Economic Gloom Has Operators, E&S Suppliers Feeling Nervous

The spate of negative economic news, combined with political paralysis in the U.S. and Europe, has foodservice operators and suppliers alike wondering about the future. Several measures of operator confidence turned sharply lower in August. The National Restaurant Association’s Restaurant Performance Index fell into contraction territory for only the second month this year. Expectations for future business conditions and plans for capital spending took especially big hits. (See complete story below).

Even McDonald’s got caught up in the turmoil last Friday, as investors drove the company’s stock down 4.4% after the chain reported August same-store sales rose 3.5% worldwide. Analysts had expected a 4.3% gain, according to Reuters. Comp sales for McDonald’s fell 0.3% in Asia/Pacific, the Middle East and Africa as continuing problems in Japan dragged down gains. Sales growth in Europe also failed to meet analysts’ forecasts. The chain said same-store sales rose 3.9% in the U.S. on top of a 4.6% gain during August last year.

The uncertainty led one major E&S dealer to call and ask if we are having second thoughts about Foodservice Equipment Reports’ recent forecasts for the market this year and next. Not quite yet, we said, though there is no question operators are concerned not only about softening sales and traffic, but also about food costs that are 9% higher than a year ago.

“Our current forecast of 4% growth for 2011 is probably still a bit light,” says FER Publisher Robin Ashton, “given the strong numbers from the MAFSI Barometer and the public companies for the first half of the year. Operators can’t shift gears that fast; what’s planned is already in process. Next year might be another issue.” The magazine currently forecasts nominal E&S market growth of 4.7% for ’12.