Are humans soon to be obsolete in the kitchen? Foodservice hired at a hot pace in January. Fewer independent restaurants pulled down the overall number of foodservice locations last year. We will explore these stories and a whole lot more in This Week in Foodservice.
Labor costs continue to rise, in part due to higher minimum wage rates. Some industry observers feel that will that force foodservice operators to take a closer to look at labor-saving technology to reduce the number of employees they require.
But a natural question to ask is why aren’t operators using more labor-saving technology now? A closer look at the financial aspects of this may start to shed some light on this situation. If foodservice operators can get qualified help at $8 or $10 an hour the return on labor-saving technology may not make as much sense. But if they have to pay $15 per hour, the investment may not only work but could become necessary for survival.
Someone will also argue the foodservice industry tends to slowly adopt new ideas. Like any industry, foodservice certain has its techno luddites, but many operators have eagerly adopted “set it and forget it” systems, and tablet ordering systems continue to appear in more and more restaurants. No, the major difficulty is that the machinery simply isn’t there now.
Decades ago a foodservice magazine decided to discover when the industry would have the kitchen of tomorrow. It turned out the kitchen of the future was not right around the corner. Food preparation and cooking remains a highly complex and intricate business. One engineer pointed out that robots in manufacturing plants may be required to make as few as eight movements while putting meat, potatoes and vegetables on a plate requires dozens of judgments and movements.
Last month the Wall Street Journal carried a front page article, the thrust of which was that machines are now advanced enough “to take on skills once thought to be uniquely human.” But in a side bar, the writer talked about folding laundry and that no one has come up with a machine that can match a human’s dexterity and problem solving abilities when it comes to working on a pile of irregular shaped clothes.
Perhaps even more interesting, in the same edition the Wall Street Journal carried a story on Chipotle Mexican Grill dealing with the chain’s made from scratch policy and the amount of manual work that goes into food preparation. One example was chopping onions. Chipotle tried several machines but found they left “macerated, watery onions” so the chain continues chopping by hand.
We should never say never in the foodservice business and maybe one day foodservice kitchen will be staffed with robots while a chef sits in front of a panel in a control room. Just don’t expect to see it soon.
Economic News This Week
- The Federal Reserve’s latest survey provided an upbeat perspective but some “points of concern” about the economy remain, including bad weather in the Northeast, which affected retail sales, the West Coast port slowdown, and layoffs in the petroleum industry due to the decline in oil prices.
- Initial jobless claims increased to 320,000, an uptick of 7,000, for the week ending February 28. The 4-week moving average was 304,500, an increase of 10,500. The Department of Labor said there was no unusual factors affecting the number of claims but some employment experts speculate that layoffs in the petroleum industry as well as the West Coast Port slowdown are now showing up in the claims filed.
- The ADP National Employment Report showed the U.S. economy added 212,000 new jobs in February, the lowest rate since May of last year. ADP also reports that small businesses, those with fewer than 50 employees, created 94,000 of the new positions.
- The Bureau of Labor Statistics reported strong hiring in February with the economy adding 295,000 new jobs, including 288,000 new workers in the private sector. This marks 12 straight months of more than 200,000 new job gains, something that hasn’t happened since 1995. On the negative side the number of long-term unemployed as well as the number of part-time employees who would prefer full-time work both remained high. Unemployment fell to 5.5 percent in February from 5.7 percent in January but some of the decline is attributed to people dropping out of the workforce. One labor authority said that it was a strong report everywhere but in wage gains and he feels that will come soon.
- Labor productivity decreased 2.2 percent in the fourth quarter of 2014 according to the Bureau of Labor Statistics’ revised estimate. The Bureau also reports that unit labor costs increased 4.1 percent in the fourth quarter. These stats could spell inflationary problems in the future. However, some economists believe the last quarter was an anomaly and the situation should reverse itself in the first quarter of this year.
- Car manufacturers chalked up good sales in February despite bad weather holding down volume in some parts of the country. Sales increased 5.3 percent compared to February 2014 although the annualized sales rate slipped to 16.23 million last month from 16.66 million in January.
- The Census Bureau’s full report on manufacturing for January stated that new orders for manufactured goods decreased 0.2 percent over December. Excluding transportation, new orders declined 1.8 percent. New orders for manufactured durable goods increased 2.8 percent.
- The Institute for Supply Management’s Non-Manufacturing Index edged up in February, rising 0.2 percent from January to 56.9. The new orders index fell but the employment index rose. This index measures service industries with 14 of the 18 industries included in the study by the Institute growing in February.
Foodservice News This Week
- Foodservice hiring came on strong in February with the Bureau of Labor Statistics reporting the industry added 58,700 jobs or one fifth of the positions added by the private sector last month.
- The number of restaurants in the U.S. declined last year. The NPD Group’s Recount study for fall 2014 found total units fell by 1 percent due to a 2 percent drop in independent restaurants. NPD says the decline was a reflection of the flat traffic growth last year. The fast-casual unit growth partially offset the decline in independent restaurants.
- The restaurant employment picture changes — fewer teens, more boomers. The National Restaurant Association reports the number of teenagers in the labor pool is shrinking so operators are turning to older workers. With Baby Boomers staying in the work force longer, the number of restaurant employees 55 and older is up 32 percent.
- McDonald’s had another bad month in February with worldwide comparable store sales falling 1.7 percent. U.S. comparable store sales were particularly poor, declining 4 percent for the month. The only bright spot was European operations where same-store sales were up 0.7 percent. Actual sales declined 8 percent for the month but were up 0.5 percent when adjusted for currency fluctuations.
- Pizza Hut is testing new technology that will allow customers to order from their cars. The consumer can use an interactive voice control feature to verbally place an order and pay via Visa Checkout.
- For McDonald’s, a minor menu change can be a major headache. It can literally take years for the restaurant giant to line up a supplier for a new item and there are other issues including labeling and marketing.
- Middleby Corporation announced sales increased 15.5 percent for the company’s fourth fiscal quarter and 14.5 percent for the year ending January 3, 2015. Excluding acquisitions, the multi-line foodservice equipment manufacturer reported fourth quarter sales were up 7.4 percent and sales for the year rose 8.4 percent.
- Romacorp, parent company of Tony Roma’s, has introduced a new concept named TR Fire Grill. The 230-seat restaurant near the Orlando Airport features seasonal produce from local farms, a wood-burning grill, house-made sauces and more than 20 craft beers. A second location is planned in Winter Park, Fla.
- Corporate Stirrings: Famous Brands International, owner of Mrs. Fields and TCBY, is being put up for sale by their parent Z Capital Partners. Z Capital is looking for a price of $175 million to $225 million and probably will not sell if bids come in under this range. MOD Pizza is “closing in” on $40 million in financing to support expansion.
- Growth Chains: Taco Bueno plans on opening three restaurants in Colorado. Togo Eateries has signed two new franchise agreements that will result in the opening of five restaurants in California. Church’s Chicken has signed a franchise agreement for 10 units in Road Ranger Travel Centers. El Pollo Loco has signed a franchise agreement for the development of 5 restaurants in the Salt Lake City area.
- Comparable Store Sales Reports: Bob Evans up 3.8 percent, Country Style Cooking down 7.7 percent and Sonic (system up 11.5 percent, company up 11.3 percent, and franchised up 11.5 percent.)
For details and same-store sales of other chains, please click here for the Green Sheet.