Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
July 3, 2007

Regulatory Report:
Sponsored by:
Lawsuit Stalls NYC Menu Board Makeover
Michigan Eyes Tougher Food Code
NRA Expresses Concern About Biofuels
New Food Code In Effect In Western Illinois

Industry Report:
Sponsored by:
Server Products
Upgraded Data Protocol Now Lets POS Talk To Kitchen Equipment
R.W. Smith & Co. Donates $10,000 To Road To Atlanta Charity Ride
Wendy's, Applebee's Consider Selling; Friendly Does
TGI Friday's Says Smaller Portions To Show Profits

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In This Section:
July 6 Early Deadline For FER President's Preview Forecast Meeting
Technomic Revises Forecasts Upward At 'Restaurant Trends' Meet
McDonald's Grows Robustly, Plans Faster Openings

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

July 6 Early Deadline For FER President's Preview Forecast Meeting
You need to register by this Friday, July 6, to save $100 on the seminar fee for Foodservice Equipment Reports' 2008 E&S Market Forecast President's Preview. The seminar is designed to help senior executives of equipment and supplies manufacturing companies and others in the industry plan for '08. The meeting is slated for this Aug. 1 at the Eaglewood Resort & Spa in Itasca, Ill.

The meeting will feature FER's exclusive, hard-number forecasts of E&S market growth for '07 and '08, analysis of general economic and operator metrics and trends, materials price forecasts and exclusive data on E&S price changes as recorded by AutoQuotes.

The President's Preview will kick off with an open forum with leading operators and will also include an analysis of the Top 100 E&S manufacturers from John Muldowney, principal at Clarity Marketing, and an overview of the E&S mergers and acquisitions climate by Ron Rosati, principal of Ronald Rosati Business Brokerage Services.

Price of the President's Preview, including all data and presentations in both print and digital forms, is $845 through July 6, and $945 thereafter.

To allow for many attendees to fly in and out of O'Hare Airport the day of the meeting, the first session doesn't start until 10 a.m. But for those who prefer to arrive the day before, the resort has a limited number of rooms available July 31.

A second meeting, FER's 2008 E&S Market Forecast Focus On Channels, which includes similar forecast data with additional emphasis on channel issues, is slated for Oct. 25 at the Embassy Suites O'Hare near Chicago.

Further information on the programs, prices and registration forms are available at or by calling the magazine at 800/986-9616.


Section sponsored by Manitowoc Foodservice Group

Technomic Revises Forecasts Upward At 'Restaurant Trends' Meet
Foodservice research firm Technomic Inc. has revised upward its estimates and forecasts of growth of key restaurant segments for both 2006 and '07. The revisions were detailed at the organization's annual "Restaurant Trends & Directions" Conference, held June 22 in Rosemont, Ill.

One of the most surprising insights is that full-service was not as affected by trading down during the gas crisis of '06 as previously believed, according to Technomic. The firm has also raised its estimate of food-away-from-home inflation in '07 to 3.5%, up considerably from the previous 2.8% projection. The higher inflation estimate has raised the projections for nominal growth of both quick-service and full-service segments in '07.

Joe Pawlak, v.p. at Technomic, shared some of the key highlights of company's estimates and outlook with FER Fortnightly:

"Last year was a better year than expected, especially (the) full-service restaurant sector. When all was said and done, the total FSR category grew at a 6% rate. Despite all the news of declining same-store sales results of the major chains, FSR had strong sales numbers. These were driven by a number of factors:

  • Major chains adding a significant number of units overall. For example in Top 500 casual dining chains with varied menus added units at a 7% clip.
  • Local independents showed strong growth as consumers drove shorter distances to go out to eat, hence stayed locally.
  • Polished casual (segment between traditional casual dining and fine dining (examples include Cheesecake Factory, Kona Grill) did well, as higher income consumers were not significantly impacted by fuel.

We can expect the following for the remainder of this year:

  • Increasing commodity costs will raise menu price inflation to at least 3.5% for the year.
  • Limited service will continue to do well as they offer better quality foods, and as consumers trade down. We (Technomic) don't expect the 6% growth rate for full service, but a more modest 4% growth. We do not believe that FSRs can add units at such an aggressive clip as they did last year. Major chains going private also will have an impact, as they will focus on same store sales performance, not increasing units.

Information on Technomic research products are available at or by calling 312/876-0004.

Section sponsored by Manitowoc Foodservice Group

McDonald's Grows Robustly, Plans Faster Openings
More evidence of why Technomic's Joe Pawlak notes quick-service restaurant chains having a good year: McDonald's reported May was another month of strong sales and systemwide sales growth in all its major regions. And while McD's leads the quick-service pack, and has since the current expansion began four years ago, most of the other major QSR chains also are doing quite well so far this year.

McDonald's said comparable sales, their term for same-store sales, rose 8.7% worldwide in May. Systemwide sales rose 11.9% before currency adjustments. This is a remarkable gain for a chain that boasted $57.667 billion in sales for 2006. These results follow an only slightly less robust comparable sales gain of 4.8% in April and 6.3% for the first quarter.

Comparable U.S. sales rose 7.4% in May, and Europe was up 8.9%. Asia/Pacific jumped 10.2%, benefiting from significant upgrading in Japan and unit growth in China.

McDonald's also announced at its annual shareholder meeting in May that it plans to start ramping up the building of new restaurants. Plans call for 800 new units this year, all but about 200 outside the United States. The chain built about 600 units in '06.

The Oak Brook, Ill. company had deemphasized unit expansion for nearly five years. And it paid off big time in margin gains and same-store sales. From '02 through '06, McD's grew system sales 39.1% on a net unit gain of only 2.6%.

While McDonald's surges forward, its major competitors Yum! Brands, Burger King and Wendy's are also showing good same-store sales gains worldwide. Worldwide revenues for BK, in fact, rose 9% in the first quarter, as it aggressively ramped up international expansion.

In the United States, Yum!'s domestic figures were pinched by negative publicity at Taco Bell and KFC, but Wendy's U.S. comps in the first quarter were up 3.5%, and Burger King's U.S. comps rose 2.6% for the same period.

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