Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
July 25, 2006

Regulatory Report:
Sponsored by:
Franke Foodservice Systems
Chicago Bans Foie Gras, Eyes Trans Fats
San Francisco Sitting On Foam Law For 30 Days
California Says Plumbing Must Get Lead Out
Maricopa Calls Critical Health Code Violations Criminal
Three States Pass 'Merlot-To-Go' Laws

Industry Report:
Sponsored by:
Server Products
Bennigan's Up To 30 Units In South Korea
Lenny's Subs Continues Aggressive Expansion
Church's Isn't Chicken About Opening New Units

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In This Section:
When In Life Do You Get Another Chance? Read On...
Technomic Lowers Operator Forecast For 2006
Meanwhile, McDonald's Chugs Along, And Even Some Airlines Do Well

This issue's Regulatory ReportSponsor: Franke Foodservice Systems Industry Report
Sponsor: Server Products

Economic Report FER E&S Market Forecast: Focus on Channels

When In Life Do You Get Another Chance? Read On...
What? You couldn't make it to Foodservice Equipment Reports'
2007 E&S Market Forecast President's Preview this Thurs., July 27?
Don't despair, you get another chance in October.

For those who can't make the July meeting, our print-product sister publication, FER, will run a second version, "Focus on Channels," Oct. 4 at the Hilton Pittsburgh. The second meeting is planned to precede the Allied Buying Corp. Fall Convention beginning Oct. 5.

The October meeting's program will include much of the same information, but with a perspective that will appeal not only to suppliers but also to senior executives of dealers, reps, consultants, and service agencies seeking an in-depth look at current conditions and prospects for the coming year.

The program will feature FER's exclusive hard number E&S forecasts, overviews of pertinent economic and operator trends as well as forecasts for materials costs and E&S price increases. Special program features will include a panel of chain operators discussing how they evaluate and choose dealers and other function providers as well as an open forum with representatives of the major E&S functions/channels. The meeting will provide attendees with extensive material they can use in their own planning and budgeting for 2007.

For more information on the FER's 2007 E&S Market Forecast Focus on Channels, click here.


Technomic Lowers Operator Forecast For 2006
In preparing for our President's Preview 2007 Forecast meeting this week, we paid particular attention to current operator conditions and the outlook for the remainder of 2006.

And that led to a conversation with Joe Pawlak, senior v.p. at Technomic Inc., which had revised downward its restaurant industry forecast at the company's "Restaurants 2007: Trends and Directions Conference," held June 28 outside Chicago. The firm took the overall forecast for "restaurants and bars" down to 4.9% from 5.2% nominal growth. The forecast for limited-service growth was pared to 5.3% from 5.8%. Full-service was left at 4.6% growth, Pawlak said, but that may very well change. Food-away-from-home inflation, which is used as the deflator for restaurants, stood at 3.2% through May, according to Technomic.

Pawlak told us that casual dining traffic and sales have been "sucking wind" since April. "We're seeing a lot of trading down to quick service and patrons cutting back on extras such as desserts, appetizers and alcoholic beverages at full-service," he said.

And, of course, the question in a week of Mideast turmoil was, how bad can it get? "Next year is a real wild card," said Pawlak, who is beginning work on his firm's annual forecast, presented each year during the "Forecast & Outlook" seminars that Technomic produces for the International Foodservice Manufacturers Association.

"If we see $4-a-gallon gas, we'll see inflation at 4% to 5%," he said, "and that will change everything. There is no question higher inflation and gas prices are already impacting the market."

"On the other hand, we could also see a quick recovery if things settle down," he added. As the week ended, the price of oil had dropped back under $70 a barrel. But the week's events make clear that forecasting becomes particularly perilous at times such as these.

For information on Technomic's "Restaurants 2007" materials or the coming "Forecast & Outlook" seminars, contact Technomic at or 312/876-0004

Section sponsored by FER E&S Market Forecast: Focus on Channels

Meanwhile, McDonald's Chugs Along, And Even Some Airlines Do Well
In a week when many were following events in Lebanon, trying to figure whither the price of oil and listening to every word Federal Reserve Board Chairman Ben Bernanke uttered before Congress, McDonald's announced healthy growth in U.S. and worldwide same-store sales for June and the second quarter.

McDonald's said July 17 that comparable sales at U.S restaurants rose 5.2% in June and 4.2% for the second quarter. For the first half of 2006, comparable sales are up 5%.

Very strong performance in both Asia and Europe helped global comparable sales rise 5.5% for the quarter. Breakfast promotions in the United States and benefits from the recently concluded World Cup Football sponsorship were credited with some of the gains.

At the same time, both Southwest and American Airlines posted very strong second quarter earnings, demonstrating that travel in the United States is quite robust. American Airlines posed its best quarterly earnings in eight years. Southwest also saw profits soar. Full planes and an upward creep in fares are responsible for the gains.

The healthy travel activity bodes well for foodservice as well.

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