Operators Prefer DSRs Take the Order, YUM Under Pressure, Domino’s Holding Its Prices and More

Operators like the DSR to take their orders. Will YUM sell its China operation? Domino’s Pizza nixes menu price increases. A Target store adds a new kind of Starbucks. The NPD Group reports breakfast traffic is up. These stories and a whole lot more This Week In Foodservice.

For decades one of the major goals of foodservice distributors was to relieve their DSRs of taking orders. This freed up time would be devoted to solving problems, making suggestions for improving the operator’s businesses, and, of course, presenting new products. Distributors ultimately wanted their customers to do their routine ordering online or at least by phone with an in-house sales person. In short, the goal was remove the stigma of “order taker” from the DSRs.

But a new report from Technomic, the “2015 DSR Benchmarking Study”, shows removing the DSR from the ordering process may not be desirable or even possible. The study found “…it has been clear over the years that operators value the fact that DSRs help with ordering and that this has become part of maintaining strong business relationships.”

While distributors are investing in better online ordering technology and training, there seems to be a conflict between the distributors’ objectives and the wants and needs of customers.

It is also interesting to note that 75 percent of the distributors surveyed said they will hire more sales reps this year. Is this a tacit admission on the part of distributor management that DSRs will continue to take orders? One might think if DSRs were spending less time taking orders that distributors would be need fewer of them.

Economic News This Week 

  • Initial jobless claims fell by 13,000 to 263,000 the week ending October 3. The 4-week moving average dropped by 3,000 to 267,500. For some reason a number of news organizations reported the increase of 10,000 new claims last week as very significant. It appears that this bump up was just a glitch.
  • New orders for manufactured goods fell 1.7 percent, according to the U.S. Census Bureau’s full report for August. Shipments for manufactured goods declined 0.7 percent and unfilled orders dropped 0.2 percent for the month.
  • Christmas selling season to be “solid” according to the National Retail Federation. But the Federation’s forecast of a 3.7 percent gain for this year, while higher than the average 2.5 percent sales gain over the last 10 years, is less than the 4.1 percent sales growth from 2014.
  • Consumer’s increased borrowing by 5.6 percent in August. The Federal Reserve said that revolving credit – mostly credit card debt – increased 5.3 percent after a 5.5 percent increase in July and a 9.8 percent increase in June. Revolving credit increased 3.7 percent in 2014 so it appears that consumers are getting more comfortable with borrowing. Non-revolving credit increased 5.7 percent in August. Non-revolving credit would include auto loans and student loans and appears to be tailing off from earlier this year and 2014.
  • Job creation is at a 7-year high, based on the Gallup Poll’s U.S. Job Creation Index for September, which now stands at +32. Gallup’s study is calculated by surveying over 17,000 workers and asking if their employers are hiring or letting people go. The difference between the two responses is then the Index. For September, 42 percent of the workers reported that their employers were hiring vs. 11 percent said their employers were laying people off.
  • U.S. Economic Confidence Index was flat in September, according to Gallup. The Index was minus 14 in September following minus 13 in August. The Index represents the difference between consumers who believe the economy is “excellent” or “good” compared to the number who think the economy is “poor.” Since its inception in 2008 the index has been in negative territory except for short period of time early this year.

Foodservice News This Week

  • YUM! under fire after China sales weak performance. The company was being pushed to either come up with a new strategy to improve business or to sell the 6,900-unit China division outright.
  • Domino’s Pizza says this is not the time to raise prices. The chain’s CFO stated that they will try to “upsell” to offset increasing prices for commodities, labor and leasing costs. He believes that “aggressive” price increases will negatively affect sales given overall economic conditions.
  • A new Target store changes the chain’s usual product lineup – including an Evenings Starbucks. The store is aimed at condo-dwellers and is a “smaller footprint” design that Target is putting up in urban areas. The Starbucks is the Evenings concept offering beer, wine and sharable small plate menu items.
  • The NPD Group says breakfast is the only daypart to sustain growth. Breakfast/morning meal visits grew by 5 percent in the year ending in June. Visits grew 2 percent in the same period last year. Lunch visits rose 1.0 percent in year ending in June while lunch visits declined 2.0 percent in year ending June 2014. Confirming the popularity of breakfast, NPD reports that foodservice distributor shipments of bacon, eggs, and pancakes are up significantly.
  • Restaurants got a win in congress when the U.S. Senate followed the House and voted to amend the Affordable Care Act to allow businesses with 50 to 100 employees to buy health insurance on the “large-group” market. The way the law originally read, restaurants and other businesses next year would have to buy health insurance on the small-group market, which is more expensive.
  • Corporate Stirrings: The T-Bird Restaurant Group, franchised operator of 63 Outback Steakhouse restaurants in California, has been purchased by the private equity firm of H.I.G. Capital, LLC.
  • Famima!!, the Japanese C-store chain, is closing its 7 stores in the Los Angeles area and withdrawing from the U.S. market. The company first opened their U.S. stores a decade ago.
  • Growth Chains: Domino’s Pizza has opened a store in Italy with 3 more scheduled to open this year. Jersey Mike’s Subs will open 15 to 20 stores in New Jersey next year. Smashburger will open 25 restaurants in Egypt over the next several years. Dunkin’s Donuts is targeting college campuses for expansion and now has over 75 operations at colleges and universities. Dickey’s Barbecue will open a restaurant in Walla Walla, Washington, with 5 locations planed for Spokane. Tim Horton’s will open 150 restaurants in the next 10 years. Topper’s Creamery has signed a multi-store agreement for 29 “non-traditional” locations in Central Florida.
  • Comparable Store Sales Reports: COSI down 0.3 percent, Ruby Tuesday up 0.6 percent and YUM! (KFC up 3 percent, Pizza Hut up 1 percent, and Taco Bell up 4.0 percent.)

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

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