It is hard to recall a messier situation at a major restaurant chain than the saga now playing out at Papa John’s Pizza. The battle in the executive suite has carried out to the units with same-store sales falling 6.1 percent in the quarter-ending July 1. Worse still, comp sales declined 10.5 percent in July. The company has announced reduced royalty charges to assist the franchisees. In the meantime, Domino’s reported same-store sales rose 6.9 percent in their fiscal quarter ending in June.
It is pretty obvious that Papa John’s founder, John Schnatter, has lost the confidence of the company’s board of directors or at least most of the board members. It is also possible the board has differences with Schnatter beyond his comments about the NFL and his use of a racial slur. But, the board cannot remove him his position as chairman of the board. That has to be done by vote of the stockholders. (Schnatter owns less 30 percent of Papa John’s stock.)
Decades ago the Harvard Business Review published a study of family-owned companies. Perhaps the key finding of study was that the company founder did not distinguish between the company and themselves. Most founders saw them as one in the same. That is why it is so difficult to let go of “their” business. It will be interesting to see if Schnatter will be forced out or if he and the directors can reach some accommodation.
Economic News This Week
- First-time jobless claims remain low with the Department of Labor reporting 213,000 new claims filed the week of August 4. This was a decline of 6,000 claims from the previous week. The 4-week moving average was 214,250, a decline of 500.
- The Bureau of Labor Statistics “JOLT” study changed little in June from May. Job openings were little changed at 6.7 million. (Note: There are more job openings than there are people looking for work in the U.S.) The number of hires (5.7 million), total separations (5.5 million), quits (3.4 million), layoffs and discharges (17 million) and other separations (57,000) were all little changed from May.
- The U.S. Federal Reserve reports consumers’ borrowing slowed in June. Consumer credit rose 3.1 percent for the month on a seasonally adjusted annual basis. However, revolving credit fell 0.2 percent. Non-revolving credit increased 4.4 percent.
- The July Producer Price Index for Final Demand was unchanged from June on a seasonally adjusted basis. A 0.1 percent increase in final demand goods was offset by a 0.1 percent decrease in final demand services. The food index declined 0.1 percent. The core index, that is, all goods, less food and energy prices, rose 0.3 percent.
- The Consumer Price Index increased 0.2 percent in July on a seasonally adjusted basis. In the last 12 months the index is up 2.9 percent. The core index, which excludes the volatile food and energy indexes, was up 0.1 percent in July and was flat for the last 2 months ending in July.
Foodservice News This Week
- The Consumer Price Index Food Index increased 0.1 percent in July. For the 12-months-ending July 2018 food prices are up 1.4 percent. In July, the index for food at home was up 0.2 percent and the index for food away from home rose 0.1 percent. But in the past 12 months, food at home prices were up just 0.4 percent while food away from prices increased 2.8 percent.
- Sysco reported strong quarterly and annual financial results. The foodservice distribution giant said its fourth quarter sales rose 6.1 percent to $10.4 billion while gross profit increased 5.2 percent to $2.1 billion. Case volume grew 5.0 percent and organic case sales from broadline operations increased 3.0 percent. For the fiscal year, sales rose 5.4 percent, gross profit rose 4.6 percent and organic case volume for U.S. broadline operations increased 2.1 percent.
- A futuristic McDonald’s opens in Chicago. Replacing the iconic “Rock n’ Roll” McDonald’s that opened in 1983, the new location measures 19,000 square feet and is enclosed in 27-foot windows with an arboretum and trees on the roof. The restaurant also features solar energy that powers parts of the restaurant, an energy efficient HAVC system and fryers that use less oil. The franchisee who runs the new operation believes it shows McDonald’s is “very young and very creative” as well a “…it’s forward thinking and it’s a growth company.”
- Popeyes will relocate its headquarters to South Florida. Popeyes parent, Restaurant Brands International, also owns Burger King, which has its headquarters in Miami. The Atlanta Journal is quoted to the effect that Popeyes management has been leaving Atlanta since March of this year. Details of the move including the address were not provided in the story.
- Corporate Stirrings: Four Tim Hortons restaurants in the Cincinnati area were closed abruptly. Tim Hortons parent company, Restaurant Brands International, said they reached a mutual agreement with the Cincinnati franchisee.
- Growth Chains: Cousins Pizza has signed a franchise agreement for 40 restaurants in Chicago in the next 7 years. Mighty Quinn’s, a 15-unit fast-casual barbeque chain, plans to grow to 60 restaurants in the next 5 years through franchising. Jamba Juice will open three stores in Dallas in the next two months. Domino’s will open 60 stores in the UK this year.
- Comparable Store Sales Reports: Fiesta Restaurant Group (Pollo Tropical up 3.4 percent & Taco Cabana up 3.1 percent. Jack in the Box (system up 0.5 percent, company owned up 0.6 percent and franchised up 0.5 percent), Papa John’s (North America down 6.1 percent, company owned down 7.2 percent and franchised down 5.7 percent) and Ruth’s Chris Steak House up 1.3 percent.
Fork details and same-store sales of other chains, please click here for the Green Sheet.