Wawa Remodels for Foodservice, McDonald's Starts Battle for Breakfast, and More

Restaurant sales remained moderately strong in August. Job openings hit an all-time high in July. Operators are not standing idly by while McDonald’s rolls out its all day breakfast program. Wawa says foodservice was the primary reason for the largest remodeling program in the c-store chain’s history. To escape expensive ground floor rents, New York City restaurants continue to lease upper floors. These stories and a whole lot more This Week In Foodservice.

Retail sales rose 0.2 percent in August over July according to the advance report from the Census of Retail Trade. Compared to August of 2014, retail sales increased 2.2 percent. So far this year retail sales are up 2.1 percent. Excluding automobile and auto parts sales, August retail sales are up 0.1 percent from July and 1.3 percent from August 2014.

Restaurant and drinking place sales once again outperformed the retail market as a whole, rising 0.7 percent in August vs. July. Restaurant sales and bar sales rose 8.2 percent over August and are up 8.5 percent for the first 8 months of the year. Thus, restaurants continue to show steady sales performance this year.

The numbers above have some limitations and cautions. The data is considered to be advance sales figures because they are based on a small sample. The figures are subject to revision and are, in fact, frequently revised. The Census Bureau surveys restaurants and drinking places excluding other segments of the industry such as hotels, clubs, employee feeding, education, military and healthcare.

Finally, the recent sales numbers are adjusted for seasonal variations, holidays, and weekends but not for menu price changes.

Economic News This Week

  • Job openings hit an all-time high of 5.8 million in July. The Bureau of Labor Statistics began the Jobs Opening & Labor Turnover, or JOLT report, in December 2000. The highest number of job openings previously reported was 5.4 million in May of this year. The number of hires edged down to 5.0 million in July. The number of separations also edged down in July to 4.7 million. The number of people voluntarily quitting their jobs was 2.7 million. This number has been relatively constant in the last 11 months. Labor experts believe the number of people quitting their job is an indicator of confidence in the economy.
  • Initial jobless claims fell to 275,000, a decline of 6,000 for the week ending September 5. The 4-week moving average was virtually identical at 275,550 with an increase of just 500 from the previous week.
  • The August Producer Price Index was unchanged from July with a 0.4 percent increase in the index for final demand services offsetting a 0.6 percent decrease in the index for final demand goods. The “core” index — the overall index less food and energy — for final demand goods fell 0.2 percent with food prices up 0.3 percent and energy prices down 3.3 percent. In the last 12 months the PPI has dropped 0.8 percent.
  • Consumer credit increased by an annual rate of 6.75 in July, according to the U.S. Federal Reserve Bank. Revolving credit, mostly credit card debt, grew at annual rate of 5.75 percent. This is looked at as positive signal that consumers are confident enough to borrow more. Non-revolving credit increased at an annual rate of 7 percent. Non-revolving credit includes auto loans, student loans, etc.
  • World food prices fell sharply in August with the United Nations’ Food & Agriculture Organization’s Food Price Index declining 5.2 percent from July and 15.1 percent from last year. Factors fueling the decline include China’s economic slowdown and a slump in energy prices.
  • Consumer confidence in the U.S. economy remains at the low end of this year’s rankings. More Americans had a pessimistic view of the economy in the week ending September 6 with Gallup’s Index reading minus 14, up slightly from a low for the year of minus 17. Economic Confidence moved into positive territory in the early part of the year after negative findings ever since the recession began. But since mid-February the index has drifted lower.
  • The Reuters/University of Michigan Consumer Sentiment Index took a nasty drop in the study’s preliminary September reading with the index falling to 85.7 from the final August reading of 91.9. This is the lowest level in a year. The decline was mostly caused by the Expectations Index, which fell from 83.4 in August to 76.4. The Current Index also fell, dropping to 100.3 from 105.1 in the prior month.

Foodservice News This Week

  • The battle for breakfast has accelerated since McDonald’s announced its all day breakfast program. More chains are striving to protect their share of the breakfast business, reports Scott Hume, publisher of Burger Business. Hume notes these chains have a lot to protect given The NPD Group’s data showing that breakfast was the fastest growing foodservice daypart, up 4.0 percent in the 12 months ending in May of this year. NPD also pointed out that while traffic at family dining restaurants has dropped over the past 5 years, their customer counts at breakfast have been at least flat. Thus, both fast food and family dining chains have been announcing new breakfast items on their menus as well as special promotions.
  • Foodservice was the major factor in Wawa’s remodeling program. A spokesperson said Wawa had made small, incremental changes as the c-store chain’s foodservice business grew over time but now major changes were necessary, including layout and equipment upgrades. Wawa plans to remodel about 40 stores this year and it will take to 2018 to complete all 600 plus stores.
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  • First-floor retail space is expensive and limited in New York City so restaurants are leasing less expensive space on upper floors. Some consider this a risky move, believing that a lot of time-pressed New Yorkers simply don’t look up. But for those restaurants that are fortunately blessed by having most of their customers make reservations, upper floors can make the operation financially viable.
  • Minimum wage for fast food workers in New York State will rise to $15 an hour over the next 6 years. Governor Cuomo plans to ask the legislature to raise the minimum wage to $15 an hour for all industries.
  • The New York City Health Department received 8,653 complaints about restaurants in the city’s last fiscal year. This marks an 18 percent increase from the previous year with the most common problems being rodents, insects and garbage on the floor. But officials insist that restaurants are cleaner than ever with 58 percent of operations receiving an “A” on their first inspection, up from just 37 percent 6 years ago when the letter grading system was initiated. The number of violations issued has also dropped. The NYC Hospitality said that an increase of 1,300 complaints is probably not significant given the billions of meals served by the city’s restaurants. Further the Alliance spokesperson said the city has made it easier to file complaints.
  • Corporate Stirrings: McDonald’s reported a 2.8 percent same-store sales increase at its Japanese Division in August. McDonald’s has struggled with poor sales due to the food safety concerns of Japanese consumers.
  • Three Smashburger Restaurants in Central Ohio were closed for non-payment of taxes. The franchisee stated that the operations did not “maintain the sales levels we needed to be successful.” The restaurants may reopen under a different owner and/or under corporate management.
  • Growth Chains: Casey’s General Store will add approximately 100 stores to their pizza delivery program this year. Pollo Tropical will open 4 new locations in the Dallas-Ft. Worth area in the next 4 months. Caribou Coffee and Einstein Brothers Bagel’s have opened a new joint concept location in Colorado and plan on opening 20 similar units across the country in 2016. Krispy Kreme is expanding into South America with agreements to open 24 stores in Peru and 12 stores in Bolivia over the next 5 years. Sbarro continues with their plans to open more standalone stores with 4 units scheduled to open in the Columbus, Ohio, area. McAlister’s Deli has signed a new franchise group who will open 5 locations in the Chicago area.
  • Comparable Store Sales Reports: Casey’s General Store up 10.3 percent, COSI up 1.0 percent, Dave & Buster’s up 11.0 percent, and Krispy Kreme up 5.5 percent.

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

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