Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
September 6, 2005

Regulatory Report:
Sponsored by:
APW Wyott Innovations

Texas Food Code Changes Up For Comment
Connecticut Hopes Campaign Will Jolt Users Into Action
Houston, Sacramento Let Consumers See How Restaurants Fare
Drive-Throughs Going The Way of Drive-Ins
French Face Possibility Of Quitting Cold Turkey

Industry Report:
Sponsored by:
McCall/Manitowoc Foodservice Group

SFM To Change Plans For Its New Orleans National Conference
Hurricane Hotlines And Foodservice Updates
If It's November, It Must Be IH/M&RS
Imperial Opens State-Of-The-Art Facility
Wind-Power For Burgerville Restaurants
SoCal Edison To Build Huge Solar Power Array
Amateur Inspectors Rate Restaurants Online

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In This Section:
Too Early To Assess Katrina Impact On E&S Market
Gas Prices Nibble At Restaurant Spending As Consumer Sentiment Sinks
NRA's Restaurant Performance Index Dips In July

This issue's Regulatory ReportSponsor: APW Wyott Innovations Industry ReportSponsor: McCall/Manitowoc Foodservice Group

Economic Report Drive To Survive Charity Golf Event

Too Early To Assess Katrina Impact On E&S Market
While the robust rates of growth seen in the first quarter of 2005 appear to be moderating somewhat, the seven public E&S companies that have filed reports on the second quarter showed good gains again.
As we write this, the potential impact on the E&S industry of Hurricane Katrina is still impossible to calculate. Thousands of locations, and the infrastructure and logistic channels that support them, have been destroyed or severely damaged. With no food, power, water, employees or customers, it will be months, if ever, before many foodservice operations are back up and running.

The facilities destroyed or damaged include major hotels, casinos, convention centers, schools, colleges and hospitals in New Orleans as well as Gulfport and Biloxi, Miss., and the surrounding areas. Mobile, Ala., also sustained significant damage. A new Hard Rock Hotel and Casino, as well as a Café, were scheduled to open in Biloxi Sept. 1. According to an e-mail received from Eric Rainville, senior manager of facilities for Hard Rock Café, through consultant Ken Schwartz, the facility took significant structural, wind and water damage. It will be 2006 at the earliest before it can open. One report on a national news network speculated it will need to be torn down and rebuilt. Our thoughts and prayers are with all those affected throughout the area.

As for our industry, the direct impact at this point is still not certain. DI Foodservice Companies' plant and headquarters in Jackson, Miss., was closed for only a day and a half, reopening Aug. 31. Master-Bilt Products in New Albany, Miss., further north, weathered the storm, according to a company official. But we were unable to contact several other manufacturers in the area by phone or through their Web sites. The Web site of the Commercial Food Equipment Service Association was also affected.

While the major cities hit by the storm have significant numbers of foodservice operations, combined restaurant sales for the entire states of Louisiana, Mississippi and Alabama account for only 2.6% of U.S. restaurant sales, according to data from the National Restaurant Association. Since only the southern third of the three states is severely affected, total foodservice sales impact is certainly less than 2% total.

The most immediate impact of the storm on foodservice nationally is likely to be yet another surge in gasoline prices. Industry data are beginning show that already high prices are eating into restaurant traffic (see separate story). With more than 10% of the nation's total gas refining capacity off-line because of the storm, prices have already jumped. The question is how long the refineries will be inoperable and even when back up and running, whether the product can be distributed, given the impact on infrastructure in the region.

In the long run, of course, many of the facilities, including restaurants, hotels, casinos and institutional kitchens, will have to be rebuilt and replaced. It's just going to be a while before we know when that might occur.


Gas Prices Nibble At Restaurant Spending As Consumer Sentiment Sinks
It seems a bit obscene to discuss mundane economic foodservice news while such disaster in the gulf coast area calls for immediate attention, but we must. A recent survey by Technomic Inc. is showing some of the first signs that ever-increasing gasoline prices are chewing into restaurant traffic and sales. The research firm reported 18% of consumers polled said they have cut back spending at quick-service restaurants, and 19% reported cutbacks at full service operations, because of rising gas prices. Technomic Pres. Ron Paul said "It appears that the threshold has been reached where consumers are feeling the pinch" of the gas price increases.

Michele Schmal, v.p. at NPD Foodworld, said same-store sales growth for the large chains charted by the group's SalesTrac study remained positive through the week of Aug. 22, though the rate of growth has moderated.

This is worrisome in light of continuing gas-price increases in the wake of Hurricane Katrina's devastation of the gulf coast oil and natural gas facilities.

In another sign that gasoline prices are undermining confidence and spending, The University of Michigan Surveys of Consumers reported a substantial drop in its Consumer Sentiment and Expectations Indices in August. The Sentiment Index fell to 89.1, down from a surprisingly robust 96.5 in July.

The Expectations Index declined to 76.9 compared with 85.5 in July. While the gas-price increases affect less affluent consumers more, Survey Director Richard Curtin said the unusually large August decline was widespread among all demographic groups and all regions of the country.

Section sponsored by Drive To Survive Charity Golf Event

NRA's Restaurant Performance Index Dips In July
The big guys are still driving the bus. As reported two weeks ago, restaurant traffic grew a moderate 1.5% in the March through May period, versus the year prior, according to data from NPD Foodworld's CREST research. But not everyone is fairing equally. With all but one of eight separate components registering declines, the Restaurant Performance Index fielded by the National Restaurant Association fell 0.4 point in the July reading to 101.7. The Current Situation Index was off 0.3 point; the Expectations Index declined 0.4 point. NRA Sen. V.P. Hudson Riehle said that a majority of operators reported positive same-store sales, the 24th consecutive month of such growth, and that the overall picture remains positive. And while the overall Index declined, it remained above the 100 point threshold that separates restaurant sales expansion from contraction. But he did note that rising gas prices are a bigger worry for more operators.

Same-store sales and traffic both lost half a point as part of the Current Situation Index. (Index components can decline even if a majority of those responding note growth.) The indicator of capital expenditures made during the past three months fell a slight 0.1 point.

All components of the Expectation Index were down. The capital expenditure component, indicative of plans to buy during the next six months, was off 0.5 point.

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