The National Restaurant Association’s Restaurant Performance Index retreated in July. U.S. gross domestic product in the second quarter was the highest since the third quarter of 2014. Coke buys a major coffeehouse chain. Meijer debuts a new c-store design. These stories and a whole lot more This Week in Foodservice.
The National Restaurant Association’s Restaurant Performance Index hit 101.1 in July, down 0.6 percent from June. (Any reading greater than 100 shows growth.) The Index drop was due to a lower reading in one the RPI’s components, specifically the Current Situation Index which dropped 1.2 percent in July for a final reading of 100.8. The percent of operators reporting higher same-store sales fell from 53 percent in June to 47 percent in July. Customer traffic suffered a net decline.
The other component of the RPI, the Expectations Index, inched up by 0.1 percent to 101.4. The Expectations Index has “been stuck in a soft patch for several months, after hitting a nearly three-year high in December,” per the National Restaurant Association. Operators remain optimistic about their businesses in the next six months but have mixed opinions about the overall economy.
As for spending, 66 percent of the operators in the survey said they made capital expenditures in the last 3 months for equipment, expansion or remodeling. This is down from a near record high of 75 percent in June when the question answered affirmatively. As for future investments, 59 percent of operators plan to spend money for equipment, expansion and/or remodeling in the next 6 months. This is virtually identical to the 58 percent who said so in the June report.
So, for another month the NRA’s research shows a field that continues to expand but at a very slow pace.
Economic News This Week
- Second quarter gross domestic product for 2018 was revised up to 4.2 percent, per the second estimate by the U.S. Commerce Department. This marks a .1 percent increase over the initial estimate. This is the largest quarter-to-quarter increase in GDP since the third quarter of 2014.
- Initial-jobless claims climbed to 3,000 for a reading of 213,000 for the week ending August 25. The 4-week moving average fell by 1,500 claims to a final level of 212,500. This is the lowest this average has been since Dec. 13, 1969.
- Personal income increased 0.3 percent in July, reports the Bureau of Economic Analysis. Personal consumption expenditures increased 0.4 percent for the month of July.
- The Chicago Business Barometer dipped 1.9 points in August for a final reading of 63.9. (Any number greater than 50 indicates increasing activity.) The survey showed gains in Production and New Orders but Order Backlogs and Employment declined.
- The Conference Board’s Consumer Confidence Index neared an 18-year high in August. The index increased to 133.4, up from 127.9 in July. (The index hit 135.8 in October 2000.) The Present Situation Index rose to 172.2, up from 166.1 in July. The Expectations Index increased to 107.6, up from 102.4 in July. A spokesman for the Conference Board said the results of the August survey indicate strong economic performance for the rest of this year.
- The University of Michigan’s Index of Consumer Sentiment August survey fell to its lowest level since November. The index reading was 96.2, down from 97.9 in July. The Current Economic Conditions Index fell from 114.4 in July to 110.3. The Index of Consumer Expectations was little changed at 87.1 after reading 87.3 in July. A spokesman for the university said the decline seemed to be due to less favorable perceptions of market price and, to a lesser extent, rising interest rates.
Foodservice News This Week
- Coke takes a big gulp of the coffee business. The beverage giant agreed to buy Costa, a U.K.-based chain with 4,000 shops as well as retail and vending operations. Coke will pay $5.1 billion, which is 16 times earnings. The move will make Coke a head-on competitor to Starbucks.
- Meijer introduces a new c-store design in Grand Rapids, Mich. The 5,500-square-foot design includes a gas station and a full-service Starbucks. In addition, the new store will offer an expanded assortment of fresh produce and protein-based snacks, wraps, fruits and organic items. Grab-and-go items, prepared locally by Superior Foods, will also be available. Free WiFi and phone charging stations will be part of the new concept, too.
- Dunkin’ Donuts will invest $100 million to better serve customers ordering via their mobile devices. The chain will have 50 test stores with dedicated pickup areas, digital ordering kiosks and expanded drive-thru windows that prioritize orders via mobile app. Dunkin’ hopes to improve order speed, accuracy and convenience with this initiative.
- Meet Generation: the “Total Social Generation.” Generation Z will account for 40 percent of all consumers by 2020, per a study from Engagement Labs. When ranking the top eight brands members of Generation Z talk about only one restaurant concept – McDonald’s. But there does seem to be more talk about other restaurants with Baskin Robbins, Del Taco, Domino’s Pizza and California Pizza significantly growing their mentions among the emerging demographic. But McDonald’s, Burger King, Subway, Taco Bell and Wendy’s are all seeing modest declines in this study.
- Burger King signed a nationwide delivery agreement with DoorDash. More than 1,300 BK units offer delivery.
- Corporate Stirrings: Yum China reportedly rejected a $17.6 billion buyout offer from a consortium led by the Chinese investment firm of Hillhouse Capital Group. The global investment group of KKR was a member of the consortium. Speculation is that the consortium will take no further action at this time.
- Growth Chains: Papa John’s International plans to open 16 restaurants in Kazakhstan. Curry Up Now, which has only opened locations in the chain’s home state of California until now, has finalized an agreement to open restaurants in central and northern New Jersey. Bosa Donuts may open as many as four locations in Phoenix. The ONE Restaurant Hospitality Group opened their first STK restaurant in Mexico City. Dunkin’ Donuts will open 3 restaurants in New York City.
- Comparable Store Sales Reports: Red Robin Gourmet Hamburgers Down 2.6 percent.
For details and same-store sales of other chains, please click here for the Green Sheet.