Most restaurant sectors aren’t performing to their previously held standards. Casual dining is down. Quick-service restaurants are flat, and even fast-casual chains have seen sales growth slow some. One exception to this rule is pizza, which is generally cheap and works well in a weak economy. Another exception: coffee.
Avenue Capital took over the near-bankrupt Quiznos late in 2011. The hedge fund quickly pumped millions into marketing the chain, brought in a load of new talent and began working closely with franchisees. But so far, none of those efforts have yet been able to correct its most glaring problem: plunging sales.
When the Chicago-based daily deal company Groupon fired its founder and CEO Andrew Mason in February, it could have been construed as a sign that the daily deal phenomenon he helped start was starting its eventual demise. That’s not happening. If anything, consumers continue to prove that they love those offers.
One can learn a lot about the state of the economy by simply watching restaurant industry sales. For instance, after the most recent round of financial reports, we can say for certain that the economy isn’t going nearly as well as the stock market says it is. Today’s example: Carrols Restaurant Group.
Roark Capital recently bought the 65-unit Miller’s Ale House, based in Jupiter, Florida. At roughly the same time, Doherty Enterprises bought Gator Apple, which owns 41 Applebee’s locations in Florida and Georgia. There’s nothing unusual about these deals, except this: they closed in the late summer.
Perhaps no state suffered from the housing crisis and the recession as much as California. In November 2006, the unemployment rate there was 4.8 percent. By July 2010, it was 12.4 percent. Any restaurant with a sizable presence there got hammered, and many a location closed. But one company thrived: BJ’s Restaurants.
Ignite Restaurant Group said late yesterday that comp sales at its two “legacy” brands, Joe’s Crab Shack and Brick House Tavern, grew 1.3 percent last quarter. So why is its stock down 13 percent today? Macaroni Grill. The concept’s same-store sales sales fell 7.4 percent during the period, and that’s not even the worst of it.
Mounting competition in the lending environment has made life pretty good for restaurant companies and big franchisees, assuming they operate one of a handful of big, legacy chains. For the rest of the world, lending is still tough to find. The result: meager growth in the number of restaurant units over the past year.
Much is being made today in various news reports of a study out of Kansas that claims a Big Mac would cost 68 cents more if McDonald’s doubled worker salaries. Perhaps, but most of those doubled salaries would not be going to fast food workers because McDonald’s doesn’t own most of its restaurants.
Despite positive reports from Texas Roadhouse yesterday, and from DineEquity this morning, this has been a lackluster earnings season for the restaurant industry, and many have wondered why, given increases in home prices and consumer confidence. Here’s a hint: the economy is still really, really weak.
We wondered recently whether the successful debuts of Chuy’s, and now Noodles, would prompt other growth restaurant chains to seek a public offering. Now, apparently, we’re getting our answer: Vancouver, Washington-based Papa Murphy’s is preparing for an IPO, according to a report this morning by Reuters.
Casual dining chains are losing customers again. Ruby Tuesday, for instance, said that its same-store sales fell 3 percent last quarter, while chains like Cheesecake Factory have underperformed expectations. But one chain saw some improvement last quarter: Famous Dave’s. And it can thank its robust to-go business for that.
Restaurants can only handle so much capacity. At some point, a concept can bring in so many sales before it starts to reach its ability to handle its customer base. To wit: Panera Bread, the St. Louis-based bakery/café chain that today more or less said that it is straining its ability to serve customers, particularly at lunch.
Want to improve your franchise company’s stock price? Sell off company stores. That’s the lesson from Wendy’s this morning. The big Ohio-based QSR announced plans to sell off 425 company-owned stores by the second quarter of next year. Not surprisingly, its stock price shot up 9 percent despite mediocre quarterly financials.
Few restaurant sector booms over the years have been as pronounced and dramatic as the frozen yogurt explosion, and perhaps few have been as maligned. Experts, who have seen the sector boom before, seem to believe that frozen yogurt is in for another 90s-style collapse. But that may not be the case, thanks to froyo’s unfrozen sibling.
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