Top 500 Chains Sales Slow, Arby’s Rebranding, Darden May Lose Tax Breaks and More

A look at the Census Bureau’s advance sales estimates for May, Technomic’s analysis of chain growth in 2013, Arby’s brand revitalization and a whole lot more.

U.S. retail sales grew 0.3 percent in May over April, according to the Census Bureau advance estimate but not all segments performed equally. Motor vehicle sales increased 1.5 percent while building material and garden stores sales grew 1.1 percent. Minus autos and light trucks retail sales were up just 0.1 percent over May 2013. Total retail sales were up 4.3 percent.

Unfortunately, restaurants and drinking places did not share in the overall growth with May sales down 0.2 percent vs. April. Malcolm Knapp’s theory that consumers are spending very selectively seems to find some credence last month. But compared to May 2013, restaurant and bar sales rose 4.1 percent. So far this year, sales are up 3.7 percent.

The caveats and limitations to this data are as follows: Only restaurants and bars are surveyed so many foodservice segments, such as hotels and resorts and clubs, are not included nor are the “institutional” operators such as schools and colleges, employee feeding, health care and military. The sales numbers are adjusted for seasonal variations such as weekends and holidays but not for inflation. Further, the Commerce Department’s advance estimates are based on a small sample and are subject to revisions and updates.

Economic News This Week

  • Job openings increased with the Bureau of Labor Statistics reporting there were approximately 4.5 million jobs available in the U.S. on the last business day of April. This is the largest number of job openings in seven years and marks the return of job openings to pre-recession levels. The Bureau said that there were 2.2 unemployed persons for every job opening compared to the recession’s end (June 2009) when there were 6.2 people for each job.
  • Initial jobless claims rose by 4,000 to 317,000 in the week ending June 7 while the less volatile 4-week moving average increased by 4,750 to 315,250. The number of claims for unemployment compensation is now hovering just above where they were before the start of the recession. However, labor experts frequently point out that fewer layoffs do not automatically translate into more jobs.
  • Consumer credit spending shot up in May by $28.6 or 10.2 percent annualized, exceeding forecasts. Non-revolving credit (car loans, student loans, etc.) grew by 9.5 percent while revolving loans (mostly credit cards) rose steeply, by 12.3 percent. This may indicate that credit is easier to obtain, which should boost consumption and economic growth.
  • The Producer Price Index fell 0.2 percent in April after increasing in the previous 2 months. Without the volatile food and energy segments, the PPI was flat. Producer food prices were down 0.2 percent.
  • Small business owners are becoming more optimistic according to the National Federation of Independent Businesses. The NFIB Optimism Index rose 1.4 points in May to 96.6 based mostly on “soft” factors such as expectations about sales and business conditions while index components: job openings, job creation plans, inventory and capital spending plans, collectively fell by a point. The NFIB says their Optimism Index is now at its highest level since September 2007 but they see “no sign of a surge.”
  • The Empire State Manufacturing Survey for June from the Federal Reserve Bank of NY showed good activity for the second month in a row. The index was up slightly over May coming in at 19.3 vs. last month’s 19.01. Showing particular strength was the new orders index, which rose 8 points putting it at the highest level in 4 years. Employment levels and hours worked edged up as well.
  • The US Economic Confidence Index is static.  Gallup reports that their Economic Confidence Index was minus 14 for the week ending June 8. For the most part the Index has been in this range for most of the year. Gallup measures the difference between Americans who think the economy is getting better and those who think it is getting worse. In the latest poll 21 percent of those surveyed think the economy is getting better while 35 percent thought it was getting worse. Thus, a reading of minus 14.
  • The Reuters/University of Michigan Consumer Index preliminary consumer index for June was 81.2, down slightly from the final May reading of 81.9. Most observers had expected a slight increase.

Foodservice News This Week

  • Technomic finds Top 500 Chains’ growth rate slowed in 2013. In 2013 the Top 500 U.S. restaurant chains grew by 3.5 percent after chalking up a 4.9 percent increase in sales in 2012. Last year limited-service restaurant sales grew 3.9 percent while full-service restaurant sales advanced 2.4 percent.
  • Arby’s announced a brand revitalization, including a new building image, team member retraining and franchisee remodel financing solution. This year Arby’s will remodel 30 company-owned locations and expects to expand the program in 2015.
  • 7-Eleven will reimage its Hawaiian stores over the next five years. The remodeling will attempt to give the stores a standardized look and be built around the concept of “7-Eleven, Your Neighborhood Store.” The makeover will include new fixtures, counter tops, tile flooring, LED lighting and new wall panels.
  • Food Truck Sanitation is fine, according to the Institute for Justice, a non-profit law firm “that works to defeat anti-competitive restrictions that violate the constitutional rights of street vendors to earn an honest living.” The report analyzes 260,000 health inspections since 2008 in 6 major cities and found food trucks performed at least as well brick and mortar restaurants.
  • Carlisle Corp Will Sell 56 Wendy’s in Virginia and North Carolina. The purchaser is NPC International, the big Pizza Hut franchisee, who had purchased 20 Wendy’s since July of last year before this deal. The Memphis Business Journal speculates that Carlisle sold the Wendy’s to finance a massive mixed-use development in downtown Memphis. Carlisle will still own 77 Wendy’s after the sale is complete.
  • Having an outdoor cafe in New York City is a challenge. The city has about 1,300 licensed sidewalk cafes and earns $11.6 million a year in fees so you would think setting up a sidewalk eatery would be simple but according to an article in the Wall Street Journal the process can be “daunting.” Part of the difficulty stems from the process requiring approvals from the consumer affairs department, the city planning department, the local community board and finally, the city council. One restaurant owner stated, “Running businesses in New York…everyone wants a piece.”
  • Starbucks will offer wireless cell phone charging. The chain has begun rolling out the installation of 100,000 Powermat charge pads in conjunction with Duracell. The average Starbucks will have about a dozen chargers and there will be no charge for the service.
  • US Foods will open a new distribution center to serve New England. The 500,000-square-foot facility in Seabrook, N.H., is expected to open in the first quarter of 2015.
  • Darden’s cut to their workforce may cost millions in tax breaks. According to the Orlando Sentinel, the company has had 3 rounds of layoffs in less than a year and has already given up $2.3 million in incentive money, saying it probably won’t be creating 500 new jobs at its headquarters by 2015.
  • Growth Chains. Dunkin’ Donuts will open over 200 franchised stores in California in the next few years. Krispy Kreme has signed a franchise agreement for 3 new stores in southeast Washington State. TCBY and Mrs. Fields plan on opening at least 50 dual branded units in Phoenix. Smashburger has opened the first of three planned restaurants in El Salvador. SmallCakes Cupcakery plans on opening three stores in Dubai. Wingstop plans on opening 50 restaurants in the Philippines. Baskin Robbins will open 20 locations in Australia in the next 12 months.
  • Comparable Store Sales Reports. Casey’s General Store (up 12.6 percent), Logan’s Roadhouse (down 3.2 percent), and Luby’s (all concepts up 0.3 percent, Luby’s Cafeterias up 2 percent, Fuddrucker’s down 3.9 percent, and Koo Koo Roo down 13.3 percent.)

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

 

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