Knapp-Track finds reasons for optimism among the casual-dining chains. Gallup’s Economic Confidence Index (finally) turns positive. Employment reports are pretty good and that includes foodservice hiring. These items and a whole lot more in This Week In Foodservice.

Has the casual-dining segment turned a corner? Malcolm Knapp, who bases his Knapp-Track report on the actual sales of 50-plus casual-dining chains, had a rather optimistic tone in a recent conference call. Same-store sales in December 2014 rose 2.2 percent over December 2013. Same-store guest counts fell 0.5 percent and check averages increased 2.7 percent.

Knapp reports the recent decline in gas prices is a “modest plus” for restaurant sales but does not attribute the full increase in December casual restaurant sales to lower gasoline costs. He does see some savings in distribution costs, particularly among chains that do their own distribution. Knapp reiterated his belief in the “allocation nation” theory, that is, that consumers are highly selective on how they spend their available dollars.

Knapp had some positive comments about family-dining chains such as Bob Evans, Cracker Barrel and Denny’s, noting that these operations have relatively low check averages and have benefited from remodeling initiatives. Finally, Knapp looks for 2015 sales to be modestly better than 2014 with growth of 0.5 percent to 0.6 percent.

Economic News This Week

  • The Gallup Organization’s U.S. Economic Confidence Index turned positive. The Index averaged +1 for the week ending January 4. The previous week the Index was +2. For the month of December the Index averaged -5. The Economic Confidence Index is determined by taking the difference between Americans who believe the U.S. economy is “excellent” or “good” and those who think it is “poor.” Since its inception in 2008 the Index has always been negative, that is, there have always been more respondents who answered “poor” than those who responded that the economy was at least “good.” As recently as fall 2013 the Index was -39. Thus, the Confidence Index’s creeping into positive territory may be an important indicator about American’s view of the economy.
  • The Bureau of Labor Statistics released some positive news for December. The economy added 252,000 new jobs in December. The private segment added 240,000 jobs and the government added 12,000. The unemployment rate declined to 5.6 percent from the 5.8 percent reported in November. Offsetting this good news was the report that long-term unemployed (more than 27 weeks) remains high on a historical basis as does the number of part-time workers who wish for full-time employment. Perhaps most distressing is that average hourly wages actually fell last month. There has been considerable concern over the fact wages have not increased since the end of the recession.
  • The ADP National Employment Report for December virtually matches the government’s numbers. The giant payroll processing company reported that the U.S. added 241,000 new jobs. ADP said small companies, those with less than 50 employees, added 106,000 jobs, medium-size firms, those with 50-499 employees, added 70,000 employees, while large companies, those with more than 500 employees, hired 66,000 new employees.
  • The Institute for Supply Management’s Non-Manufacturing Index totaled 56.2 in December, a decline of 3.1 points. The decline simply means that the service segment of the economy continues to growth but at a slower rate than in November. The New Order Index and the Employment Index also grew at a slower pace in November but both stayed well into a positive range at 58.9 and 56.0 respectively.
  • Factory orders for manufactured goods fell 0.7 percent in November, per the Census Bureau. Without the volatile transportation segment, orders fell 0.6 percent. Shipments decreased 0.6 percent while unfilled orders increased 0.4 percent. Unfilled orders in November were at the highest level since the U.S. Department of Commerce started studying them in 1992.
  • Consumer borrowing increased in November, with the Federal Reserve reporting a 5 percent growth in credit. Non-revolving loans such as car loans and student loans rose 7.5 percent but revolving loans, chiefly credit card debt, fell by 1.3 percent. Reluctance to take on more credit card debt is seen as a negative factor in consumer confidence by some economists.
  • Christmas sales wrap-up. Sales rose but just by 3.9 percent over holiday sales in 2013. One estimate puts brick and mortar sales up 0.7 percent with internet sales taking a lion’s share of the season’s sales increase.

Foodservice News This Week

  • The foodservice industry hired heavily in December.  The Bureau of Labor Statistics reported the industry added 43,600 new jobs for the month, which translates into 18 percent of all the new workers. That’s the highest number of new hires this year and possibly the best month ever for the foodservice industry.
  • Arby’s revamped stores have paid off. The chain reports its new “fast-casual look” increased sales by 18 percent to 20 percent.
  • The RAM Family of Restaurants & Breweries has become an employee-owned company. The firm is using an employee ownership stock program (ESOP) where stock is allocated to employees at no cost. Founded in 1971, the company has more than 30 restaurants in 6 states.
  • Sysco Corporation has developed a dual-language website aimed at Hispanic foodservice operators. Named “Sobremesa,” which refers to the time after a meal when family and friends converse, Sysco hopes the site will serve the fast-growing Hispanic operator population by providing “specialty crafted menu items” and “developing comprehensive and culturally relevant marketing programs.”
  • Corporate Stirrings: J & B Restaurant Partners, owners of 37 Friendly’s restaurants, filed for voluntary bankruptcy under Chapter 11. The company’s pre-negotiated filing indicates closing some of its locations and exiting bankruptcy in 6 months. Pizza Inn Holdings, Inc., owner of Pizza Inn and Pie Five Pizza, has changed its name to the Rave Restaurant Group.
  • Growth Chains: Dunkin’ Donuts signed an agreement for about 100 stores in Mexico. El Pollo Loco closed 2014 by opening three new restaurants in California and one in Nevada. Tom+Chee will open 16 restaurants in the first quarter of this year with a total of 170 units in the pipeline. Habit Burger announced a franchise agreement for up to 50 restaurants in the Middle East in the next 10 years. Uncle Maddio’s Pizza announced the opening of four new restaurants ­— one each in Colorado, Nebraska, South Carolina and North Carolina.
  • Comparable Store Sales Reports: Good Times Burgers (up 8 percent), Rave Restaurant Group (Pie Five Pizza up 16.9 percent and Pizza Inn up 6.4 percent) and Sonic Drive-Ins (system up 8.5 percent, company-owned up 7.9 percent and franchised up 8.5 percent).

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