Consumers Choices Becoming Clear

As their cars get older and food trucks become more prevalent, the way consumers use foodservice continues to evolve. Also, This Week in Foodservice explores disaster plans, growth chains and much more.

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Well, we are in hurricane season, that time of year when storms starting over the ocean can come ashore and batter businesses and people alike. Recent examples of hurricanes that have wreaked havoc include Sandy and Katrina, among others. What Sandy taught us last year was that no matter how unlikely it seems that severe weather of any kind may impact your business, that chance always remains that a storm could deliver devastating blows to your organization, its employees, suppliers and customers.

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So always make sure that your company's disaster plan is up to date and everyone knows what to do and where to turn for emergency aid that government agencies and other organizations offer after these storms hit. And understand that it might take some time to accomplish this.

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For example, there is a "Stronger New Jersey" program consisting of grants up to $50,000 and low interest loans up $5,000,000 for small businesses and non-profit organizations that were damaged by Sandy. To be eligible, the business or organization must have incurred at least $5,000 in physical damage to inventory, equipment, fixtures, furnishings, or buildings. The business must be in New Jersey. This program is particularly appropriate for businesses that are tenants and did not have flood coverage on contents. Loss of business is not covered by this program nor is personal property such as homes, cars, boats, etc.

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If you have a restaurant or tavern that incurred more than $5,000 in damage or you know someone — a customer, client, etc. — who has, you can find out more about the program by clicking here.

Also, SCORE (Service Corps of Retired Executives) has established a Sandy Business Recovery Project and volunteers are available to assist people in determining eligibility and filing to receive grants and loans. SCORE mentors can be reached at (609) 271-8524.

These are just two examples of local relief efforts related to Sandy. Be sure to acquaint yourself with the options in your area and remain diligent in your follow up.

Economic News This Week:

  • First-time jobless claims rose 336,000, an increase of 13,000 for the week ending August 17. The increase was not enough to panic most labor experts since it stayed near a 6-year low. And, the less volatile 4-week claims average fell to 330,500, a decrease of 2,250.
  • July housing sales provided contradictory results. Sales of existing homes rose 6.5 percent compared to June for an annualized rate 5.39 million transactions. And sales were up 17.2 percent over July 2012. Distressed sales (foreclosures and short sales) were 15 percent of total volume, the lowest percentage of such sales since the National Association of Realtors began tracking distressed sales in 2008. Rising mortgage rates may have pushed buyers off the sidelines. Sales of new homes, on the other hand, unexpectedly fell 13.4 percent in July vs. June to an annualized 394,000 transactions. While this represents the lowest sales volume in 9 months, it also is a 6.8 percent increase compared to July 2012. At least one expert noted that significant revisions in new home sales data occur frequently.
  • Consumers were scarred both financially and emotionally by the recession and remain very cautious according to a recent article in the Chicago Tribune. With the average vehicle on the road almost 11.5 years old, people now realize a need to replace their cars but other retail sectors have a subpar flavor. As noted in this space earlier, with auto and home sales up, consumers may be reluctant to spend a lot on eating out.
  • The Chicago Federal Reserve's National Activity Index improved to a negative 0.15 in July from a negative 0.24 in June. The Index consists of a weighted average of 85 different economic indicators.
  • Durable goods orders fell by a steep 7.3 percent in July. Commercial aircraft orders declined 52 percent after growing by 33 percent in June and more than 67 percent in May. Car and truck orders climbed 0.5 percent. Without the transportation segment, overall durable goods orders were down 0.6 percent. Core capital goods orders — those products used to manufacturer other goods — fell 3.3 percent, the first decrease in 5 months.
  • The Gallup Organization's Economic Confidence Index was negative 13, which continues to be down from readings in late May, June and July. But the Index remains improved from earlier this year.
  • The Conference Board's leading economic indicators rose 0.6 percent in July. A spokesperson for the Conference Board noted that growth over the last 6 months has doubled while 8 of the 10 indicators grew in July.

Foodservice News This Week:

  • Fast food workers plan nationwide walkout on August 29. It is almost a sure bet that the walkout's organizers will announce the action was a tremendous success while foodservice managers will say that there was no major disruption in their overall business. One of the main goals of the protest organizers is $15 an hour minimum wage. Ed Rensi, retired McDonald's CEO, told Fox News that $15 an hour would "absolutely" kill jobs and result in 15 percent to 20 percent of small businesses folding.
  • Steak n' Shake is fighting law suits from franchisees as well as suing franchisees over the $4 meal program the chain is promoting, among other complaints. According to the Wall Street Journal, the relationship between Biglari Holdings, Steak n' Shake's parent company, and the franchisees began to sour three years ago when the chain began requiring a set menu (except breakfast) with all items priced by the company and to offer all company promotions including the "4 Meals under $4." The problem, of course, is not directly with the selling price but rather with impact on franchisees' profits, a topic that Burger King and McDonald's franchisees know well. Meanwhile, Sadar Biglari is attempting to get a seat on the board of Cracker Barrel.
  • The restaurant tipping system has been in the news lately. Darden Restaurants, as well as other operators, may drop adding automatic gratuities to guest checks because of an IRS ruling that will treat such tips as wages leading to higher payroll taxes and more complicated accounting.
  • Fast food restaurants are losing consumers to food trucks, according to research from The NPD Group. About half of those surveyed said they would have eaten at a brick and mortar fast food place if they hadn't patronized the food truck. But 20 percent said their food truck meal was "spontaneous or unplanned." NPD says that threat to fast food operators is limited in some parts of the country to spring and summer due to weather.
  • The food truck business has grown so much there is now a website — FoodTruckRental.com — where food truck owners can list their trucks for sale or lease by foodservice operators.
  • Bob Evans Express is a new concept that will offer a mix of "self serve and prepared foods" that the chain has launched with AVI Foodsystems, Inc. The target is non-traditional sites such as hospitals, malls, universities, airports and corporate cafeterias.
  • Restaurant expansions always make news — including the Growth Chains section of this report every week — but a restaurant closing can make news, too. A unit of one of the hottest chains, Five Guys Burgers and Fries, recently closed in the Cincinnati suburb of West Chester. The local Five Guys franchisee said the restaurant's business was good but another chain offered more than $1 million for the site which, according to Five Guys, made selling "kind of no brainer." Raising Cane's Chicken Fingers now owns the property.
  • Growth Chains: CaliBurger has signed a 5-unit deal for Bahrain. Teriyaki Madness has 4 new franchisee agreements for restaurants in 7 locations in Southern California. Dunkin' Brands plans to open 100 Baskin Robbins in South Africa in the years ahead. Firehouse Subs is planning on opening 73 locations in Michigan in the next decade. Jersey Mike's Subs plans to open 40 new restaurants in Michigan in the next 2 years. MOOYAH plans on adding 36 restaurants in Florida in the next year or so. Quizno's has signed a franchise agreement for 3 units in Nicaragua. Subway will open 1000 new operations by the end of 2014. New Miami Subs Grill has a franchise agreement for at least 5 units in Jordan.
  • Comparable Store Sales Reports: AFC Enterprises (domestic up 4.3 percent, company-owned up 1.7 percent, and franchised up 4.3 percent) COSI (down 3.6 percent and Kona Grill down 2.5 percent).

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

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