Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
June 2, 2009

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
Santa Monica Reviewing Outdoor, Indoor Design Standards
N.Y. Governor Proposes Statewide Menu Labeling
Beer Capital Of America Nixes Public-Area Smoking

Industry Report:
Sponsored by:
NSF Bestows Food Safety Awards
Chipotle New-Unit Openings On Track
Heartland Food Corp. Buys 20 Burger Kings
Hurricane Grill Spreads Expansion Wings
Ace Mart's Norm Gustafson Passes

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In This Section:
NRA Restaurant Performance Index Jumps In April
When Will Economy Turn? Green Shoots Beginning To Sprout
Real Foodservice Operator Sales To Contract 5% in 2009, Technomic Forecasts
Technomic Top 500 Chain Study Charts Challenges, Successes
FER Sets Aug. 5 For Annual President's Preview Forecast Seminar

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: Food&HotelVietnam2009
Economic Report FER E&S Market Forecast Meetings

By Robin Ashton

NRA Restaurant Performance Index Jumps In April

Now maybe we have some good news to hang a hat on. The National Restaurant Association's monthly Restaurant Performance Index rose in April for the fourth consecutive month and now stands at 98.6.

It was the highest reading in 11 months, although the April reading was the 18th straight month of Index values below 100. Index values below 100 signal contraction; above 100 indicate expansion.

Every one of the April Index's eight components showed improvement. Perhaps most significantly, the four-component Expectations Index surpassed the 100-point indicator of expansion versus contraction, reaching 100.2. It was the first time the Expectations Index had exceeded 100 in 18 months.

The Current Situation Index stood at 96.7 points, up a strong 0.9 point from March. Both same-store sales and traffic posted reasonable gains of 0.6 and 0.7 point respectively.

In the Expectations Index, optimism about the near-term future was apparent. The operators' outlook for same-store sales jumped 1.2 points as did expectations for business conditions in six months.

The indicators tracking capital expenditures also rose. The measurement of purchases made during the past three months jumped a substantial 1.6 points, while that for expected expenditures during the next six months rose 0.3 point.


Section sponsored by FER E&S Market Forecast Meetings

When Will Economy Turn? Green Shoots Beginning To Sprout
Despite the wretched first-quarter 2009 reports on traffic and same-store sales from many restaurant chains, green shoots of a revival are beginning to appear in both the general economy and the foodservice sector.

Many economic forecasting groups including those polled by Blue Chip Economic Indicators and the National Association of Business Economists are predicting U.S. gross domestic product will turn positive by the third quarter of this year. One good early sign: While job losses continue to be dreadful, new claims for unemployment insurance have been falling in recent weeks.

Consumer confidence also is improving. The Conference Board's Consumer Confidence Index soared in May, jumping to 54.9 in May, a big improvement from 40.8 in April. In February, it stood at just 25. The University of Michigan's Consumer Sentiment Index also was up in May.

On the foodservice side, the latest National Restaurant Association Restaurant Performance Index, which charts activity in April, had several positive indicators as well (see following story), which perhaps should be no surprise considering foodservice indicators often lead the macro economy.

Does all this mean the worst is over? Well, maybe. But admittedly there are still plenty of challenges. In an address May 16 at the National Restaurant Association Restaurant, Hotel-Motel Show, Hudson Riehle, NRA's Senior V.P. and head researcher, acknowledged the record number of Americans on unemployment insurance as well as the drastic declines in consumer spending. These factors, among others, he said, have battered restaurant operators with sales and traffic declines that are unprecedented in our lifetimes.

But Riehle also noted pent-up demand for foodservice is strong. In a recent survey, the number of adults saying they were not eating out as regularly as they'd like rose two points over year-earlier figures. Perhaps more importantly, those numbers rose six points for those with incomes from $50,000 to $74,999 and seven points among those with incomes exceeding $75,000. Wealthier households eat out significantly more often than those with lower incomes.

Riehle told FER Fortnightly he believes the market will start to improve by the fourth quarter this year.

Others are not quite so sure. Joe Pawlak, v.p. at Technomic Inc., while hopeful foodservice will begin to recover in the fourth quarter, said he thinks it may take until the first quarter next year before things start to improve. “The unemployment rate is expected to increase through first quarter of next year, which will postpone the foodservice recovery compared to GDP turnaround,” he said. His organization recently revised downward once again its '09 forecast of operator sales (see following article).

Section sponsored by FER E&S Market Forecast Meetings

Real Foodservice Operator Sales To Contract 5% in 2009, Technomic Forecasts
Technomic Inc. has once again revised downward its 2009 forecast of foodservice operator sales. The total operator market is now expected to contract 5% in real terms this year, compared with the research firm's January re-forecast of a 4.6% decline. Nominal sales are forecast to fall 3.6% versus the earlier prediction of a 2.2% drop. Menu-price inflation is projected to be 2.5% this year, unchanged from the earlier forecast.

Among those segments most affected by the revision, full-service restaurants are now forecast to contract 9.8% in real terms and 6.6% nominally, a decline of a point-and-a-half more than predicted in January. Travel and leisure foodservice spending for '09 is now projected to be down 12% real, 4.6 points lower than earlier projected. Business and industry and retail hosts were also revised downward.

In contrast Technomic raised the forecast for quick-service restaurants to -1% real from the earlier forecast of -2.4%. The group also boosted the projection for colleges and universities by half a point to 1% real growth. Schools, colleges and senior living are the only segments expected to post real growth this year.

Section sponsored by FER E&S Market Forecast Meetings

Technomic Top 500 Chain Study Charts Challenges, Successes
The largest restaurant chains were certainly not immune to the slowdown in total industry sales in 2008, but the results of the latest Top 500 Chain Restaurant Report from Technomic Inc. also make it clear that when times are tough, the large do better. Rankings are based on U.S. sales only and rank chain brands rather than companies.

Large chain operators in both quick service and full service significantly outperformed the general industry last year, the report details. While limited-service chains in the Top 500 saw nominal sales grow 4.5% last year, limited-service restaurants generally managed only 3.2% growth, according to the latest Technomic revised forecast.

Large full-service chains outperformed their smaller chain and independent competitors by even more. Those in the Top 500 grew current-dollar sales 1.1%, while Technomic estimates the general full-service market saw sales fall 2.5%.

Unit growth for both full-service and quick-service chains in the rankings outpaced those of the general market. While total units fell 0.6% in '08, Top 500 organizations grew units by 1.8%.

Chains in the Top 500 controlled 62.3% of all restaurant sales and 36.2% of all units, Technomic reports.

For information on Technomic research products, click on or call 312/876-0004.

Section sponsored by FER E&S Market Forecast Meetings

FER Sets Aug. 5 For Annual President's Preview Forecast Seminar
In this challenging environment, you can't afford not to know. So sign up for Foodservice Equipment Reports 2010 E&S Market Forecast President's Preview. This annual meeting offers senior executives an early look at the foodservice equipment and supplies market in 2010, in time for most companies' planning and budgeting cycles.

The meeting is scheduled for Wed., Aug. 5, at the Hotel Orrington in Evanston, Ill. The program kicks off with an open forum of leading multiunit operators discussing the challenges facing their businesses.

John Muldowney, principal at Clarity Marketing, Tipp City, Ohio, will join FER Publisher Robin Ashton in analyzing general economic, operator and materials-price data. Muldowney will also update his listing of the top 150 E&S manufacturers and review their performance in '08. Michael Greenwald, president of AutoQuotes Inc., will present exclusive information on E&S manufacturers' pricing trends. The meeting will close with Ashton and Muldowney offering hard-number forecasts of the E&S market for '10. Attendees will receive all data in both print and electronic formats.

The meeting, scheduled 9:30 a.m. to 4 p.m., has been planned so many in the East and Midwest can fly in and fly out on Aug. 5. Cost of the seminar is $845 until June 26, $945 afterward. For agenda, hotel and registration information, go to, or call Chris Palmer at 847/336-2049.

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