Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
December 4, 2007

Regulatory Report:
Sponsored by:
More Cities Now In FOG
Illinois Snuffs Out Butts In January
San Francisco Fleet To Run On Bio-Fuel
Anaheim Utilities Offers Rebate On Thermal Storage Units
U.K. Companies Commit To Environmental 'Nutrition' Label

Industry Report:
Sponsored by:
Chains Fly South To Test Eco-Friendly Designs
Papa John's Lets Patrons Pick Pizzas Via Text Messages
Panera Bread Celebrates 20th Year
Qdoba Franchisee Opens Chain's 400th Store

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In This Section:
Operator Expectations Fall In Latest NRA Survey
What? Me Worry? Some Things To Worry About
Patches Of Blue Sky: Items On Positive Side
Can't Follow Game Without Scorecard: Revised FER 2008 E&S Market Forecast Available

This issue's Regulatory ReportSponsor: Enodis
Industry ReportSponsor: FHA2008
Economic Report Manitowoc Foodservice Group

Operator Expectations Fall In Latest NRA Survey
All the bad economic news is getting to restaurateurs, apparently. Operators' expectations nosedived, and current conditions were reported virtually flat in the October installment of the National Restaurant Association's Restaurant Performance Index, released Friday.

The two subcategories combined to leave the overall RPI down 0.7 point, to 100, the Index value that marks the balancing point between expansion and contraction. It's the first time the overall Index dipped to 100 since late spring 2003.

The Expectations Index dropped to 100, down substantially from 101.4 in September. October's EI was the lowest since NRA began the survey in the spring of '02.

All four components of the EI—same-store sales, staffing, capital expenditures and business conditions—headed lower. The steepest decline was in expectations for future business conditions, which dropped 2.6 points, to 97.9, from September's 100.5. The number of survey respondents who said they expect conditions to worsen during the coming six months jumped to 40% in October, nearly doubling the 21% reading in the September survey. The component that tracks operators' intentions to make capital expenditures during the next six months fell the least of the four components, off 0.4 point.

The Current Situation Index held steady at 99.9, just below the tipping point. The indicator for same-store sales actually rose slightly. The component tracking capital expenditures during the past three months held steady.


Section sponsored by Manitowoc Foodservice Group

What? Me Worry? Some Things To Worry About
If one were just a neutral observer, watching the ebb and flow of economic news the past couple weeks would be good sport. But because we're running a business too, all the economic distress is nerve-wracking. Here are a few troubling things we've seen:

The housing crisis is costing major metropolitan areas and states lots of tax revenue. The research firm Global Insight, in a study prepared by for the U.S. Conference of Mayors, estimates the property value loss from foreclosures and sinking home prices at $1.2 trillion this year and next. And it puts the aggregate tax loss for just 10 states at $6.6 billion in 2008. "The loss of property, sales and real estate transfer taxes will hurt local and state governments," the group said.

Since noncommercial segments such as schools, colleges, prisons and the other government funded operators have been among the bright spots of the current E&S market, this is more than a tad worrying.

Consumer confidence continues to wane. Both the University of Michigan/Reuters Index of Consumer Sentiment and The Conference Board Index of Consumer Confidence hit their lowest level in November since October 2005, which was just after the big hurricanes and during the gasoline and natural gas price spikes they caused.

Lynn Franco, director of the Conference Board's report, said consumers' concerns this year are fueled by "volatility in financial markets, rising prices at the pump and the likelihood of larger home heating bills this winter." Those surveyed by both groups also cited worries about jobs.

Consumer confidence, while sometimes challenged in other market contexts, has traditionally been a good indicator of eating-away-from-home behavior. We'll see. This has been an unusual period in the foodservice market. Things that normally suppress traffic haven't.

Section sponsored by Manitowoc Foodservice Group

Patches Of Blue Sky: Items On Positive Side
Not all the news was bad the last few weeks. Here are some good bits that caught our eye.

Oil prices backed off the $100/barrel threshold. Through Thursday last week, the price of oil had dropped more than $8 from its high the week before. The January contract for light, sweet crude dropped to its lowest level since Oct. 30, according to The Wall Street Journal Online. The fall-off occurred despite a pipeline oil fire in Minnesota. The reasons for the drop? Signs of slowing demand by both retail and industrial users, a report stating the Strategic Petroleum Reserve has more supply than previously reported, and rumors from OPEC sources that the cartel may boost production.

Of course, the pump price of gasoline continued to rise and remains above $3 a gallon nationwide. But moderation will help that consumer confidence we mentioned above.

Jobs growth was decent again in October. The announcement in early November that jobs grew a surprising 166,000 in October and that unemployment remained at the historically low 4.7% is a very good sign for foodservice. We'll see what happened in November at the end of this week.

Retail sales were better than expected on Black Friday and Cyber Monday. Despite all the naysayers and doom-and-gloomers, American consumers once again demonstrated they'll shop 'til we all go bankrupt. Retail sales for Black Friday, the so-called "first" shopping day of the holiday season, surpassed all the restrained forecasts. ShopperTrak RCT Corp., which surveyed 50,000 retailers, said sales were up a robust 8.3% compared to the day following Thanksgiving last year, according to WSJ online. ShopperTrak estimates total retail sales at more than $10 billion for the day. Several of the major retailers backed up the report with their own announcements. And online sales on "Cyber Monday," Monday last week, rose 21% from a year earlier. Of course, we prefer the former kind of sales activity, the one that requires going outdoors and passing restaurants. Unless, of course, folks are buying at their computers with a cup of Starbucks and a Dunkin' Donut.

And oh yeah, the stock market had a 500-point run-up. It must be very tempting for the folks at the Federal Reserve. All they need do is whisper about the possibility of another interest rate cut and the bulls start a-running. Of course, the other good news above helped too.

Section sponsored by Manitowoc Foodservice Group

Can't Follow Game Without Scorecard: Revised FER 2008 E&S Market Forecast Available
How do you know how you're doing if you don't have benchmarks?

The completely revised 2008 Equipment & Supplies Market Forecast is available from Foodservice Equipment Reports for $249. The forecast includes detailed data and analysis of the general economy, the operator market, materials pricing, historical E&S price data from AutoQuotes, and detailed forecasts of growth and price changes for nine categories of equipment and supplies.

To order the forecast or for more information, contact Jessica Scurlock at or call 800/986-9616.

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