- Published on Wednesday, 01 August 2012
- Written by Jerry Stiegler
In addition to the National Restaurant Association releasing its June Restaurant Performance Index, a number of restaurant companies released their second quarter operating results this week. After swimming through this sea of numbers, it seems as if the industry remains on a slight growth curve despite battling a variety of outside factors.
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This Week in Foodservice
The NRA's Restaurant Performance Index for June remained positive at 101.4, the same overall finding as May. While the Current Situation Index increased by 0.7 percent to 101.5, the Expectations component fell by 0.7 percent to 101.3. In other words, while the operators surveyed reported good traffic and same store sales, they are nervous about the future.
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Forty eight percent of operators report making a capital expenditure for expansion, remodeling and/or equipment purchases in June, up two percent from May. Looking ahead, 51 percent of those surveyed plan to make a capital expenditure in the next six months.
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Economic News This Week
- U.S. Gross Domestic Product for the second quarter of the year crept up an anemic +1.5 percent, according to the Commerce Department's advance estimate. The only good news was that this slightly exceeded estimates of +1.2 percent. Also, the final GDP for the first quarter of the year was revised up to 2.0 percent from 1.9 percent. For comparison, GDP for the fourth quarter of last year was +4.1 percent.
- First Time Jobless Claims for the week ending July 20 fell by 35,000 to 353,000. Big week to week swings are the result of the Bureau of Labor Statistic's attempts to seasonally adjust data for summer auto plant closings that have been greatly reduced due to high car and truck sales. One economist says that when things settle down in August we will get more realistic figures.
- Personal Income rose 0.5 percent in June mostly due to Americans working more hours.
- Personal Spending fell by 0.1 percent in June despite an increase in earnings. This is the second straight month consumers have reduced their spending, which does not bode well for the economy. Also, personal spending in May was reduced down to -0.1 percent. The original report stated spending was unchanged.
- New Home Sales fell 8.4 percent in June to an annual rate of 350,000. This follows May new home sales that jumped to a two-year high. Meanwhile, Zillow, Inc. reported that home prices have increased 0.2 percent for the quarter ending in June. Experts place their confidence in Zillow's report since they monitor comparable home sales within the same communities.
- The Reuters/U. of Michigan Consumer Sentiment Index for July closed at 72.3, showing the public continues to worry about the economy. The index had consumer's current sentiment actually increasing slightly to 82.7 last month from 81.5 in June but when asked their feelings about the future, the index fell to 65.6 from 67.8 in June.
Foodservice News This Week
- Restaurant visits and spending increased by 1 percent and 2 percent respectively over a year ago for the year ending May 2012 according to the NPD Group.
- Both independent and chain restaurant unit numbers grew in the past year according to NPD's ReCount research. There was an increase of 984 independent restaurant locations while the number of chain locations grew by 1,188. NPD says this has been the first increase in total restaurant locations since 2009. (Please note an article that ran in last week's This Week In Foodservice quoted different numbers from the NRA's analysis of Bureau of Labor Statistics.)
- Restaurant financial reports have been called rocky, disappointing and controversial so far this quarter. According to B of A Merrill Lynch, the bright spots have been The Cheesecake Factory, Domino's and Panera Bread.
- 24-hour service pays dividends for McDonald's restaurants, according to the Tampa Bay Times. More than 70 percent of the McDonald's in the Tampa Bay area offer drive-thru service and many of them offer dining room service, too, or are moving in that direction. According to McD's executives, units open 24 hours generate up to 10 percent of sales capitalizing on what they call the "nocturnivore" market. The story quotes an owner of six McDonald's restaurants to the effect that never closing actually simplifies operations.
- The drought's effect on the corn crop has brought predictions that the yield might be at a 10-year low. But the president of Smithfield Foods, Inc. had an op-ed piece in the Wall Street Journal stating that ethanol mandate is more responsible for high corn prices than weather related problems.
- Vegetarians are 5 percent of the population according to a Gallup Poll but, somewhat surprisingly, this has actually declined 6 percent since1999 when the Gallup people first asked the question.
- Miami Subs has announced that Latin hip-hop star Pitbull has taken a "significant" equity position in the chain. Miami Subs has declined from 170 stores in 2001 to 38 units today.
- Top 100 Advertisers in 2011 according to Advertising Age included McDonald's (#24), YUM! (#50) and Subway (#74). No, neither Burger King nor Wendy's made the list.
- Growth Chains. Dunkin' Donuts has signed a franchise agreement for at least 15 stores in Germany. Jamba announced signing franchise agreements for 32 stores in the next five to seven years. Hot Head Burritos opened its fourteenth location in Dayton, Ohio. The chain will open six more restaurants in the Dayton-Springfield market soon and have 22 new units by the end of this year. Starbucks will add 1,200 units in 2013 with 500 of them in the Americas.
- Comparable Store Sales announced in the past week are Buffalo Wild Wings, with company-owned units up 5.3 percent and franchised up 5.5 percent; Cheesecake Factory up 2.1 percent; Domino's up 1.7 percent; Dunkin' Donuts up 4 percent), Famous Dave's down 0.6 percent; Grand Lux down 2.9 percent; Mitchell's Fish Market up 2.3 percent; Panera Bread, system up 5.9 percent, company-owned up 7.1 percent and franchise units up 4.8 percent; Ruby Tuesday, company owned down 4.6 percent and franchise locations down 7.3 percent; Ruth's Chris up 6.0 percent; and Starbucks up 7 percent.
For more details on comp store sales, click here for the Green Sheet.
Equipment & Supply Manufacturers reporting their quarterly financial results are Cintas, Illinois Tool Works, International Paper, Libbey, and Newell Rubermaid. For complete report on suppliers' financial results click here.