This Week in Foodservice: Things Aren't As They Seem

Despite the fact recently released employment numbers are worse than they appear on the surface foodservice operators continue to hire people. And although negative, the casual restaurant sales reported by Knapp-Track may actually be better than it appears. Also, this week we take a look at a marketing research report that says fast food is "back on track," among many other economic and foodservice news items.

Advanced Data Processing, the payroll processing company, got the employment reports rolling this past week by projecting there were 176,000 new private sector jobs created in August. The U.S. Bureau of Labor Statistics said first-time jobless claims declined by 9,000, resulting in a total of 323,000 for the week ending September 1. The 4-week moving average fell to 328,500. While this data represents a significant improvement over the number of claims in the first half of the year, it still remains high from a historical perspective.

The U.S. Department of Labor's Friday release had unemployment falling a tenth of a percentage to 7.3 percent. This seems positive but the decline was due mostly to people leaving the job market and thus no longer counted as unemployed. Moreover, if people working part time but who desired full time work and those who want to work but have given up finding a job are counted, the true unemployment rate is 13.7 percent.

The U.S. Department of Labor projected new job growth in August at 169,000 with 152,000 jobs added in the private sector and 17,000 by various government operations. While not a disaster, many labor experts believe the economy needs to create 150,000 jobs a month just to keep up with population growth. And, in order to make any real dent in unemployment, the U.S. needs to add at least 225,000 or more jobs each month.

Other bad news found in the details were that the number of long-term unemployed (27 weeks or more) was unchanged and the number of "discouraged workers" (those who have given up looking for jobs because they feel there are no jobs) has stayed the same for the last 12 months.

Buried in the statistics — some news reports missed it — were downward revisions in both June and July numbers for new jobs. The U.S. Department of Labor dropped the number of new jobs created in July to 104,000 from 162,000. This is the smallest monthly gain since June 2012.

While not wishing to pile on the bad news, there's one other depressing bit of data we should share: The workforce participation rate — healthy people 16 years older and over who are working or looking for jobs — is down to 63.2 percent, the lowest it has been since 1978.

Finally, one ray of sunshine, at least for FE&S readers: 21,200 new jobs were created in the foodservice industry last month, representing almost 14 percent of the new private sector employment.

Economic News This Week:

  • Sales of cars and light trucks boomed in August with at least one observer talking about "the good old days" when comparing the results to the time prior to the recession. Most manufacturers enjoyed double digit sales growth compared to August 2012. In fact, sales could have been even better but a number of auto companies experienced a shortage of inventory among some models. The silver lining to this situation is higher prices and greater profitability on the cars they did sell.
  • Construction spending increased 0.6 percent in July driven by a 12.7 percent increase in residential building, according to a U.S. Department of Commerce Report.
  • The Institute for Supply Management's Manufacturing Index crept up in August to 55.7 from 55.4 in July, showing that manufacturers are still active. Of the 18 manufacturing segments ISM follows 15 had increases. New orders increased while production and employment both declined slightly over July but both stayed in positive territory.
  • Factory orders declined 2.5 percent in July, according to the U.S. Commerce Department, but without the extremely volatile transportation segment orders grew 1.2 percent
  • The Institute for Supply Management's Non-Manufacturing Index in July hit 58.6 — its highest level since January 2005. The ISM reported that 16 of the 18 service industries included in the survey were up in July with new orders and employment both growing.
  • Home prices surged higher according the CoreLogic report, which stated prices in July were up 1.8 percent over June and 12.4 percent over July 2012. The report noted this was the 17th straight month prices have gone up.
  • A Gallup poll on self-reported spending hit a 5-year high in August with consumers recording average daily expenditures of $95.
  • The Gallup Organization's U.S. Economic Confidence Index weekly average in August was minus 13, similar to its minus 12 in July but significantly down from the minus 7 average in May.

Foodservice News This Week:

  • Malcolm Knapp's Knapp-Track reported casual dining same-store sales declined 1.7 percent in the first 4 weeks of August and same-store guest counts fell 3.1 percent, marking the third month in row comparable store sales and traffic declined. Offsetting the drop in the number of customers was a 1.4 percent increase in check average. The rise in check average is somewhat puzzling given the widespread use of promotions and discounting. This could reflect the loss of lower income customers. The good news in the report is that the decline in same-store sales is slowing down. June same-store sales were down 2 percent and July declined 3.8 percent. Knapp Track information is courtesy of Bank of America Merrill Lynch.
  • The fast food industry is back on track proclaims a just-released report from market research firm Packaged Facts. Despite economic headwinds including a slow recovery from the recession by many in the industry's targeted demographic, the report says that operations that can steal a share of the market from competitors, offer innovative menu items, and keep up with broader nutritional trends should have at least moderate growth. Another research company, Saegeworks, echoes these findings and stated that fast feeders are in a strong financial position. But, The NPD Group has come to an opposite conclusion, noting that traffic is not increasing while ingredient prices and heavy discounting are affecting margins.
  • Consumer satisfaction with U.K. fast food restaurants has soared while satisfaction with full-service restaurants has declined, according to a new study by the National Customer Satisfaction Index – UK. Both types of restaurants scored a 78 in the most recent research report. This obviously raises a question of how the more expensive full serve places can compete with the fast food operators.
  • Taco Bell's turnaround was the topic of a recent Advertising Age article tracing the chain's rise from being a "punch line" to the addition of successful menu items and a creative new marketing program.
  • Food trucks were in the news this week with the Tampa Bay Times reporting the World's Largest Food Truck Rally featured a record-breaking 99 food trucks. A traffic snarl almost backed up to I-4 and forced the event managers to open parking lots early.
  • Growth Chains: Eat & Go, the Cold Stone Creamery franchisee for Nigeria, will open 16 units next year. Del Taco plans to open 25 restaurants in San Antonio. Corner Bakery Café announced plans to open 14 Stores in Tampa Bay and 7 in Oklahoma. Perkins Restaurants signed a six-unit franchise agreement for Iowa and Nebraska over the next six years. Project Pie Pizza has signed a master franchise agreement for 25 restaurants in the Philippines over the next 3 years. Togo's has signed 2 multi-unit franchise agreements for the 20 restaurants in Oregon and California.
  • Comparable Store Sales Reports: Just one this week – Good Times Burgers (up 18.7 percent)

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

 

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