Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
August 11, 2009

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
U.S. House Food-Safety Bill Fails, Then Passes
Albany Mulls County Calorie Counts
Pennsylvania Wants State Food-Safety Standard
Increased Deduction For Meals Proposed

Industry Report:
Sponsored by:
Server Products
Yum! Scores In India
CKE Unveils Five-Year Expansion Plan
Pizza Inn Rolls Out Franchisee Stimulus
Chick-fil-A Ramps Up Openings
Starbucks Makes New Name For Itself

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In This Section:
FER Forecasts E&S Market To Shrink
MAFSI Business Barometer Falls 12.8% In Q2
NRA Restaurant Performance Index Falls Again In June
Job Losses,Unemployment Rate Dip

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: Server Products
Economic Report Food & Hotel Vietnam 2009

By Robin Ashton

FER Forecasts E&S Market To Shrink

Citing a downturn “that has been unprecedented in its ferocity and depth for foodservice operators and the equipment and supplies market,” sister publication Foodservice Equipment Reports forecasts a current-dollar decline of more than 20% in the E&S market in 2009. And while the market is expected begin stabilizing next year, the magazine predicts another moderate decline in '10. Projections were presented Aug. 5 at the magazine's annual President's Preview E&S Market Forecast meeting, held at the Orrington Hotel, Evanston, Ill.

The magazine forecasts E&S sales at the manufacturer level will decline 18.6% in real terms in '09. Because this grim market has led to price deflation of E&S products, the nominal drop is predicted to be 21.1%.

Noting that job cuts in the U.S. economy are likely to continue until next year, and that operator fortunes are unlikely to improve significantly until then, “We believe the negative E&S market environment will last well into '10 ,” FER Publisher Robin Ashton told the assembled group of manufacturers and operators. The forecast for '10 is a real decline of 1.4%, with a nominal fall of 1.5%. The magazine also cut its estimate for '08 to a real decline of 4.1% and a nominal decline of 2.6%.

Ashton and forecasting partner John Muldowney, principal of Clarity Marketing, Tipp City, Ohio, said they expect commercial operators to begin ramping up purchases sometime next year. The two forecasters project positive real growth for '11 through '13.

Despite the grim overall data, the seminar was hardly all doom and gloom. A panel of multiunit operators began the meeting telling the audience that strong operator organizations perceive the current environment as an opportunity to continue to strengthen their brands and operations. The panel included Bob Chuhak from Darden, Duane Clark from Aramark, Mike Harlamert from KFC and Brandon Melton from Chipotle. All four said their companies are spending as much or more on E&S this year as last.

The meeting also featured an in-depth look at historical E&S pricing trends from David Greene, president of European Operations for AutoQuotes Inc., and an analysis of the top E&S manufacturers' growth by Muldowney.

Ashton and Muldowney will present the forecast again through an online Webinar scheduled Nov. 4, complete with updates and revisions incorporating any late-breaking data. Attendees at the Webinar, like those at the live forecast, will receive the entire six-section forecast including all the data and analysis of the general economic, operator and materials-pricing trends. Also included: the magazine's hard number forecasts of nine separate E&S product categories, Muldowney's overview of top E&S manufacturers' growth and data on E&S price increases from AutoQuotes Inc. Those who attended the August meeting can attend the webinar and receive the updates for no charge.

In the meantime, the entire forecast package is available for $449. Past attendees of our forecast seminars or other meetings qualify for a discount. To order or for information on participating in the forecast webinar, e-mail Robin Ashton at or call the magazine at 800/986-9616.


Section sponsored by Food & Hotel Vietnam 2009

MAFSI Business Barometer Falls 12.8% In Q2
The records keep on coming, and they are not good ones. The Manufacturers' Agents Association for the Foodservice Industry's quarterly Business Barometer survey indicates overall comparable sales of equipment, supplies and furnishings fell 12.8% in the second quarter of 2009 compared to year-earlier levels. The decline eclipses the previous record 11% decline in the first quarter and the 4.7% drop in fourth-quarter '08. Sales have now been negative for six consecutive quarters.

All four U.S. regions showed dramatic declines with sales in the West off an astounding 21.9%. Only Canada and the South avoided double-digit drops. Sales in Canada fell 4.6% while those in the South fell 9%. Sales in the Northeast fell 11% and those in the Midwest were off 11.7%

Overall, sales of equipment fell 13.7%, supplies were off 9.7%, tabletop sales dropped 7.9% and furnishing sales declined 13.8%.

Unfortunately, the reps responding to the survey said they foresee little relief as the year wears on. Their forecast for sales in the third quarter is another 11% decline.

Section sponsored by Food & Hotel Vietnam 2009

NRA Restaurant Performance Index Falls Again In June
Just when we thought the restaurant industry might be coming out of its tailspin—the worst declines in our lifetime—things got worse again. After improving for three months in late winter and spring, the National Restaurant Association's Restaurant Performance Index fell for the second consecutive month in June. Both the Current Situation Index and the Expectations Index fell as traffic and sales continued to deteriorate, and confidence about future business conditions fell dramatically

The only real positives in the survey were improvements in the two capital spending indicators.

The overall Index fell 0.5 point to 97.8. This followed a 0.3-point decline in the May survey. The overall Index has now been below the 100-point level for 20 consecutive months. Above 100 indicates expansion; below indicates contraction. The Index bottomed in December '08 at 96.4.

The four-component Current Situations Index fell slightly, 0.3 point, as same-store sales and customer traffic each dropped by comparable measures. The labor component fell a bit more, 0.8 point. Only the indicator tracking capital expenditures in the past three months rose, up 0.3 point.

The Expectations Index fell 0.7 point, to 99.1. The measure had crept above 100 in April but has now fallen back for two straight months. The component that tracks expected business conditions during the next six months dropped a substantial 1.7 point. Expectations for staffing was off a full point, probably driven in part by anticipation of the increase in the Federal minimum wage that occurred in late July and uncertainty about the demands of health-care reform. Expected same-store sales fell, slightly, 0.3 point.

The good news for expectations came in expected capital expenditures during the next six months, which rose half a point.

While the improvement in the capital expenditure indicators is heartening, it is clear many operators continue to experience a tough environment and are uncertain about the near-term future.

Section sponsored by Food & Hotel Vietnam 2009

Job Losses,Unemployment Rate Dip
And now for a bit of good news: The pace at which the American economy has been losing jobs slowed in July, according to the Department of Labor, and the unemployment rate fell 0.1 point to 9.4%, surprising many economists and observers.

Nonfarm payrolls fell 247,000 for the month, according to the so-called household survey. The July slide, bad as it was, was an improvement over worrisome June job losses, which were revised to 443,000 and represented a backslide after the pace of losses had consistently improved since reaching a breathtaking 700,000-plus in January.

The economy has shed 6.7 million jobs since the recession began December 2007, according to government data. Overall, the Bureau of Labor Statistics says 14.5 million are unemployed. In addition another 8.8 million are underemployed, working part time for economic reasons.

On the other hand, the better-than-expected jobs numbers had many economists beginning to believe the economy and the jobs market are beginning to turn. Many economists have said they expect positive real growth in the third quarter this year, though job losses are likely to continue into at least the first quarter next year.

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