This Week In Foodservice looks at the on-going fight for a $15 an hour minimum wage as well as unionization, reports on Panera Bread’s new test operation, plus the latest chain comparable store sales data and a whole lot more.
Restaurant worker protests aren’t going away and are spreading to other countries. Thursday, May 15 brought widespread reports of walkouts, strikes and protests across the U.S. but also from Tokyo, Manila, Seoul, London, Dublin, Zurich, and other overseas locations. One observer suggested that since the chains are governed by the same policies, attacking low wages and unionization as an international strategy makes sense.
However, trying to get a handle on the number of protests and protestors is difficult. While some reports talked in terms of “dozens” or “scores” of employees participating, stories also indicated some of those participating were “supporters” or “community activists.” An AP news report on a protest at an Atlanta Krispy Kreme noted that the leader was a McDonald’s employee. One article pointed out that while the “strikers” were, in fact, chain employees, they were not working the shift when the action occurred. Some of the media reports featured an interview with an employee relating their personal story on the difficulty of living on their wages.
There doesn’t appear to be any hard data by the protest leaders of business interruptions. Reports of store closings were denied later by management in some instances.
It is hard to get around the fact that many foodservice employees are among the lowest paid workers in the US. The Christian Science Monitor pointed out that McDonald’s employees in Denmark are unionized and make the equivalent of $21 an hour. The minimum wage in France is equal to $12 an hour and McDonald’s has 1,200 stores there. (The Monitor also noted out that McDonald’s pays fifty cents an hour in India.)
But the bottom line is with all the activity since the start of the labor movement in November 2012 there are no reports of any wage increases nor any negotiations for a union contract.
(This article is based on various sources including USA Today, the Wall Street Journal, The Christian Science Monitor, the Chicago Tribune and the New York Times as well as others.)
Economic News This Week
- First-time jobless claims for the week ending May 10 fell by 24,000 to 297,000, the lowest number of claims in 7 years. The increase in claims in the previous weeks may be related to a late Easter, which makes it difficult for the Labor Department to make seasonal adjustments.
- The Producer Price Index took a sharp increase of 0.6 percent in April following a 0.5 percent increase in March. In the past 12 months the unadjusted index for final demand prices has risen 2.1 percent. Leading the way for the jump in the index were food prices, which shot up 2.7 percent. Without food and energy prices, the PPI was up 0.3 percent. The rise in Producer Prices put to rest the fear of deflation, at least for the time being.
- Consumer prices rose 0.3 percent in April, the biggest jump since June 2013. Excluding the food and energy segments, “core” consumer prices were up 0.2 percent. In the past 12 months, the CPI has risen 2 percent while “core” prices rose 1.8 percent. The latter is below the level the Federal Reserve thinks is acceptable. Food price rose 0.4 percent for the second month in a row while prices for food-away-from home increased 0.3 percent. In the past 12 months, prices for food away from home are up 2.2 percent.
- Small business owners are more optimistic. The Wells Fargo/Gallup Index rose 2 points and now stands at 47, the highest level in 6 years. Contributing to the improvement was small business owners, who have a more positive outlook on their ability to obtain credit. Perhaps as a direct result of this factor, more owners expected to increase their capital spending than to decrease it.
- Industrial production declined 0.6 percent in April after rising almost 1 percent in both February and March. The Federal Reserve also reported that capacity utilization fell 0.7 percent to 78.6, which is 1.5 points below the long-term (1972-2013) average.
- The Empire State Manufacturing Survey Index jumped to 19, the highest level in almost 4 years. The NY Federal Reserve said the increase was driven in part by sharp jumps in new orders and shipments.
- The Philadelphia Federal Reserve Bank’s Survey of Manufacturing Activity retreated slightly in May, falling to 15.4 from 16.6 in April. Both new orders and shipments declined from the month before but stayed well in a positive area.
- Housing starts and building permits issued rose in April mostly on the basis of multifamily construction. Housing starts were 1,072,000 on an annualized basis, which is 13.2 percent over March. Building permits issued were 1,080,000 on an annualized basis, which is 8 percent over March. However, single-family starts were up just 0.8 percent to 649,000 and single-family permit issues were up 0.3 percent to 602,000 on an annualized basis.
- The Reuters/University of Michigan Consumer Index preliminary May survey found sentiment falling to 81.8 from the final April reading of 84.1. Consumers’ views of both current economic conditions and their expectations slipped.
- Gallup’s U.S. Economic Confidence Index was up a hair to minus 14. The Index has been moving in a narrow range this year of minus 20 to minus 13.
Foodservice News This Week
- Panera has opened a test bakery in New Haven, Conn., with the goals of testing new bread products and staffing levels that might be applicable to Panera’s store operations. The news release didn’t mention if the test involves any new equipment.
- In other Panera news, the company’s new ordering system won’t cut jobs but will reduce the number of cash registers. Any employees not needed to work the registers will deliver food directly to the customers’ tables, a new procedure for the chain. The new ordering system, which combines store kiosks with online and mobile ordering, is an attempt to eliminate waiting in line. The National Restaurant Association reported that their research found that 36 percent of consumers are more willing to use high-tech ordering than they were just two years ago.
- New domain names are available for restaurants and bars. Punta 2012, a Mexico City-based company that owns the domains “.rest” and “.bar” offered them through Colorado-based Name.com at the NRA Show.
- Darden announced The Red Lobster chain was sold to Golden Gate Capital, a private equity firm. The price was set at $2.1 billion and the sale is expected to close in the first quarter of 2015. Darden stated that the firm expects to realize $1.6 billion after taxes and transaction costs. About $1 billion will be used to pay down debt with the remainder going for the repurchase of Darden shares.
- Food truck trend gets a movie. “Chef,” The Movie. A movie entitled simply “Chef” is coming out this summer with a plot line about a chef who quits his job because of a controlling owner then finds himself by starting a food truck.
- Corporate Stirrings: New holding company, Brix Holdings LLC, will operate the Red Mango yogurt chain as well as sister companies the Smoothie Factory and RedBrick Pizza. Delaware North Companies have finalized their purchase of Patina Restaurant Group, operator of upscale restaurants in New York, California and Orlando. Sysco has purchased a 50 percent interest in Costa Rican food distributor Mayca Distribuidores S.A. Darden has let go a number of employees at their corporate HQ go but refused to state how many.
- Growth Chains: Jet’s Pizza will open 3 locations in Orlando this year. 100 Montaditos will open 5 restaurants in NYC this year and expects to have 30 units in the market by 2017. Outback Steakhouse plans to double the number of their restaurants in Brazil to over 100 in the next 3 to 4 years. Togo’s Eateries with over 325 units currently is seeking to have over 400 locations in the next several years. The controlling owners of Smoothie King and RedBrick Pizza hopes to open 25 new locations of each of the two chains in the next 12 months. Auntie Anne’s Pretzel’s has signed a master franchise agreement for 40 stores in Canada. Bar Louie has an area development agreement for 6 restaurants in the Chicago area. Arooga’s Grille House & Sports Bar has signed a franchise agreement with the Mohegan Tribe for a minimum of 15 restaurants in New England in the next 5 years.
- Comparable Store Sales Reports: Country Style Cooking (up 2.5 percent), Jack in the Box (system up 0.7 percent, sompany owned up 0.9 percent, and franchised up 0.6 percent), NPC International (down 4.7 percent), Pizza Inn (up 0.8 percent), Qdoba (system up 7 percent, company-owned up 7.2 percent, and franchised up 6.8 percent), Smoothie King (up 7.2 percent), and Steak N Shake (up 3.7 percent.)
For details and same-store sales of other chains, please click here for the Green Sheet