Until very recently food delivery was proclaimed the future of the restaurant business. New delivery companies rushed to sign partnerships with restaurants. Operators were told they had better develop home delivery programs or be left behind.
Now it appears the food delivery business has, as an article in the Wall Street Journal put it, “many challenges.” One difficulty is pushback from operators who object to the delivery companies’ fees. Noodles & Company took a step to counteract these fees by adding a 10 percent markup to delivery orders. The fast-casual chain says this step has not cut into sales.
Other challenges include consumers not exhibiting any brand loyalty to the food deliverers but instead going for the best deal. Companies now offer promotions and discounts to build market share. Delivery companies are also trying to grow their business with operators with whom they do not have formal agreements. All these activities hurt profits.
Grubhub recently put out a financial forecast so gloomy that its stock price dropped 43 percent. Once the leader in the field, Grubhub now has 23 percent of consumer dollars, which makes it the third largest delivery company. DoorDash is number with 35 percent market share and Uber Eats is second with 25 percent market share.
New ideas come and go all the time. The ones that stay are the ones that make money. Food delivery is undoubtedly a good idea but the industry is certainly going through growing pains with this concept.
Economic News This Week
- Initial-jobless claims totaled 211,000, a decline of 8,000 To 211,000 for the week ending November 2. The 4-week moving average totaled 215,250, a decline of 250.
- Job openings declined to 7 million by the last day of September, according to the Bureau of Labor Statistics “JOLT” Study. This represents a decline of 262,000 job openings – all in the public sector as government openings were unchanged. Hires and separations were essentially unchanged. Likewise, the number of quits changed little. The number of discharges and layoffs edged up, including 72,000 in accommodations and foodservice. Other separations increased by 15,000 for accommodations and foodservices. The beginning of the school year and end of the vacation period could account for the separations.
- Non-farm business productivity decreased 0.3 percent the third quarter on a seasonally adjusted annual rate basis. Output increased 2.1 percent and hours worked increased 2.4 percent. Unit Labor Costs increased 3.6 percent with a 3.3 percent increase in compensation per hour and a 0.3 percent decline in productivity, according to the U.S. Bureau of Labor Statistics.
- September new orders for manufactured goods dipped 0.6 percent, according to the Census Bureau’s full report for the month. This follows a 0.1 percent decrease in August. Shipments of manufactured goods decreased 0.2 percent. Unfilled orders of manufactured goods were virtually unchanged from August.
- The Institute for Supply Management’s Manufacturing Activity Index increased 0.5 percent in October but stayed in a contraction mode at 48.3. (Any reading less than 50 means declining activity.) While some indicators showed slight improvement, most remained below the all-important 50 mark, including New Orders at 49.1, Production at 46.2, Employment at 47.7 and Order Backlog at 44.1. Of the 18 industries included in the study, just 5 reported growth in October.
- The Institute for Supply Management’s Non-Manufacturing Activity Index hit 54.7 in October, an increase of 2.1 points. October marked the 117th consecutive month the non-manufacturing sector grew. Almost all of the indicators in the study improved for the month, including business activity/production up 1.8 points for a reading of 57.0, New Orders up 1.9 points for a reading of 55.6, and Employment up 3.3 points for a reading of 53.7. One indicator that was down was Backlog of Orders, which dropped by 5.5 points for a reading of 48.5.
- Consumer credit increased 5 percent in the third quarter, on an adjusted annual basis according to The Federal Reserve. Revolving credit increased at an annual rate of 2.25 percent. Non-revolving credit increased at an annual rate of 6.0 percent. · Consumer sentiment remains unchanged in November, per The University of Michigan’s Consumer Sentiment Index The Current Conditions index declined to 110.9 in November from 113.2 in October.
Foodservice News This Week
- Consumers now go to mall to eat rather than shop. With 25 percent of apparel sales coming from online now, 7.0 percent of consumers now go to the mall to eat. This marks a 3 percent increase from last year. Mall owners have taken note and are leasing space accordingly. The American Dream Mall in New Jersey will be 45 percent retail shops with the rest of the space going to entertainment spaces. All told, there will be more than 100 places to eat, including 23 full-service restaurants.
- PF Chang’s tests a night club concept at one of its Miami locations. The entertainment and food plan will operate after 11:00 p.m. Thursday through Saturday. The goal of the concept is to stimulate late-night business.
- Corporate Stirrings: Bloomin’ Brands will explore strategic options, including putting itself up for sale. The parent company of Outback, Carrabba’s, Bonefish Grille and Fleming’s has been a target of activist investor Jana Partners. TGIF plans to go public. TGIF Holdings and Allegro Merger Corporation announced signing a definitive agreement for “a business combination transaction,” the result will be TGI Fridays becoming a public company. Friday’s has about 840 units with 396 in the U.S.
- Growth Chains: BurgerFi reached an agreement with U.S. Air Force Services to open restaurants on Air Force installations around the world. The number of locations was not given. Rally’s will open 3 restaurants in Phoenix, with plans for expansion. Wendy’s believes the company can increase its international units to 1,500. Walk-Ons Bistreaux & Bar plans to open 30 locations in the near future with a goal of hitting 150 units in the next few years. The sports bar chain operates 32 locations.
- Comparable Store Sales Reports: Burger King up 5.0 percent, Chuy’s Holdings up 2.6 percent, FAT Brands down 1.3 percent, J. Alexander’s Holdings (J. Alexander’s down 0.2 percent and Stony River Steak House down 0.7 percent), One Group Hospitality up 9.3 percent, Popeye’s Louisiana Kitchen up 9.7 percent, Potbelly Sandwich Shops down 3.0 percent, Shake Shack up 2.0 percent, Tim Hortons down 1.2 percent, Wendy’s up 4.4 percent, YUM! Brands (KFC down 1.0 percent, Pizza Hut down 3.0 percent and Taco Bell – system up 4.0 percent) and YUM! China (KFC up 3.0 percent and Pizza Hut up 1.0 percent).
For details and same-store sales of other chains, click here for the latest Green Sheet.