Casual Dining Numbers, June Sales Figures and a Possible Foodservice Labor Shortage

This week we look at the U.S. Commerce Department’s June sales figures, explore the possibility of a foodservice industry labor shortage, provide the latest Knapp Track data for same store sales at casual dining chains and a whole lot more.

U.S. retail sales were soft in June, according advance estimates from the Department of Commerce. Adjusted sales rose just 0.2 percent, far below forecasts and the slowest pace in 5 months. Without automobiles and light trucks, sales increased 0.4 percent. The good news was that retail sales were revised up to 0.5 percent from 0.3 percent in May and revised to 0.6 percent from 0.5 percent in April.

Sales at restaurants and bars experienced a 0.3 percent decline in June from May’s levels. However, May sales, which were originally placed at down 0.2 percent in the Department’s advanced estimate, were revised to be up 0.9 percent.

June restaurant and drinking place sales were up 5.6 percent over 2013 and are up 4 percent for the first 6 months of 2014.

The caveats that go with this data are worth repeating. First, the government classifies this initial sales reports as advance results, which are subject to revision. As noted above, May results for restaurants were significantly revised. Second, the stats are adjusted for seasonal and calendar variations but not for menu price inflation. Finally, only restaurants and bars are included in the survey. Sales at hotels, motels, resorts, clubs, the military, education, health care and other operations are not included.

Economic News This Week

  • First-time jobless claims totaled 304,000, a decline of 11,000, for the week ending July 5, according to the U.S. Department of Labor. The less volatile 4-week moving average also dropped to 311,500, a decline of 3,500.
  • Optimism among small business owners retreated in June, falling to 95.00, a decline of 1.6 points, according to the Small Business Optimism Index. This comes after the National Federation of Independent Businesses posted increases during the previous three months.
  • The Gallup Organization’s Self-Reported Daily Spending Index declined in June, to an average of $91 a day. This is down from May’s 6-year high of $98 per day.
  • Consumer borrowing increased by $19.6 billion in May. The Federal Reserve said non-revolving credit such as tuition and car loans reached $17.8 billion, an increase of 9.3 percent, while revolving credit (mostly credit card debt) rose $1.8 billion.
  • Americans’ social well-being is doing OK. Financial well-being? Not so much. The Gallup Organization reports the number of people who say they are “suffering” in their social, community, or physical well-being is 16 percent or less, while 23 percent report suffering in managing their financial lives.
  • The Gallup Organization’s U.S. Economic Confidence Index remained at minus 16. Gallup now uses the word “stuck” to describe the Index’s remarkably stable performance.

Foodservice News This Week

  • Is foodservice heading for a labor shortage? A Businessweek article provides some anecdotal evidence suggesting that is already the case. First came the recession that limited the need for some employees and made it harder for those employees who were still on the job to leave for another position. Then there was an amazingly slow and painful recovery, which felt to many workers as if they were still in a recession. Now it appears that at long last the labor market is improving and some operators now find it difficult to fill jobs. At least one economist believes that the “shortage” of people means it is hard to find help at the salary being offered as opposed to a shortage of qualified applicants.
  • Same-store sales at casual restaurants dropped 1.1 percent in June, according to Malcolm Knapp’s report on 50-plus chains. Guest counts were down 2.9 percent but check averages rose 1.8 percent. Knapp revealed that prior to June Olive Garden was underperforming significantly and pulled down the Knapp-Track results. However, last month Darden stated that Olive Garden was running flat and outperforming Knapp-Track. Mr. Knapp’s information is courtesy of Bank of America Merrill Lynch.
  • Food trucks keep rolling. Food truck sales have sped ahead at a rate of 12.4 percent a year for the last 5 years. It is estimated there are more than 4,000 food truck companies now operating in the U.S., according to data from IBISWorld. For many startups, food trucks represent a far less expensive way of launching a new foodservice operation compared to traveling the brick and mortar route. In contrast, chains, including Starbucks, Taco Bell, TGI Fridays, and White Castle use trucks to build sales volumes, promote their brands and test new menu items.
  • Corporate Stirrings: Peter Piper Pizza, the countries 15th largest pizza chain is reportedly being put up for sale by the chain’s owner, Acon Investment. Crumb’s Bake Shop closed all of its stores and filed for Chapter 11. The chain, which went public three years ago, has been delisted by the NASDAQ exchange, having failed to meet the exchange’s requirements. An arrangement with two private investors to take the company private and reopen at least some stores needs approval by the bankruptcy court. Darden CEO Clarence Otis Jr. has been challenged to give up his board chairmanship by Barrington Capital Group. The activist investor has proposed that Darden have an independent chairman. Bank of America Merrill Lynch stock analysts will no longer cover Ruby Tuesday due to a “reallocation of resources” by the investment firm.
  • New concept alert: Potato Flats. Industry veteran Phil Ramano’s (Macaroni Grill, Fuddruckers & EatZi’s) new restaurant uses special presses to flatten baked potatoes to approximately a quarter-inch high then offers customers their choice of meat, vegetables and other toppings.
  • Bob Evans plans to expand its express units this year. The chain, which launched its first 2 units of this new smaller concept last year, is working with contract feeders to place the Express style operations in 4 locations and may open as many as 10 this year.
  • Krispy Kreme considers expanding its menu to include sandwiches and a broader beverage line.
  • Growth Chains: Dickey’s Barbecue opened restaurants in Missouri, Kentucky and Virginia on July 10. Project Pie, a fast-casual pizza concept that operates nine locations, has seven more in the development pipeline. Teriyaki Madness signed franchise agreements that will expand the chain in Arizona, Florida, Michigan, New Jersey, Ohio and Tennessee. Quaker Steak & Lube has signed a franchise agreement to open four restaurants in Florida. Starbucks plans to double the number of units it operates in Thailand to approximately 400. Krispy Kreme plans to open up to 80 stores overseas and up to 15 stores in the U.S. this year. McAlister’s Deli will open three locations in Florida over the next three years.  Dewey’s Pizza will open its sixth store in St. Louis this year and announced plans to open three more a year for the next few years.
  • Comparable Store Sales Reports: Bob Evans (down 4.1 percent), Good Times Burgers (up 12.5 percent), and Potbelly Sandwiches (down 1.6 percent).

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

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