Nation's Restaurant News on the Go #79
Nation's Restaurant News
The #1 source of news and business intelligence for restaurant and foodservice industry professionals
The summer lull is already coming to an end
Hey, everyone, executive editor Alicia Kelso here. Though we’re constantly barreling toward our next print deadline here at NRN, on top of our daily digital deadlines beholden to breaking news, it still seems like we’ve had a nice – and welcomed – little lull these past few weeks following the giant National Restaurant Association Show in mid-May. That event was preceded by a bevy of other events, like the Restaurant Leadership Conference, Women’s Foodservice Forum, ICR, and so forth. Things got a little crazy in Q1 and early Q2.
And yes, we measure things in quarters here; we’re business journalists, after all. That means our little summertime lull is quickly coming to an end. Domino’s reports Q2 results next week (July 18), kicking off a steady cadence of the bigs – McDonald’s, Yum, Chipotle, Wingstop, Wendy’s, RBI, Papa Johns, and so on and so forth.
While we’ll miss that short little summer calm, we love it when these reports pick up. They give us a comprehensive look at what’s happening in the business at a high level and we’re usually able to derive a few trends from the calls accordingly. Earlier this year, we started to see an uptick in marketing and advertising spend across several public companies, for instance. Late last year, more companies started talking about catering programs and a normalizing breakfast business.
They also give us a good read on consumer sentiment because what other industry can deliver such a strong overview than the one in which most every consumer consumes? That said, Q2 is expected to be particularly interesting. For starters, Q1 was dismal for many, if not most, concepts as consumers simply stopped spending as much at restaurants. Q2 is typically stronger (shout out to Mother’s Day!) and while several brands reported sequential improvement through the latter part of Q1 and into Q2, we’ve seen some signs of weakness manifest again, and surprisingly. In response, nearly every brand has created some sort of value offering reminiscent of the Great Recession, except with $4 and $5 deals versus $1 and $2. Are these deals sustainable in the long term? Probably not. Will they move the needle for now? Some signs are pointing to yes. Will it be enough to shift the value perception of restaurants back to positive? Maybe. We will hopefully get some clearer answers throughout the next round of earnings calls in the next few weeks. As usual, stay tuned here.
Read on to learn more from NRN.
McDonald’s has experienced a traffic bump from its $5 Meal Deal
It’s been a tough year across the board for restaurant traffic as consumers tighten their spending in favor of cooking at home. Despite a wildly successful run these last few years, McDonald’s hasn’t been immune to the current environment. In February, CEO Chris Kempczinski said the company was experiencing transaction reductions from those making $45,000 and below – an overindexing demographic for the chain. Executives cautioned that those headwinds were expected to continue through the duration of 2024 and that seems to be the case so far based on new data from analytics firm Placer.ai.
In the 27 weeks measured this year, McDonald’s has experienced negative year-over-year comparisons for nine of them. For the rest of those weeks, just three generated traffic comps higher than 3% – the week of Jan. 29, which was up 7.6% year-over-year; the week of Feb. 5, which was up 3.5%; and the week of July 1, up 3.1%.
Menu inflation at full-service restaurants outpaced QSRs in June
The Consumer Price Index fell by 0.1% in June, marking the first time inflation levels have dropped since 2020. The inflation level is now 3% higher year-over-year, marking the CPI’s smallest annual increase in a 12-month period and inching closer toward the Fed’s target of 2%.
Much of this cooling was driven by home and rent prices, however, while food prices remained relatively stubborn. According to new data from the U.S. Bureau of Labor Statistics released Thursday morning, the food index rose by 0.2% in June after a 0.1% increase in May. Food at home was up by 0.1% on the month, while the food-away-from-home index increased by 0.4%, matching May’s increase.
The Consumer Price Index fell by 0.1% in June, marking the first time inflation levels have dropped since 2020. The inflation level is now 3% higher year-over-year, marking the CPI’s smallest annual increase in a 12-month period and inching closer toward the Fed’s target of 2%.
MOD Pizza agrees to sale to Elite Restaurant Group
MOD Pizza, one of the once-growing group of fast-casual pizza concepts, has agreed sell to Elite Restaurant Group, the companies announced Wednesday.
Bellevue, Wash.-based MOD Super Fast Pizza Holdings LLC said Chatsworth, Calif.-based Elite Restaurant Group had acquired 100% MOD’s equity in a merger agreement between the company and an Elite affiliate, a press release said. Terms were not disclosed.
“MOD has an outstanding culture and passionate, loyal guests and employees,” said Michael Nakhleh, president of Elite Restaurant Group, said in a statement. “We recognize the inherent value this represents and look forward to helping MOD write the next chapter in its history.”
Kura Sushi CEO: California’s wage increase is impacting all restaurants
Kura Sushi reported its third quarter results Tuesday after market and they were largely in line with the company’s pre-release announcement in June. As CEO/president Hajime Jimmy Uba summarized, the quarter fell short of expectations. The combined reports seem to have caused some trepidation among investors, as share prices fell to $50.09 Wednesday, from nearly $120 in March.
Total sales for Q3 were $63.1 million, representing a comp growth of 0.6% and traffic growth of 0.3%. This is compared to comp growth of 3% in the prior quarter. Sales declines began in mid-April and were “sudden and unexpected,” Uba?added. “We believe the current headwinds are macro driven and transitory.”
Whataburger app turns into powerful Hurricane Beryl tool
Whataburger Inc.’s smartphone app stepped into the void during this week’s Hurricane Beryl’s aftermath, providing users with a map of power outages that the South Texas region’s electricity provider couldn’t offer.
San Antonio, Texas-based Whataburger said that on Tuesday, July 9, a day after Hurricane Beryl made landfall on the Texas Gulf Coast, that it saw a 286% increase in new app user sign-ups and 30,430 downloads.
An X, formerly Twitter, post by Bryan Norton, a podcaster who uses the X handle @BBQBryan, noted about?10 p.m. Monday: “The Whataburger app works as a power outage tracker, handy since the electric company doesn't show a map.” That post had been viewed more than 2.5 million times by Thursday.
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