December 02, 2011
I mentioned last month that many operators are aggressively renovating facilities and replacing equipment— after dramatically cutting back capital spending during the Great Foodservice Recession. They just can’t wait any more if they want to remain competitive in a market with flat traffic and same-store sales. And this fact is driving increases in sales of foodservice equipment and supplies, in spite of an economic climate that remains quite gloomy and scary.
There really is no other explanation for the numbers that keep coming in. Since that column was written, the Marketing Agents Association for the Foodservice Industry released its third-quarter Business Barometer.
It was up 4.4% again, following increases of 4% in the first quarter and 5.7% in the second. The results in the U.S. regions were even better, overall numbers showing Canada is struggling a bit.
Five of the seven public E&S companies we follow have reported third-quarter numbers. The more chain oriented companies were up strongly again, in a couple cases, up double digits. The tabletop oriented supplies company had one of its best quarters in a couple years, a sign of how operators are upgrading their interiors.
What’s remarkable about the positive E&S aggregate numbers is that operator customer traffic and same-store sales growth remain sluggish at best. While the National Restaurant Association’s Restaurant Performance Index snuck back into positive growth territory in the September survey, that result follows three negative months this summer. Technomic Inc.’s tracking of chain same-store sales shows both quick-service and full-service chains posting gains, but they are very moderate, in the 1.5% to 2.5% range. In other words, once menu-price changes are factored out, comp sales are flat.
As we said, pent-up demand has to be driving the E&S gains. But we believe something more is at work, something longer term, more structural. The fact is, many American foodservice facilities are aging. For the operators who own them, there is little choice but to renew, renovate, replace and upgrade. The alternative is gradual decline, and in some cases, going out of business. The problem is, “re-imaging” thousands of restaurant units isn’t cheap. And finding the money for it isn’t easy following the most severe downturn in our business in half a century. But it appears many operators are finding a way.
Speaking of finding a way, please find a way to our biennial Multiunit Foodservice Equipment Symposium in Austin next month. Details are in the ad in this issue, or at fermag.com/event-calendar/mufes.html. It will help you spend the money for that upgrade wisely, or, if you’re a supplier, it’ll help you promote your solution. And have a wonderful, happy holidays and healthy 2012.