Published on Tuesday, July 10, 2012
Written by Jerry Stiegler
A study done by the prestigious consumer-based magazine shows how tight the competition in the restaurant community really is. Also, blogger Jerry Stiegler takes a look at the continued mixed economic news, exploring jobs data both in and outside of the restaurant industry and a variety of other indicators, as well as some chain expansion news.
A number of media sources picked up on Consumer Reports' study of 102 restaurant chains based on data from more than 47,000 readers' 110,000-plus eating occasions. The range of overall scores was somewhat tight, going from 88 (Biaggi's) to 69 (Buffalo Wild Wings). It was also interesting that all 100-plus operations scored at least midrange for food taste. In the complaint department, almost one of four consumers said that noise was a problem. Other major complaints were bad service (10 percent), food related problems (9 percent) and dirt (8 percent). Three chains received above average complaints about both noise and service — Buffalo Wild Wings, Chevy's Fresh Mex and Hard Rock Café. Three others, Hooter's, Joe's Crab Shack and Logan's Roadhouse were dinged for both noise and dirt problems.
This Week's News on the Economy
- This past week brought a lot of data on the labor market. News started on the right foot with payroll processor ADP reporting the private sector created 176,000 new jobs in June. Then first time jobless claims fell to 374,000, the lowest number of new claims since May 19. The good news dissipated on Friday when the Bureau of Labor Statistics (BLS) reported that the economy created just 80,000 new jobs in May. This was less than the forecasts and less than half the number needed to make any dent in unemployment. A separate BLS study had the June unemployment rate remaining at 8.2 percent, but when those individuals who work part time but would prefer full-time employment are counted the unemployment rate is 14.9 percent. The Bureau also found that there were large increases in temporary jobs, which usually means that employers are reluctant to commit to hiring. Perhaps the most significant indication of how weak the recovery can be was found in the following statistics: In the first quarter the number of new jobs created averaged 226,000 per month. In the second quarter, the average dropped to just 75,000. (For a look at the employment picture in foodservice industry, see below.)
- Comparable store sales for some major retail chains were tepid. Most were in positive territory but a number of big operations missed projections. An index from the Council of Shopping Centers and Goldman Sachs of retail stores rose 2 percent.
- Auto sales came on strong last month with the Japanese-based companies posting high double-digit volume gains vs. an extremely weak June 2011. June sales last year were pulled down by the earthquake and tsunami. Usually when the Japanese sales take off it is at the expense of the Detroit auto manufacturers, but this was not the case last month. GM and Chrysler sales were up 16 percent and 20 percent, respectively, and Ford was up 7 percent. Despite predictions for car sales to turn softer the industry is on track for annual sales of 14 million cars and light trucks.
- The Institute for Supply Managers Non-manufacturing Index declined to 52.1 in June from 53.7 in May. Still, any number in excess of 50 indicates an expansion in activity.
- Factory orders as measured by the Commerce Department rose 0.7 percent in May, beating expectations.
Foodservice News This Week
- With the total number of jobs increasing by just 80,000 in June, as mentioned above, it is interesting to note that restaurants added 15,000 employees last month. The National Restaurant Association says that in the last 12 months restaurant employment rose by 2.7 percent, which is virtually double the overall increase of 1.3 percent. Further, the NRA states that restaurants have added 115,000 new jobs so far this year and nearly 600,000 jobs since March 2010. An article in the Wall Street Journal on jobs that can't be exported says that since 2007 Panera Bread has increased its U.S. workforce by 50 percent or 22,000 jobs and Chipotle Mexican Grill has added 12,000, a 63 percent increase.
- The Food & Agriculture Organization of the United Nations reports their food price index dropped for the third consecutive month and is down 15 percent since it peaked in February 2011.
- Combining two restaurant brands in one operation is an interesting strategy that some in the industry question. As a result many foodservice professional will closely monitor the progress of Darden's decision to open combination Olive Garden and Red Lobster restaurants. Darden believes this move will allow the company to enter smaller markets and drive expansion.
- Panera Bread pulled their ad support from website SheKnows.com when an email surfaced from two of the site's editors encouraging their writers to repeatedly click on sponsors' ads.
- Bank of America Merrill Lynch projects that Malcolm Knapp's Knapp-Track will show casual restaurant chains' comparable store sales for June will be "marginally negative", which they see as down 1.0 percent or less. Mr. Knapp's interview will take place Tuesday, July 17.
- ChiefExecutive.net has named David Novak of YUM! Brands CEO of the year.
- Cupcake chain Sprinkles now has a vending machine that sells one cupcake at a time and is available 24 hours a day. The machine sells 1,000 cupcakes on an average day and the company plans on expanding the program to their other stores.
- CKE has never been apologetic for its menu's high calorie and fat offerings and it appears the chain is not alone. In fact, the chain may serve what could be considered healthy fare when compared to the Heart Attack Grill in Las Vegas and the Second Avenue Deli in Manhattan. This came to light when the Wall Street Journal reported that the two firms are involved in a legal tussle over the rights to the menu items named "Instant Heart Attack" and "Triple Bypass" sandwiches.
- Athens, Ga.-based Zaxby's opened a restaurant in Los Angeles. The chain plans to have more than 500 locations across the country by early 2013. Johnny Rockets signed a franchise agreement for 30 restaurants in Brazil. Japanese C-store chain Lawson's, with 10,000 units in its native country, will open two stores in Wiaikiki, Hawaii. Lawson's wants 30 to 50 stores in the state and eventually plans to expand to the U.S. mainland. A Jimmy John's franchise group in New Orleans that includes Saint's Quarterback Drew Brees as one of its owners has one restaurant open with two more scheduled to come on line later this year
For recent detailed reports on restaurant comp store sales click on this link to the Green Sheet. For Equipment Supplier Financial Data for July 10 click here.