Restaurant Performance Index Edges Up, Foodservice Hiring Increases, Rumors Surface About JAB Holdings Acquiring Dunkin’ Brands

The National Restaurant Association reports industry performance ticked up in September. Foodservice hiring shot up in October after hurricanes resulted in massive job losses in September. JAB Holdings, owner of Krispy Kreme and Panera Bread, may be pursuing Dunkin’ Brands. These stories and a whole lot more This Week in Foodservice.

The National Restaurant Association’s Restaurant Performance Index (RPI) edged up for September with the index rising 0.5 percent to 100.7 (any reading over 100 indicates growth).

The Current Situation Index fell 0.1 percent to 99.9. This is the third consecutive month the Current Situation Index fell. Same-store sales in September were virtually identical to those in August but customer traffic continued to drift lower for the sixth consecutive month.

The other major component of the RPI, the Expectations Index, rose 1.1 percent to 101.6. More operators expect higher sales in six months than did last month. Operators were also more optimistic about the direction of the economy.

As for investing in their businesses, 61 percent of those surveyed made a capital expenditure for equipment, expansion and/or remodeling in the last 3 months. This is a decline from 65 percent in August, but still an impressive finding.

Regarding future spending, 59 percent said they will invest in equipment, expansion and/or remodeling in the next 6 months. This compares with 52 percent last month.

While the numbers are not great, it does appear that the September report shows some slight improvement.

Economic News This Week

  • Initial jobless claims fell by 5,000 to 229,000 for the week ending Oct. 28. The 4-week moving average fell by 7,250 to 232,500. This is the lowest the 4-week average has been since April 1973. The Department of Labor again reported that hurricane-damaged Puerto Rico and the U.S. Virgin Islands have had difficulty in processing jobless claims.
  • ADP reports strong hiring in October. The payroll processing company announced that the economy added 235,000 new jobs last month. All firms added to their employment in October, regardless of size. Small firms (fewer than 50 employees) hired 79,000 new workers, mid-size organizations (50-499 employees) added 66,000 new hires, and large companies (more than 500 employees) hired a hefty 90,000 workers.
  • Employment bounced back in October with the economy adding 261,000 new jobs, according to the U.S. Department of Labor. This is the largest increase in more than a year. In September, hiring was negatively affected by hurricanes. The unemployment rate, which is determined by a separate study from the employment survey, fell 0.1 percent to 4.1 percent. The last time unemployment was this low was December 2000. (For foodservice employment trends last month, please see the Foodservice News This Week section below.)
  • Auto and light truck sales slipped 1.1 percent in October after a strong September. October was still the second-highest sales month this year, driven by high discounts, fleet sales by some vehicle manufacturers, strong truck sales and replacement demand for cars in hurricane-damaged states. The annualized sales rate for the month was 18.1 million.
  • The Institute for Supply Management’s Manufacturing Index showed expansion in October, but at a slower pace. The October Index dropped from 60.8 in September to 58.7. (Any number greater than 50 means increasing activity.) The indexes for new orders, production, employment and order backlogs all declined while staying well within growth range.
  • The Institute for Supply Management’s Non-Manufacturing Index was up slightly in October. The Index was up 0.3 percentage points from September to 60.1. (Any number greater than 50 indicates increasing activity.) New orders and order backlogs retreated but stayed well above 50 while the employment index was up 0.7 percentage points. The Institute also reported that 16 of the 17 non-manufacturing industries in the study, including accommodations and foodservice, experienced growth in October.
  • Business sector productivity increased 3.0 percent in the third quarter. Output rose 3.8 percent and hours worked increased 0.8 percent. Unit labor cost increased 0.5 percent, with compensation up 3.5 percent and productivity up 3.0 percent.
  • The October Chicago Business Barometer hit a six-year high. The Index rose to 66.2, up from 465.2 in September. (Any number greater than 50 indicates expansion.) New Orders and Production both rose to levels not seen since 2014, while Order Backlogs reached a 43-year high. The Employment indicator fell into contraction mode as employers appeared to be losing skilled workers.
  • Total construction spending rose 0.3 percent in September from August and increased 2.0 percent from September of last year. Private construction fell 0.4 percent from August while residential construction spending was nearly identical to August.
  • The Conference Board Consumer Confidence Index increased 5.3 percentage points in October to 125.9. This is the highest reading since the index hit 128.6 in December 2000. The Present Situation Index rose to 151. 1 from 146.9 in September while the Expectations Index increased to 109.1 from 103.9 in September. Unless the economy experiences some outside shock, it appears that consumers will continue to spend.

Foodservice News This Week

  • Foodservice operators were back on the hiring track in October. After foodservice employment dropped by 98,000 in September, due primarily to hurricane destruction, operators hired 89,000 employees in October. Undoubtedly this was the result of workers being called back to jobs they had pre-hurricanes.
  • Is JAB Holdings interested in acquiring Dunkin’ Brands? JAB Holdings owns Krispy Kreme, and more recently bought Panera Bread Company. At least one source claims JAB Holdings has been interested in Dunkin’ Brands for some time. The purchase of Dunkin would fit in with JAB’s strategy of building up coffee and breakfast brands.
  • Is Starbucks being “middled” by the competition? Some analysts believe Starbucks is being hurt on the one end by upscale operations, like Blue Bottle and Intelligentsia, and on the value side by operations like McDonald’s and Dunkin’ Donuts.
  • Friendly’s opened a new concept in Marlborough, Mass. In addition to a new look, the restaurant will feature a drive-up window.
  • Happy Joe’s Pizza and Ice Cream Parlors sold. The chain, which currently has 55 locations in 7 states, was purchased by Dynamic Restaurant Holdings. The company said it intends to expand Happy Joe’s regionally, and then grow nationwide. Terms of the deal were not disclosed.
  • Standex International reported that the company’s foodservice equipment sales rose 2.3 percent in the quarter ending Sept. 30. Including sales from recent acquisitions, foodservice equipment sales increased 11.2 percent.
  • Corporate Stirring: &pizza has received a cash infusion from RSE Ventures. The additional capital will enable the 23-unit chain to expand more quickly. One of RSE’s owners is Stephen Ross, owner of the Miami Dolphins. Financial terms were not disclosed. Genuine Pizza has received a $2.5 million investment from the Florida Opportunity Fund. Genuine Pizza is a new concept developed by James Beard Award-winner Michael Schwartz for Harry’s Holdings LLC, which currently operates as Harry’s Pizzeria. The existing stores will eventually rebrand as Genuine Pizza. FAT Brands Inc. announced the acquisition of Homestyle Dining LLC, owner of the Ponderosa Steakhouse and Bonanza Steakhouse brands. The selling price was cited as $10.5 million. FAT Brands is the parent of Fatburger, Buffalo’s Cafe and Buffalo’s Express. Granite City Food & Brewery announced the chain is closing four restaurants. Operations to close include: Two Granite City locations in Kansas, one in East Wichita and the other West Wichita; a site in Madison, Wis.; plus the Cadillac Ranch/Bartini in Indianapolis. Love’s Travel Stops has finalized the acquisition of Speedco from Bridgestone Americas. Speedco’s 52 locations provide quick lube and other services for the trucking industry. Starbucks will sell its Tazo brand of tea to Unilever for $384 million. Starbucks said they wish to focus on their Teavana brand. Ruth’s Hospitality Group Inc. will acquire the six Ruth’s Chris Steak House locations in Hawaii from franchisee Desert Island Restaurants. The reason for the sale and purchase price were not given.
  • Growth Chains: Friendly’s plans to open 5 to 10 stores a year. BJ’s Restaurants will open 6 locations in 2018. Dickey’s Barbecue Pit has signed a partnership to open 45 restaurants in 7 countries in the Middle East. Flippin’ Pizza is expanding in the next few years to California, Georgia and Texas. Freddy’s Frozen Custard & Steakburger opened locations in Georgia, Indiana, Illinois and Texas. Shake Shack will open 32 to 35 restaurants in 2018 in the U.S. and 16 to 18 internationally. Dairy Queen has opened a Grill & Chill in South Korea, the first of 50 units planned for that country.
  • Comparable Store Sales Reports: Bloomin’ Brands (Combined up 1.0 percent, Outback up 0.6 percent, Carabba’s down 2.8 percent, Bonefish Grill down 4.3 percent and Flemming’s down 1.0 percent), Bojangles down 2.2 percent, Bravo Brio Restaurant Group (Total down 5.7 percent, Bravo down 2.7 percent and Brio down 7.4 percent), Brinker International (Chili’s Company owned down 3.4 percent, Chili’s Franchised in the U.S. down 1.7 percent and Maggiano’s down 2.6 percent), Cheesecake Factory down 2.3 percent, Chuy’s down 2.1 percent, Denny’s (Company owned up 2.6 percent and Franchised up 2.6 percent), Diversified Restaurant Holdings down 4.4 percent, Pot Belly Sandwich down 4.8 percent, Ruth’s Chris Steak House down 1.8 percent, Shake Shack down 1.6 percent, Starbucks up 2.0 percent, and YUM Brands (KFC up 1.0 percent, Pizza Hut even, and Taco Bell up 3.0 percent)

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

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