Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
January 3, 2008

Regulatory Report:
Sponsored by:
NYRA Not Blinking In Calorie-Posting Fight
...While Left Coast Group Supports Statewide Proposal
North Carolina Bars, Restaurants Adapting To New Recycling Law
ASHRAE Updates Building Efficiency Standards
Worcester Not Blowing Smoke On FOG Law

Industry Report:
Sponsored by:
Server Products
Whole Foods Bids Plastic Bags Bye-Bye
New Guide Highlights Energy-Saving Tactics For Hotels
Starbucks Trims Growth Plans
FEDA Convention Registration Deadline Nears
Mary Jane Moon, Former Lakeside Chair, Passes
Thank You From Lyall And Deb Newby

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In This Section:
MAFSI Barometer Reports Slower E&S Sales Growth In 4Q
NRA's Performance Index Drops To Five-Year Low
Quick-Service Trends Go Flat, Even Negative
January Jobs Growth Goes Negative, Consumer Confidence Mixed
RevisedFER E&S Market Forecast Now Available

This issue's Regulatory ReportSponsor: Enodis
Industry ReportSponsor: Server Products
Economic Report Manitowoc Foodservice Group

MAFSI Barometer Reports Slower E&S Sales Growth In 4Q
Growth of the equipment and supplies market slowed during the fourth quarter of 2007, according to The Marketing Agents Association for the Foodservice Industry's quarterly survey of its members. While not surprising given a slowdown of foodservice operator sales growth during the period, the report is more evidence that the slowdown is affecting foodservice capital spending.

The MAFSI Business Barometer overall rose 2.1% during the fourth quarter. The moderate sales growth was the slowest since third-quarter '04, when sales rose 1.9%, and reversed what had been a moderately upward trend during '07. Sales grew 2.3% in first quarter, 2.8% in the second and 2.9% in the third. Still, all four quarters had growth substantially behind the record 4.5% growth of the third and fourth quarter '06. The fourth-quarter '07 number does, however, represent the 13th consecutive quarter of growing sales.

Sales were slowest in the Midwest and West, where they rose only 1.5%. Both areas were affected by severe weather during December. Canada, which continued to post strong results, saw a 4.3% rise. Sales grew 2% in the South and 1.9% in the Northeast.

Equipment sales growth cooled the most, easing to just 2%. Durable supplies sales grew 2.6%, followed by tabletop at 2.5% and furnishings at 2.4%. The stronger growth of the supplies categories was somewhat surprising, given that they usually respond quickly to changes in operator sales. The key operator segment that buys tabletop products, full-service restaurants, had negative sales trends during the period.

In the next issue of FER Fortnightly, we'll examine the reps forecast for the first quarter of '08 and the year ahead.


Section sponsored by Manitowoc Foodservice Group

NRA's Performance Index Drops To Five-Year Low
Things aren't too good out there for restaurant operators. The monthly Restaurant Performance Index fielded by the National Restaurant Association fell another 0.3 point in December and reached its lowest level since February 2003.

What's the problem? Slowing sales and traffic, and concern about the direction of the economy, said Hudson Riehle, NRA's senior v.p. for research and information services. "Restaurant operators are... becoming increasingly concerned about the economy," he noted. He said 15% of restaurant operators said the economy is the number-one challenge facing their business right now—up from just 4% who reported similarly six months ago.

The four-component Current Situation Index fell 0.6 point to 98.1, its lowest level since April '03. Same-store sales fell 1.1 point, this following a 1.2 point drop in November. Traffic was off another 0.5 point, following November's 1.5 point drop. The measurement of operators making a capital purchase during the previous three months fell 0.9 point, following a similar drop in November.

The Expectations Index held steady at 99.2, below the 100-point Index level that signifies stable, or flat, activity. In November, it fell below that stasis point for the first time since the Index was launched in the summer of '02. Staffing rose 0.3 point. Anticipated same-store sales and capital spending during the next six months were flat. This was offset by a 0.3-point drop in the outlook for business conditions.

Overall, the two components that track capital spending are at a five year low, according to NRA's Restaurant Trendmapper, which parses the survey results in more detail.

What is clear from the RPI trend during the past several months is that the restaurant market expansion that began in July '03 has come to an end. The next question is, when will the next expansion begin?

Section sponsored by Manitowoc Foodservice Group

Quick-Service Trends Go Flat, Even Negative
One of the bright spots of the past six months has been the performance of the quick-service restaurant segment. Same-store sales and traffic have continued to grow, even as casual and other full-service operators were seeing declines. Most observers, including us, see this as a sign that consumers are "trading down," but still eating away from home.

But that happy trend came to a screeching halt in December, according to reports from several big QSR chains and segment detail from the National Restaurant Association's Restaurant Performance Index.

For the first time in several years, significantly more quick-service and quick-casual operators reported same-store sales and traffic declines than gains compared to year-earlier levels. The disparity was particularly apparent for quick-service traffic; 63% of those surveyed reported lower traffic levels while only 20% reporting higher traffic. The 43-point gap was more pronounced than any in the other four segments NRA surveys.

The numbers are supported by initial same-store sales reports from several larger quick-service chains. McDonald's, which has led the market consistently since its comparable sales began to rise in the spring of 2003, reported flat comps in the U.S. market for December '07. The chain cited not only restrained consumer spending, but also harsh winter weather in much of the country. McDonald's comparable sales did continue to increase robustly in Europe and Asia.

Wendy's also reported essentially flat sales. Same-store sales were off 0.8% in fourth-quarter '07 for company-owned stores and up 0.2% for franchised locations. Since franchisees run 80% of the systems units, overall sales were essentially flat.

But not every QSR was flat or negative. Burger King said comparable sales in the United States and Canada jumped 4.2%, with worldwide comp sales up 4.5%. And CKE Inc.'s Carl's Jr. also reported a December same-store-sales gain of 1.2%, though more of Carl's Jr. units are in the Southwest and California, areas not so greatly affected by the weather.

With January another tough weather month in much of the country, it will be interesting to see whether the flat or negative QSR trends continue.

Section sponsored by Manitowoc Foodservice Group

January Jobs Growth Goes Negative, Consumer Confidence Mixed
The U.S economy unexpectedly lost 17,000 non-farm payroll jobs in January, the U.S. Labor Dept. reported Feb. 1. It was the first loss of jobs in more than four years and caught many analysts and economists by surprise. Early readings from organizations such as ADP and had most expecting a rebound from December's initial report of slow jobs growth. The Labor Dept. revised the December jobs numbers higher, to 82,000, from 18,000.

At the same time, the unemployment rate, calculated from a different survey, fell to 4.9% from 5% in December. Some analysts saw this as a sign that the February fall may be revised later. Jobs data is notoriously unreliable in early reports. Still, many saw the fall as a worrisome sign that the last bastion of positive economic news, jobs, may finally be succumbing to the general economic slowdown. Job loss was particularly severe in manufacturing and residential construction, as well as financial services and state government. Jobs growth is also an important indicator of restaurant sales and traffic growth.

Meanwhile, the two major research organizations tracking consumer confidence, The Conference Board and the University of Michigan's Surveys of Consumers, reported mixed results for confidence trends. The Conference Board's Consumer Confidence Index fell to 87.9 from December's upwardly revised 90.6. The University of Michigan's Consumer Sentiment Index rose to 78.4 in January from 75.5 in December. Michigan's Expectations Index also rose while the Conference board's fell.

Whatever the numbers, "Consumers are quite downbeat about the short-term future" and expect things to get even worse in the coming months, The Conference Board's Director of Consumer Research Lynn Franco said.

Section sponsored by Manitowoc Foodservice Group

Revised FER E&S Market Forecast Now Available
A revised and updated version of Foodservice Equipment Reports' 2008 Equipment & Supplies Market Forecast is now available. The PowerPoint deck includes updated data on macroeconomic, operator and materials price trends, as well as an early February revision of the forecast for E&S market growth this year.

Those who attended FER's President's Preview Forecast Meeting last August, or have purchased the forecast since, can obtain the revision for no charge by requesting a copy with an e-mail to Others can purchase the revision for $249. Further details can also be obtained by calling 800/986-9616.

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