Restaurant Sales Up for August, Trustworthy Fast-Food Brands, Impact of Hurricane Harvey on Restaurants, and More

Restaurant sales increased in August. Do consumers trust fast-food chains? Restaurant prices continue to rise faster than prices at grocery stores. Hurricanes cause multiple problems for restaurants. A foodservice and lodging apprenticeship program is up and running. These stories and a whole lot more This Week in Foodservice.

   

Total retail sales in the U.S. fell 0.2 percent in August compared to July but were up 3.2 percent from August of 2016. In the first 8 months of this year, U.S. retailers reported a 3.8 percent increase in sales.

Restaurant and drinking places sales rose 0.3 percent in August over July. In the first 8 months of 2017, restaurant and bars experienced a 2.9 percent sales increase compared to the same period last year. The bad news: restaurant sales that were initially reported as +0.3 percent for July were revised downward to minus 0.1 percent.

As we point out every month, there are important factors to consider when reviewing the U.S. Census Bureau’s report. The numbers are classified as advance sales since they are based on a small initial sample. When more responses are received, the government can, and frequently does, revise the data.

The Census Bureau only surveys restaurants and drinking places. Excluded are hotels, motels, resorts, clubs, retailers, employee feeders, schools K-12, colleges, healthcare and military. Thus, 30 percent to 40 percent of the foodservice industry is not studied.

Finally, some of the numbers are adjusted for weekends, holidays and seasonal changes but there is no adjustment for menu price changes.

Economic News This Week

  • U.S. household income hit a new high. The Census Bureau reported median household income in 2016 was $59,093. This is an inflation-adjusted rise of 3.2 percent and came after a 5.2 percent increase in 2015. The Bureau found that all ages, income and racial categories saw incomes increase last year. However, the Census Bureau warned that historical comparisons may not be accurate because of changes in the way the data has been gathered.
  • Initial-jobless claims fell 14,000 to a reading of 284,000 for the week ending Sept. 9. Even with the decline in claims, the total is considerably higher than the number of claims filed in the past year. The 4-week moving average rose 13,000 to a final level of 263,250. Given the increase in claims in the first 2 weeks this month, this report bears watching.
  • The Producer Price Index for Final Demand increased 0.2 percent in August on a seasonally adjusted basis. In the past 12 months, the final demand index has advanced 2.4 percent unadjusted. The index for final demand goods rose 0.5 percent. Without foods and energy, final demand goods prices were up 0.2 percent. The index for food fell 1.3 percent for the month. Final demand services prices fell 0.1 percent.
  • The Consumer Price Index increased 0.4 percent in August on a seasonally adjusted basis. Excluding food and energy prices, the so-called Core Index increased 0.2 percent. In the past 12 months, the Consumer Price Index has increased 1.9 percent on an unadjusted basis. 
  • Consumer credit increased 5.9 percent in July. The U.S. Federal Reserve reported that revolving credit (mostly credit card debt) rose 3.2 percent, which is less than the norm. Non-revolving debt (car loans, student loans, etc.) rose 6.9 percent, which is slightly more than the recent average. 
  • Industrial production declined 0.9 percent in August after 6 consecutive months of increases. The index for manufacturing fell 0.3 percent for the month in large part due to the effects of Hurricane Harvey. Mining output declined 0.8 percent as Hurricane Harvey temporarily curtailed oil and natural gas production. Utilities output dropped 5.5 percent as a result of unseasonably mild weather, which reduced the use of air conditioning. Capacity utilization for the industrial sector decreased by 0.8 percentage point in August to 76.1 percent, a rate that its 3.8 percentage points below its long-run (1972-2016) average.
  • The Empire State Manufacturing Survey showed strong growth in September. The New York Federal Reserve reported the Index held steady at 24.4. (Any reading exceeding zero shows increasing activity.) The New Orders Index increased 4.3 points to 24.9. The Shipments Index increased 3.8 points to 16.2 while the Unfilled Orders Index jumped 13.6 points from minus 4.7 in August to 8.9. The Number of Employees Index rose 4.4 points to 10.6.
  • The University of Michigan Index of Consumer Sentiment Retreated a Bit in the preliminary September report. The index fell from 96.8 in August to 95.3 in September. The Current Economic Conditions Index rose 2.7 percent for a reading of 113.9 while the Index of Consumer Expectations declined 4.9 percent for a reading of 83.4.

Foodservice News This Week

  • Do consumers trust fast-food chains? According to a national survey to determine the most trustworthy brands, a half dozen fast-food brands rank among the top 40 most trusted companies: Subway (No. 6 overall), Wendy’s (No. 8), Starbucks (No. 12), Burger King (No. 20), Taco Bell (No. 23), and McDonald’s (No. 37). Amazon was the most trusted brand overall.
  • Food prices increased 0.1 percent in August with food-at-home prices falling 0.2 percent while food-away-from-home prices rose 0.3 percent. These numbers are seasonally adjusted. On an unadjusted basis, food-at-home prices are up 0.3 percent in the past 12 months and food-away from-home prices are up 2.2 percent. Thus, the spread between the cost of eating at home and the cost of eating out continues to put restaurants at competitive disadvantage.
  • The impact of hurricanes on restaurants. First comes wind and water damage. If a restaurant survives that, a loss of power can result in massive food loss due to a lack of power. Employees may not make it to work. The streets are flooded or blocked by fallen trees. Or, employees are dealing with the loss of or damage to their own property. Most restaurants don’t carry business interruption insurance. If they have insurance, there may be exclusions or high deductibles. Customers are stuck in emergency shelters. Their homes may be gone or severely damaged and going out to eat is not high on their agenda. The Federal Emergency Management Agency estimates 40 percent of small businesses never reopen after a disaster.
  • An apprentice program for the foodservice and lodging industries takes off. The “earn while you learn” program titled the Hospitality Sector Registered Apprenticeship Program was developed by the National Restaurant Association Educational Foundation and the American Hotel & Lodging Association under a contract awarded by the U.S. Department of Labor. The program surpassed the Labor Department’s goal of 450 apprenticeships when 475 people registered. Among the operations committed to the program are Chipotle, Golden Corral, Firehouse Subs, Hilton, Wyndham, and Hyatt.
  • Beverages account for $1 out of every $5 consumers spend on food away from home, according to Technomic data. New products like energy drinks, cold brewed coffee and enhanced waters are joining soda and regular coffee now to total $181 billion in sales according to Technomic’s research. While consumers consider drinks more important than ever, some negative factors continue to affect the beverage market as well. They include a desire for healthier beverages, taxes on sugary drinks and mandatory calorie information.
  • A new Chicago food hall is positioned as an incubator for foodservice operations by young, female and minority entrepreneurs. Backed by a division of the Compass Group, the operation will offer equipment, assistance from local culinary schools and a place to sell food.
  • The Voltaggio Brothers will open a fast-casual restaurant in Santa Monica, Calif. The restaurant, named STRFSH, will offer a made to order grilled fish sandwich on a toasted potato roll customized with various condiments and rubs.
  • Growth Chains: Sunny Street Café signed a deal for 20 units in the Dallas - Ft. Worth area. The Green Turtle signed a 10-unit development agreement for northern New Jersey and northeastern Pennsylvania. Bad Daddy’s Burgers has opened six restaurants so far in 2017 and will open two more before the end of the year. Sbarro has an agreement with a new franchise partner in Russia calling for at least 300 locations to open in the next 10 years. Capriotti’s Sandwich Shop will open 15 restaurants this year and plans to have 500 by 2025. In & Out Burger has opened 2 locations in Las Vegas. Gloria Jean’s Coffee will open 5 restaurants in Buffalo.
  • Comparable Store Sales Report: Cracker Barrel down 1.7 percent

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

 

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