Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
June 1, 2010

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
Energy Star Seeks Input—NOW
NRA Launches Healthcare Alliance
Update: Scottsdale Not Ready To Ban Disposers—Yet
NSF To Verify Energy Star Claims For Refrigeration

Industry Report:
Sponsored by:
Server Products
Update: McCormick Place Revamp A Go
Sagittarius Sells Captain D's, Reboots As Del Taco
Moddelmog Returns to Arby's As New President
Quiznos Shoots For 600 New Stores
Dave & Buster's Has New Owners
Military Foodservice Operations Earn Honors At NRA

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In This Section:
NRA Performance Index Remains In Expansion Territory
Technomic Revises 2010 Operator Forecast Upwards
Heard In The Aisles At NRA: The Mood Was Upbeat
Two Key Foodservice Drivers Also Appear Positive

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: Server Products
Economic Report Henny Penny

By Robin Ashton

NRA Performance Index Remains In Expansion Territory

The Restaurant Performance Index fielded monthly by the National Restaurant Association was essentially flat in the April survey, falling a negligible 0.1 point to 100.4. That's good news, because for the second consecutive month, the index stood above the 100 level that separates expansion from contraction. The index had remained below 100 for 28 months, from November 2007 until March this year.

The Current Situation Index was flat, with same-store sales and customer-traffic measures lower, and labor and capital-expenditure indicators rising. The component that tracks capital spending in the past three months rose 0.8 point to 98; 40% of operators reported they made a cap-ex purchase, up from 36% in March and the highest number in six months.

The Expectations Index fell only 0.1 point. The outlook for same-store sales was flat, while the indicators for staffing and business conditions during the next six months fell 0.2 point each. The component measuring capital spending intentions during the next six months rose 0.2 point to 99.6, with 48% saying they will make such a purchase.

Barring some unforeseen shock, it now appears that the foodservice industry is clearly on its way to recovery.


Section sponsored by Henny Penny

Technomic Revises 2010 Operator Forecast Upwards
Technomic Inc. released a revised forecast of foodservice-operator sales for 2010 during the NRA Show and that news is also good. The Chicago-based research firm boosted its prediction of total industry sales two percentage points. Current-dollar sales are now forecast to rise 0.6%, compared to Technomic's January prediction of a 1.6% decline. Real sales, factoring in an unrevised inflation forecast of 1.5%, are expected to remain negative, at -0.9%, but that's revised upwards from -3% in January.

"There are definitely signs of improvement" in the foodservice market, Technomic v.p. Joe Pawlak said in the release accompanying the revision. "The most significant changes are in the 'commercial' sectors, with full-service restaurants, hotels and recreation, in particular, showing better than expected improvements." Still Pawlak said the recovery will continue to be slow going forward.

The firm revised full-service up 4.5 points, lodging up 7.5 points and recreation up 5.1 points on nominal sales. The giant limited-service segment was also pushed up a point. The record foodservice-sales declines of '09 were also slightly less severe than Technomic estimated in January. Current-dollar sales declined 3.5% last year, compared with the earlier -3.8% forecast; Technomic now places the real-sales decline at 5.9% versus the previous -6.1% estimate.

Section sponsored by Henny Penny

Heard In The Aisles At NRA: The Mood Was Upbeat
The upwards revision of the Technomic operator-sales forecast (see preceding story) wasn't the only upbeat news at the annual National Restaurant Association show in Chicago May 22-25. The best metaphor for the mood of equipment and supplies buyers and sellers alike was a collective relieved sigh.

Most E&S exhibitors told us traffic at NRA was the best in four years—NRA reported May 27 that registrations rose 6% to more than 58,000—and that operators are beginning, finally, to spend on capital goods. Of course, how quickly that happens depends on the segment of the market being discussed.

The chains, particularly the battered full-service segments, are finally seeing some light. Same-store sales have been on an upswing since the fourth quarter 2009. Several chain-oriented manufacturers told us some of these customers are starting to replace equipment and plan for renovations and new menu initiatives. Meanwhile, many of the large quick-service organizations have been spending all along, especially for international growth and remodeling.

On the back end-up of the E&S cycle, the specification markets are also starting to see some activity, though it may be a year to 18 months before such projects lead to sales. Several reps and consultants told us clients are beginning the planning cycle. One leading consultant told us he had eight calls from potential clients in the past two weeks alone, after months of the market being very quiet.

While most E&S industry people we spoke with acknowledged it will be three to six months at least until all these stirrings begin to translate into hard orders, even current sales are up from last year, many said. Optimism is a welcome change from the past two years.

Section sponsored by Henny Penny

Two Key Foodservice Drivers Also Appear Positive
As we enter the traditional summer season following Memorial Day, we look at two key economic factors that often have a large impact on foodservice operator sales: gasoline prices and consumer confidence. The trends and outlooks for both are positive for foodservice.

The Consumer Sentiment Index from Thomson/Reuters and the University of Michigan and the Consumer Confidence Index from The Conference Board were released last week. Both rose. The Conference Board index, which tends to be more volatile, rose to 63.3 in May from 57.7 in April. It was the measure's third consecutive monthly gain. The University of Michigan's Sentiment Index inched up to 73.6 from 72.2 in April. The UM index has been essentially flat since January.

Both organizations' expectations indices also rose. While the confidence indexes remain well below readings seen during good times, the trend is clearly toward a gradually improving consumer mood. One small and troubling trend: Both organizations report a rise in consumers' inflation expectations.

Gasoline price trends have taken a highly unusual turn this spring. Usually, prices rise from March through May, as refiners switch over to special ozone-fighting summer blends and build inventories for the summer driving season. But this year, for only the second time in 16 years, prices have fallen during the period. Nationally, prices fell nearly eight cents for the week ended May 24, according to data from the U.S. Energy Information Administration. While prices per gallon are 35 cents higher than at this time last year, they are substantially below the $4 a gallon experienced during the summer of 2008.

Many observers believe continued high unemployment levels—commuting accounts for 27% of all miles driven in the U.S.—and continuing caution from consumers about the economic recovery, will hold demand down. And this just might hold gasoline prices down too, which will hopefully leave consumers with a bit more change for foodservice.

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