Published on Tuesday, 03 June 2014
Written by Jerry Stiegler
This Week In Foodservice covers the National Restaurant Association’s April research, provides reports on how family dining is doing well but casual restaurants are not, looks at a study that says corporations will be increasing their travel and entertainment budgets and a whole lot more.
Once again the NRA’s Restaurant Performance Index inched ahead. The RPI rose 0.3 percent in April to 101.7. This is after a 0.9 percent jump in March and the Index now is the highest it has been since May 2013. April also marks the 14th straight month the RPI was above 100, signifying the point when the industry is expanding.
The Current Situation Index rose 0.5 percent to 101.3 with operators reporting nice increases in both same-store sales and traffic in April. The same-store number was impressive with almost twice as many operations having same-store sales increases as those who reported they declined (51 percent vs. 26 percent).
Operators also were slightly more optimistic in April with the Expectations Index rising 0.2 percent to 102.2.
It was also encouraging to read that operators’ investments remained positive. The majority of those surveyed — 56 percent — said they had made a capital expenditure for equipment, expansion and/or remodeling in the previous 3 months. This is up from 49 percent who had done so in March.
And, 60 percent of operators planned to make a capital expenditure in the next 6 months, which is up from 58 percent in March.
Overall, the RPI may not show a rip-roaring growth pattern but slow and steady beats no growth at all.
Economic News This Week
- The first quarter was worse than originally projected. After the U.S. Department of Commerce issued their advance estimate of gross domestic product (GDP) going up 0.1 percent some private sources expressed their opinion that GDP was actually in negative territory. The Commerce Department has revised first quarter GDP to minus 1 percent. Thus, there is more evidence of how weak the economic recovery has been.
- Initial jobless claims fell by 30,000 to 300,000 for the week ending May 24. The more reliable 4-week moving average fell 11,250 to 311,500. This is the lowest the 4-week average of claims has been since August 2007.
- Personal income rose 0.3 percent in April according to the Department of Commerce while personal spending fell 0.1 percent. Some economists were looking for more robust numbers, which would indicate the economy was recovering from the harsh winter.
- Durable goods orders rose 0.8 percent in April, the third straight month orders have increased. However, without defense orders, durable goods orders were down 0.8 percent.
- The Chicago Purchasing Managers Index showed a nice increase in May, rising to 65.5, the best reading the index has had since early 2007. April’s index was up substantially, too, rising to 63 compared to 55.9 in March. Any finding over 50 indicates expansion.
- Consumer confidence in May edged up to 83 from a revised 81.7 in April according to the Conference Board. Both the present situation and expectation indices grew for the month.
- The Reuters/University of Michigan Consumer Sentiment Index retreated in May with the final reading of 81.9 falling below the 84.1 index in April.
- U.S. economic confidence remains in the same range as it has been for most of this year. Gallup reported that the index was minus 15 for the week ending May 25. But the index remains below the May 2013 level.
Foodservice News This Week
- Family dining restaurants are looking up. The family-dining segment struggled for decades, whipsawed by the expanding menus of fast food operators and the popularity of casual restaurants. The emergence of the fast-casual segment certainly didn’t help. But now it appears that some chains, such as Denny’s, are coming back according to Malcolm Knapp.
- Casual restaurants are still struggling. The NPD Group reported that visits to casual dining restaurants hit a 6-year low for the year ending in February 2014. Visits have been declining 2 percent a year since 2009. NPD believes that promotions, such as 2 for $20 have been in place too long and casual restaurants have become more a “special occasion destination.” Consumers are going to lower priced restaurants, particularly fast-casual operations.
- Corporations plan to open their wallets and increase restaurant spending. Dinova LLC, which connects its corporate clients with restaurants nationwide, stated that restaurant spending increased 5.2 percent in the first quarter of this year. Dinova’s CEO expects this trend to continue and strengthen through 2104. Further, the Global Business Travel Association expects U.S. business travel to rise by 7.1 percent this year to over $293 billion.
- Are minimum wage increases forcing restaurant closures? Andrew Puzder, the outspoken CEO of CKE Restaurants thinks so. He states that franchisees cannot make a profit in states where the minimum wage has been increased substantially and are bailing out as soon as lease obligations are met. Further, he says some franchise groups are cancelling expansion plans to keep total employment under 50 employees and thus avoid restrictions from Obamacare.
- Corporate Stirrings: McDonalds is planning on returning $18 billion to $20 billion to stockholders in the next several years either thru dividends or repurchasing stock or some mix of both. The chain also plans on refranchising 1,500 units. The United Restaurant Group, the second largest franchisee of TGI Friday’s with 29 restaurants, received $31 million in a combined sales-leaseback and refinancing from GE Capital. http://www.businesswire.com/news/home/20140529005019/en/GE-Capital-31-Million-Financing-United-Restaurant#.U4d_6c9OXIV Apex Restaurant Management, one of the largest franchisees of YUM! Brands, has completed the purchase of Morgan’s Foods, which is also a YUM! Franchisee.
- Chipotle is expanding new concepts. After its tremendous success with Mexican cuisine, Chipotle is trying for a hat trick. The firm’s Asian fast-casual concept, ShopHouse, which opened its first location in 2011, will have 10 to 12 restaurants in Los Angeles and D.C. by the end of this year. The fast-casual pizza concept, Pizzeria Locale, will open a second location in Denver by the end of the year. Chipotle has two partners with the Pizzeria Locale company.
- Growth Chains: Bad Daddy’s Burger Bar plans to open 30 new locations in Colorado, Arizona and Kansas in the next 5 years. Doc Popcorn has inked a master franchise agreement for at least 10 stores in Spain. Fatburgers and Buffalo Express plan to open 10 cobranded operations in Singapore. Teriyaki Madness has about 40 development commitments in the pipeline, which will triple their current number of locations. Taziki’s Mediterranean Grill plans to have 50 units open or in development by the end of the year.
- Comparable Store Sales Reports: Cracker Barrel (down 0.6 percent), and Popeye’s Louisiana Kitchen (up 4.3 percent).
For details and same-store sales of other chains, please click here for the Green Sheet.