtime pay rules. It would appear that the goal is to reduce the number of workers now excluded from receiving overtime compensation of time and half for more than 40 hours a week. The National Restaurant Association said that the "issue has huge implications for all employers" and that the association is "following this issue closely." http://www.restaurant.org/News-Research/News/President-directs-DOL-to-revise-overtime-pay-rules
  • The Lot is a food court pavilion in Bend, Oregon. Five food carts rent space at The Lot that features long bistro tables, pours local micro brews, and hosts trivia nights and live music. http://www.nytimes.com/2014/03/12/realestate/commercial/food-carts-find-homes-on-vacant-lots.html?_r=0
  • Consumers are looking at c-stores as destination restaurants when eating outside their homes. A survey by AlixPartners found 13 percent of consumers prefer c-stores for their breakfasts, 6 percent preferred c-stores for their lunches, 4 percent for their dinners and 49 percent for their snacks. http://www.cspnet.com/category-management-news-data/foodservice-news-data/articles/c-stores-increasingly-seen-meal
  • Corporate Stirrings: Quiznos filed a "pre-packaged" Chapter 11 bankruptcy plan. Sasnack Management closed 17 of their Carlos O'Kelly's restaurants leaving the chain with 22 units. Darden Restaurants filed documents with the U.S. Securities & Exchange Commission for a spinoff of the Red Lobster chain. Papa Murphy's announced the chain has filed a registration statement for an initial public stock offering. IHOP is exploring the idea of a fast-casual concept within existing restaurants. DineEquity's CEO said the concept may take the form of a different menu or a separate section. King's Family Restaurants continues to upgrade both menu and d├ęcor even though the company is for sale. The 32-unit chain remodeled 3 restaurants in 2013 and plans on redoing 3 to 5 more this year. 
  • Growth Chains: Wingstop is planning 25 new restaurants in New Jersey in the next 5 years. Domino's has opened its first store in Paraguay with 2 more to follow by May. Cowboy Chicken has signed a 5-store deal in South Texas with the first to open in McAllen. PizzaRev has signed a deal for 4 units in Austin, Texas, and another deal for 3 stores in St. Louis. Marco's Pizza has announced they will open as many as 40 stores in the Miami area. Chuck E. Cheese has plans to open 80 stores in the international market with one store just opening in Saudi Arabia and another in Mexico. Fuddruckers has finalized a deal for 10 locations in Chili and has signed another development deal for 10 locations in Italy, Poland, and Switzerland.
  • Comparable Store Sales Reports: Arcos Dorados (up 10.7 percent), COSI (down 3.9 percent), Country Style Cooking (up 4.6 percent), Diversified Restaurant Holdings (up 1.1 percent), Krispy Kreme (up 3.7 percent), Logan's Roadhouse (down 5.3 percent), NPC International (down 5.2 percent), and Wingstop (up 9.9 percent). Pizza Inn's report on their last quarter did not provide a specific number but stated that comp-store sales had "decreased." A message left with Pizza Inn's asking for clarification was not returned. Note that comparable stores reports are not required by either GAAP or the SEC.

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

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