The National Restaurant Association’s Restaurant Performance Index saw only a slight improvement in October. The Index reading was 101.2 for the month, up from 101.1 in September.
The Current Situation Index increased 0.3 percent in October. Operators reporting an increase in same-store sales rose from 46 percent in September to 53 percent in October. Customer traffic also inched up for the month.
The other component of the index – the Expectations Index – was unchanged from the previous month at 101.6. Any reading greater than 100 shows expansion.
Operators reporting a capital expenditure for equipment, expansion and/or remodeling in the last 3 months fell from 63 percent in September to 53 percent in October. Likewise, the number of operators planning to make a capital expenditure for equipment, expansion and/or remodeling in the next 6 months dropped to 53 percent in October from 65 percent in September.
It is rather difficult to interpret these findings with sales and traffic up and future outlook flat with operators suddenly cutting back on spending.
Economic News This Week
- Gross domestic product increased 3.5 percent in the third quarter, according the U.S. Commerce Department’s Bureau of Economic Analysis’ second estimate. The 3.5 percent increase is the second largest increase in 4 years.
- Initial-jobless claims increased 10,000 to a final level of 234,000 for the week ending Nov. 24. The less volatile 4-week moving average rose by 4,750 to a final level of 223,250.
- October sales of new single family homes totaled 544,000 on a seasonally adjusted annual basis, according to the U.S. Census Bureau and the Department of Housing & Urban Development. Sales were down 8.9 percent from September and down 12 percent from the October 2017, per the estimate.
- Personal income increased 0.5 percent in October according to the Bureau of Economic Analysis. The Bureau also reported that personal consumption expenditures rose 0.6 percent in October.
- The Chicago Business Barometer jumped significantly in November with the index rising 8 points from October to a final reading of 66.4. This represents an 11-month high and marks the 33rd consecutive month of expansion for the region. (Any reading greater than 50 means expanding activity.) New orders rose to the highest level since May 2014. Production is at a three-month high while order back logs hit a four-month high. The labor indicator rose to a three-month high.
- The Conference Board Consumer Confidence Index declined in November. The index now stands at 135.7, down from 137.9 in October. The Present Situation Index actually edged up in November to 172.7 from 171.9 in October. The Expectations Index decreased from 115.1 in October to 111.0. A spokesman for the Conference Board described the decline as “small” and pointed out the index remains at historically strong levels.
Foodservice News This Week
- Trian Fund Management passed on purchasing Papa John’s, according to various media reports. It also appears that other investors are only interested in taking a stake in the troubled pizza chain. Papa John’s management has made no secret about putting the company on the block but weak earnings will make finding a suitor more difficult.
- Dunkin’ bets on technology. A Dunkin’ Donuts vice president says the coffee chain, now in the midst of a rebranding program, will let customers order through a robot and let crew members make the coffee and food. Dunkin’s goal is to have customers order anywhere, anytime and on any device. In addition to having pick-up lockers, the company is testing artificial intelligence to recognize customers and offer menu ideas.
- McDonald’s extends the deadline for franchisees to remodel their restaurants. The hamburger giant originally wanted all the changes done by 2020. Now the franchisees have until 2022 to remodel their units. It was found that the actual work has taken longer to complete and longer for sales to raise after the upgrades than originally forecast. While McD’s management pledged to cover half the cost of the improvements, the changes are still expensive for the franchisees.
- Franchisees sue Second Cup Ltd. Current and former franchisees accuse the Canadian coffee chain of improperly using advertising funds, forcing operators to take on debt to buy equipment that didn’t boost sales. Franchisees also claim Second Cup failed to take action to make up market share lost to other chains. Finally, the suit claims Second Cup required franchisees to purchase products at a far higher price than its worth on the market, points to stock shortages due to supplier changes, and “problematic” food quality.
- Corporate Stirrings: Papa Murphy’s sold nine company-owned stores and four franchised stores in the Dallas area to an existing franchisee, Tom Lovelace Company LLC. The Tom Lovelace Company now owns 32 Papa Murphy units and plans on purchasing more in the future. Jack in the Box is rumored to be exploring the sale of the 2,000-plus unit operation. At least one report stressed that there has been no final decision made for a sale.
- Growth Chains: Jersey Mike’s plans to open three locations in Long Island, N.Y. Baskin Robins will open 6 to 10 new or remodeled stores next year using a new design. Cousins Subs will open at least 20 locations in the Minneapolis-St. Paul area. Chef and TV personality Andrew Zimmerman plans on opening 200 of his Lucky Cricket restaurants.
- Comparable Store Sales: Cracker Barrel up 1.4 percent.
For details and same-store sales of other chains, please click here for the Green Sheet.