Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
August 8, 2006

Regulatory Report:
Sponsored by:
Franke Foodservice Systems
Columbia, Mo., Puts Lighting Changes On Hold
New Georgia Food Code Battle Continues
Food In Duluth Might Get Mandatory Second Life, And Third...
Correction: California Suspends Proposed AB 1953 Lead Law

Industry Report:
Enodis Grants Due Diligence Access To Manitowoc Following Revised Offer
Curtis Restaurant Equipment Moves Branch To Tualatin
FER Congratulates Smallwares & Tabletop Competition Winners
ServSafe Offers On-Line Version of Latest Edition
NSF Sponsors Food Safety Conference

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In This Section:
FER Forecasts Continued Real Growth For E&S Manufacturers At President's Preview
MAFSI Barometer Posts Boffo Second Quarter
Restaurant Performance Index Creeps Back Up In June
Second Quarter GDP Comes In Below Consensus Forecasts As Inflationary Pressures Grow

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

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

FER Forecasts Continued Real Growth For E&S Manufacturers At President's Preview
The foodservice equipment and supplies market will post real growth for the fourth consecutive year, according to Foodservice Equipment Reports Publisher Robin Ashton.

Ashton spoke at the magazine's 2007 E&S Market Forecast President's Preview held July 27 in Itasca, Ill. Nearly 60 manufacturers and other industry participants were onhand as Ashton and John Muldowney, principal at Clarity Marketing, discussed general economic, operator, materials and pricing trends that are driving the equipment and supplies business and presented the magazine's exclusive hard-number forecasts for the remainder of '06 and '07.

David Green, v.p. of marketing for AutoQuotes, also presented a detailed history and outlook of E&S list price increases. A panel of leading operators featuring Art Cone of Culver's, Rick Gentry of Aramark, Yum! Brands' Roger McClendon and Jim Shoemake from Al Copeland's Investments kicked off the meeting with a lively discussion of issues affecting multiunit operators.

For those who would like the detailed numbers, FER will run a second version of the forecast seminar, "Focus on Channels," Oct. 4 at the Hilton Pittsburgh. The meeting is planned to precede the Allied Buying Corp. Fall Convention beginning Oct. 5.

This meeting's program is designed to appeal to dealer, rep, consultant, and service agent principals, as well as suppliers, seeking an in-depth look at current conditions and prospects for the coming year.

Special program features will include a panel of leading chain operators discussing how they evaluate and choose dealers and other function providers as well as an open forum with representatives of each of the major E&S functions/channels. The meeting will provide attendees with extensive material they can use in their own planning and budgeting processes for '07.

For more information on FER's '07 E&S Market Forecast "Focus on Channels," click here.


MAFSI Barometer Posts Boffo Second Quarter
Sales of equipment, supplies and furnishings rose 3.4% in the second quarter of 2006 compared to the year earlier period, according to results of the quarterly MAFSI Barometer survey. It's the second strongest gain since the Manufacturers' Agents Association for the Foodservice Industry began collecting such data in '02.

The results follow increases of 2.7% in the first quarter and a record 3.8% gain in the fourth quarter of '05. In retrospect, sales in the first quarter appear to have been restrained somewhat by inclement weather in the Northeast.

Sales rebounded strongly in the second quarter, as the Northeast region posted an overall gain of 4.7%. Three of the four other regions showed sales gains in the 3.4% to 3.9% range. Only the Midwest lagged, with overall sales up 1.4%

On a product basis, equipment sales rose 3.3%, durable supplies 3.7%, tabletop a strong 4.1% and furnishings an above trend 3.7%.

The reps polled expect sales in the third quarter and the remainder of the year as a whole to remain strong. The forecast for the third quarter is for a 4.2% gain.

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

Restaurant Performance Index Creeps Back Up In June
Buoyed by gains in traffic and same-store sales, the National Restaurant Association's Restaurant Performance Index rose a slim 0.2 point in June. The increase comes after a drop of nearly one full point and an essentially flat reading in May. Operators surveyed indicate they remain cautious about what may be ahead for the rest of the year.

All four components of the Current Situation Index showed gains. Traffic was up 0.6 point while same-store sales, labor and capital expenditures during the past three month rose 0.4 point each.

The four-component Expectations Index was flat in June. While the outlook for employee counts and general business conditions over the next six months rose slightly, a 0.6-point drop in planned capital expenditures pulled the overall Expectations Index back.

Still, both indexes and the overall RPI remain above 100, the tipping point between expansion and contraction.

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

Second Quarter GDP Comes In Below Consensus Forecasts As
Inflationary Pressures Grow

Wall Street got nervous again last week as the advance estimate of second quarter real growth of U.S. gross domestic product came in below expectations, and the core rate of inflation, including wage rates, came in above.

The Department of Commerce estimates second quarter 2006 real GDP growth slowed to 2.5%, well below the consensus forecast of 2.8% from economists polled by Blue Chip Economic Indicator in early July. This follows growth of 5.6% year-on-year in the first quarter, and a meager 1.7% in fourth quarter '05. While advance estimates are often revised upward, these results could push down the current Blue Chip consensus forecast of 3.5% growth for all of '06.

In the July Blue Chip newsletter, the economists had already dropped their consensus forecast of GDP growth for next year to 2.8%.

What disturbed many economists as much as the lower GDP estimates was the strong rise in core inflation indicators. The index used to deflate personal consumption expenditures, which excludes volatile gasoline and food prices, rose at an annualized rate of 2.9% in June, the largest monthly rise since 1994. Separately, the Labor Department reported July 28 that its employment-cost index rose at an annualized rate of 3.6% in the second quarter.

These conflicting trends—slower growth, increased inflationary pressures—are likely to complicate the Federal Reserve's task of managing inflation without cutting into growth. On the other hand, a weak jobs-growth report Aug. 4—payrolls increased a meager 113,000 in July, well below the expected 150,000, and the unemployment rate increased to 4.8%—is likely to take some pressure off the Fed to raise rates at its next meeting beginning today, Aug. 8.

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