A casual dining chain makes an electronic leap, the Federal Reserve votes no confidence for the economy, Tim Horton's plans substantial changes, second quarter restaurant traffic and more.
It was bound to happen sooner or later. Given the state of technology someone was going to make a major commitment to electronic ordering. The pioneer is Chili's who announced the chain will equip tables in most of the chain's 1,200-plus restaurants with a touch screen tablet that shows menu items, offers games, and allows credit card payments.
Chili's CEO said that a test of the devices in 180 locations indicated sales of appetizers, deserts and coffee increased. Only 10 percent of guest tables paid 99 cents to play games but the usage was higher if there were children at the table. (Customers can play an unlimited number of games for 99 cents on each visit. Chili's splits the game revenue with the equipment's owner.) About half of the customers used the equipment to pay their bills, too, probably because it expedites the process. Table turns actually increased for customers using the system.
In a company statement, Chili's says the system was not intended to cut labor and no job reductions are planned. And despite reduced interaction between customers and wait staff, the tip levels remained constant. Other chains testing the same or similar systems include Applebee's and Uno Chicago Grill.
As for operations that fear turning off less tech-savvy clientele or those who might find this approach too cold and impersonal, customers are free to ignore the tablets and just talk to the staff. (Information culled from articles in the Wall Street Journal and Bloomberg Business Week.)
Economic News This Week:
- The Federal Reserve blinked. It was almost universally assumed, based on statements by Fed Chairman Ben Bernanke earlier this year, that the Federal Reserve would begin tapering off its bond buying in September. Bond buying, so the theory goes, provides stimulus for the economy by keeping interest rates artificially low. Last week the Fed announced its intention to keep buying bonds at the current rate. In response to the uproar that followed, the Fed chairman replied that no tapering would begin this month. Prior to this announcement, the widely held belief was that the Fed would follow through on its plans to taper bond purchases, thus raising interest rates, and there was no prior indication of any change of plans. The Federal Reserve has long stated that it operates entirely in the open and it wants everyone to understand its policies. Most likely what happened is that the Fed looked at employment, the housing market, and other aspects of the U.S. economy and decided things were not going well enough to slow down the money spigot.
- Initial jobless claims rose to 309,000, an increase of 15,000 for the week ending September 9. This came one week after initial jobless claims dropped to less than 300,000. The problem was, and continues to be, that California (not Massachusetts as reported last week) and Nevada remain slow in processing their claims due to new computer systems. This results in a backlog of claims. Further, employment experts warn again that a decline in layoffs doesn't automatically translate into new jobs.
- It's a good time to find a job, according to just 27 percent of Americans participating in a survey administered by The Gallup Organization. Of course, most of the participants still feel it is a bad time to find a job. Interestingly enough, the study's findings are virtually identical to what Gallop reported in 2008 at the start of the recession.
- Led by increases in shelter and medical costs, the Consumer Price Index crept up just 0.1 percent in August. In the past 12 months the index is up just 1.5 percent. Core prices, which exclude volatile food and costs, were up just 0.1 percent last month and up 1.8 percent in the last 12 months. Thus, inflation remains extremely low and far less than the Federal Reserve's "target" of 2.5 percent.
- The housing market recovery continues with the U.S. Commerce Department reporting that August housing starts increased 0.9 percent to an annual rate of 891,000. This is a 19 percent increase compared to August 2012. Single-family housing starts were up a substantial 7 percent. Building permits issued in August fell 3.8 percent compared to July but were up 11 percent over August 2012. Permits for single-family homes rose 3 percent compared to July and were the highest since May 2008. Home builder confidence remained at 58, the same as August which is an 8-year high for the Index. Finally, existing home sales added to the positive outlook with the National Association of Realtors reporting a 1.7 percent increase over July to an annual rate of 5.48 million on a seasonally adjusted basis. Despite rising mortgage rates and low inventories, August sales rose 19 percent over August last year.
- The Philadelphia Federal Reserves Business Index took a huge leap up in September to 22.3, way above the 9.3 August reading. The survey measures the difference between those who say business is expanding and those who indicate it is declining. This is the highest the index has been since March 2011.
- Household income stabilized in 2012 according to the Census Bureau. Median annual household income last year was $51,017, statistically identical to the $51,100 median in 2011. Median income hit an all-time high in 1999 at $56,080 and was $55,627 in 2007 before the start of the recession. This promoted one observer to comment that "at least the bleeding has stopped."
- The Christmas shopping season may be slower this year with ShopperTrack predicting a sales gain of 2.4 percent this year vs. 3 percent in 2012 and 4 percent in both 2011 and 2010. Note that there are various forecasts for the buying season this time of year, many of them contradictory.
- Economic confidence was minus 15 last week, virtually the same as minus 16 the week before and in the same range for the last couple of months as determined by a Gallup poll.
- Leading economic indicators were up 0.7 percent in August after a 0.5 percent increase in July, which led the Conference Board to conclude the U.S. economy is on track for modest to moderate growth.
Foodservice News This Week:
- Domestic restaurant traffic grew by 1 percent in the second quarter over the second quarter of last year, according to The NPD Group. Quick-serve restaurant traffic was up 1 percent, mid-scale down 2 percent, casual dining was flat, and upscale dining was up 6 percent. Breakfast traffic and late-night snack traffic were up while lunch and dinner traffic were both flat. Consumer spending was up 3 percent in the quarter, mostly as a result of increased check average.
- Tim Horton's CEO Marc Caira wants to improve the chain's menu in order to differentiate it from the competition. He also stated he wants to expand menu offerings for dinner, create beverage express counters, and add double drive-thru lanes at high-volume locations.
- New concept: The Truck Yard. The Burger Business website reported a restaurant named Steak Me Home Tonight has opened in the Lower Greenville area of Dallas. The operation features sliced rib-eye cheese steak sandwiches and a bar in a converted mechanic's shed situated on a 15,000-square-foot lot offering picnic tables, fire pits, and, space for food trucks to park and sell their menu items. Twenty or so trucks regularly rotate through the space two or three at a time.
- Feds crack down on payroll cards: the Consumer Financial Protection Bureau has put out a bulletin warning employers that they must offer employees a choice when it comes to being paid. If employees choose a payroll card, essentially a debit card, they must be made aware of fees. The Bureau said that the fees can result in employees being paid less than minimum wage.
- An energy-monitoring system is coming to more than 800 Arby's corporate locations. The system monitors and controls HVAC and other electrical equipment as well as water usage.
- C-Store chain Kum & Go has opened a new 5,000-square-foot store in Tulsa, Okla., that includes a full kitchen offering made-to-order pizza, baked goods, and breakfast and deli sandwiches.
- Growth chains: McAlister's Deli has signed a multi-unit development agreement for 17 restaurants in Indiana, South Carolina, and Georgia. Freshii opened 16 new stores in existing markets, which puts the chain at almost 100 locations with an additional 80 units under construction. Sunny Street Café, which has 14 locations in the United States, signed a franchise agreement for 40 units in Eastern Canada. Burger & Beer Joint inked a 10-store franchise agreement for locations in Florida and Georgia. MOOYAH Burgers plans to open 40 to 60 restaurants in 6 California Counties by the end of 2014.
- Comparable store sales reports: Cracker Barrel (up 2.6 percent), Darden (Bahama Breeze up 2.7 percent, Capital Grille up 3.2 percent, Edie V's up 2.1 percent, Long Horn up 3.2 percent, Olive Garden down 4 percent, Red Lobster down 5.2 percent, Seasons 52 down 4.4 percent, and Yard House down 1.5 percent) and Dave & Busters (down 0.9 percent).
For details and latest same store sales of other chains, please click here for the Green Sheet.