The National Restaurant Association says restaurant performance tumbled in January. The policy on joint employment was reversed again. Chipotle discontinues its Tasty Made burger concept. Double digit growth is predicted for the third-party delivery market. These stories and a whole lot more This Week In Foodservice.
After a strong December showing, the National Restaurant Association’s Restaurant Performance Index fell back in January. The RPI retreated 2.0 percent in January to a reading of 100.9, which shows minimal industry growth. The RPI’s Current Situation Index read 99.4, a dip of 3.5 percent. While 47 percent of operators reported a net increase in same-store sales, this was down from 71 percent in December. Customer traffic also was soft in January – just 26 percent of the operators surveyed reported increased traffic for the month.
The RPI’s other component, the Expectations Index, fell as well but not as steeply. It totaled 102.4, a dip of 0.5 percent. This indicates operators remain fairly bullish on the future.
Another negative finding of the study was 52 percent of operators reported they made a capital expenditure for equipment, expansion or remodeling in the past 3 months, down 10 percent from December.
One ray of light was that 62 percent of operators plan to make a capital investment for equipment, expansion or remodeling in the coming months, up 2 percent from December.
The other positive finding was that January marked the third consecutive month that same-store sales rose.
Economic News This Week
- U.S. gross domestic product grew 2.5 percent in the fourth quarter of 2017, according to the Bureau of Economic Analysis’ second estimate. This is down slightly from the Bureau’s advance estimate which projected a 2.6 percent growth rate.
- Initial-jobless claims fell by 10,000 to a level of 210,000 for the week ending Feb. 24. This is the lowest number of claims since Dec. 6, 1969. The 4-week moving average fell by 5,000 to a level of 220,500, the lowest number for this average since Dec. 27, 1969.
- Personal income increased 0.4 percent in January and personal spending rose 0.2 percent, according to the U.S. Bureau of Economic Analysis.
- New orders for manufactured durable goods fell 3.7 percent in January according to the U.S. Census Bureau’s advance report for the month. Orders for transportation equipment declined 10.0 percent. Excluding transportation equipment, durable goods orders fell 0.3 percent. Shipments of manufactured durable goods increased 0.2 percent while unfilled orders for manufactured durable goods decreased 0.3 percent.
- The Chicago Business Barometer fell 3.8 points to a level of 61.9 in February. All five of the barometer’s components fell but since any reading greater than 50 indicates growth, production activity in the Chicago area continues to expand but at a slower rate. The barometer is still up 8.0 percent from February last year and above the 2017 average of 60.8.
- Total construction spending in January was nearly identical to December’s level but increased 3.2 percent compared to January 2017. Private construction spending fell 0.5 percent from December. Residential construction spending rose 0.3 percent from December.
- Sales of U.S. automobiles and light trucks fell 2.4 percent in February for a total of 1.3 million. This represents 17.1 million vehicles on an annualized basis. Industry watchers said manufacturers pulling back on incentives, higher interest rates and tighter credit all played a role in slower sales.
- The Conference Board’s Consumer Confidence Index hit an 18-year high in February. The Index rose to 130.8, up 6.5 from January. The Present Situation Index increased to 162.4 in February, up from 154.7 the previous month. The Expectations Index rose to 109.7 from 104.0 in January. The Conference Board sees consumers as quite confident that the economy will continue to expand at a strong pace despite the recent volatility in the stock market.
- The University of Michigan’s Index of Consumer Sentiment was “quite favorable” in February. In the final reading for February, the index rose to 99.7 from 95.7 in January. This is the second highest level the index has been at since 2004. The Current Economic Conditions Index increased to 114.9 from 110.5 in January while the Index of Consumer Expectations hit 90.0, up from 86.3 in January.
Foodservice News This Week
- The policy on joint employment changes again. The Obama-era rule that franchisers could be considered as direct employers of franchisees’ workers has been vacated. A ruling by the inspector general that a member of the National Labor Relations Board that voted to change the policy back to the pre-Obama ruling should have recused himself from the case because of a conflict of interest with his law firm. This now means the Obama-era rule is back in effect.
- Chipotle Mexican Grill bails out of the burger business. A Chipotle spokesman stated that “the economics were not what we wanted them to be…” for the Tasty Made burger concept.
- The third-party food delivery market will grow at a rate of 13.5 percent per year according to researcher Pentallect. The report estimates the food delivery market will reach $24.5 billion by 2022 counting both groceries and restaurant food.
- KFC continues to have product delivery problems in England and Ireland. Last week it was reported that many KFC locations were out of chicken in the region. This week 97 percent of restaurants were open but many ran out of gravy. The chain says the difficulty lies with bringing aboard a new distributor.
- Corporate Stirrings: The JAE Restaurant Group, a major Wendy’s franchisee with more than 200 locations, purchased 34 Knoxville, Tenn., area Wendy’s units from Wendy’s corporate. Price of the acquisition was not given. JAE plans to immediately remodel four of the Knoxville area operations including adding fireplaces, various seating options, Wi-Fi, flat screen TVs and digital menu boards. JAE plans to eventually remodel all the recently purchased Wendy’s locations and to open 10 to 12 more restaurants in the next 4 years.
- Growth Chains: Starbucks will open as many as 1,000 of its Starbucks Reserve concept stores which offer expanded menus including cocktails and Princi Italian Bakeries. Chick-fil-A will add two more restaurants in Nashville. BJ’s will open four to six new restaurants this year. Freddy’s Frozen Custard & Steakburgers opened six locations in the Midwest in the last two months and plans to open 50 more in the Midwest in coming years.
- Comparable Store Sales Reports: Carrols Restaurant Group up 8.9 percent, Fiesta Restaurant Group (Pollo Tropical down 0.1 percent and Taco Cabana down 7.4 percent), Habit Burger down 0.1 percent, Jack in the Box (system down 0.2 percent, company owned up 0.2 percent and franchised down 0.3 percent), Papa John’s (North America down 3.9 percent, company owned down 4.7 percent and franchised down 3.5 percent) and Texas Roadhouse (company owned up 5.8 percent and franchised up 4.7 percent.)
For details and same-store sales of other chains, please click here for the Green Sheet.