July 23, 2020
SUPPORT THE RESTAURANT ACT
The foodservice distribution industry is enormous, employing 350,000 Americans and totaling $300 billion in annual sales across the country. However, the industry is currently in need of help due to closures stemming from the COVID-19 pandemic. In an op-ed published in the Clarion Ledger, Merchants Foodservice president and CEO Andy Mercier argued for the passage of the Real Economic Support that Acknowledges Unique Restaurant Assistance Needed to Survive (Restaurant) Act.

“The harsh reality of our otherwise symbiotic relationship is we can’t make it without a thriving restaurant industry and the restaurant industry can’t thrive without foodservice distributors. Which means in the current crisis, neither of us can get back up and running without significant economic support from Congress and the administration,” wrote Mercier. Full Story
DISTRIBUTOR NEWS
US Foods Launches Restaurant Reopening Checklist
US Foods is providing a checklist for restaurants that have stepped back their opening. Recent surges in COVID-19 cases are forcing some restaurants to make the difficult decision to temporarily close their doors again. Restaurants can download the Ramp Down Checklist to help through every step of the process. Full Story

Sysco, CAFÉ Present Culinary Education Awards
Sysco Corp. and the Center for the Advancement of Foodservice Education (CAFÉ) presented two culinary instructors with Educator of the Year awards. The 2020 CAFÉ/Sysco Corp. Postsecondary Educator of the Year award was presented to Amanda Miller, culinary arts and baking and pastry arts instructor at the Culinary Institute of Michigan at Baker College in Muskegon, MI. Meanwhile, the 2020 CAFÉ/Sysco Corp. Secondary Educator of the Year award was given to Tim Michitsch, culinary educator for Lorain County Joint Vocational School’s Culinary Arts and Restaurant Management Program in Oberlin, OH. Full Story
SUPPLY CHAIN
Switching from Global to Local Food Supply Chains
Food manufacturers are pivoting away from globalized supply chains, Goldbeck Recruiting found. Full Story

Sixty-five percent of those in the U.S., along with 82% in Canada, said they're more likely to purchase locally sourced or produced goods.

“Food producers have been through a lot over the past few months because of COVID-19 and they’re taking a closer look at export markets in the Americas," said Goldbeck Recruiting president Henry Goldbeck. "Through our network, we’re seeing food manufacturers pivot from globalized supply chains to what we’ve been calling around our office ‘post-pandemic continentalization.’"

Vegetables were the most important to buyers seeking local goods, followed by poultry and meat, fruit, and the least important were dairy, seafood, and grains. The data also found that only 23% of Canadian producers are concerned with reduced product variety and only 38% of Americans are concerned.
Particularly during the pandemic, interest in the local food system has increased. “People are looking for reliable local food, shorter supply chains, and literally fewer people touching the food as it goes through the supply chains,” said Liz Moran Stelk, Illinois Stewardship Alliance executive director, reported Agrinews (June 19). Full Story

“The good news is farmers have said they’ve been selling out of (community supported agriculture) shares and especially local meat producers who sell direct have been selling boatloads of meat," she added.

The pandemic also provided opportunity for startups that are reimagining how and where food is grown, reported Geek Wire (June 20). Full Story

Revolution Agriculture will soon launch a direct-to-consumer grocery delivery business in Tacoma, WA, that sells produce grown in backyards and on other surplus land in the community. The company plans to partner with grocery delivery services including Instacart and Postmates to distribute its produce to customers.

Revolution Agriculture will rent space from landowners in the cities it serves and manage cultivation of the “farmlets.” Hosts receive a portable, greenhouse-like facility from Revolution that enables produce to be grown year-round. The smallest greenhouse takes up the space of a standard parking spot and the largest is 540-sq. ft.

Although consumers raced to stockpile goods early in the pandemic, creating impressions of scarcity in stores, the food supply has remained "surprisingly strong," argued Daniel Sumner, PhD, a professor of agricultural and resource economics at the University of California, Davis, as reported by WebMD (June 18). Full Story

“It’s much more resilient and solid now than I would have thought two months ago."

Meat processing businesses around the globe appeared to be the weakest link throughout the food supply chain, acting as virus hot spots as workers contracted COVID-19. However, by mid-June, the meatpacking industry was back to operating at 97% capacity, Dr. Sumner noted.

Still, the pandemic exposed one of the major weaknesses of many supply chains: the inability to react to sudden, large-scale disruptions, reported Harvard Business Review (June 23). Full Story

Mapping the layers of suppliers, manufacturing plants, distributors, and other elements of the logistics network are key ways to make supply chains more resilient, as well as applying a stress test to evaluate the ability to recover from the disruption of these sites (June 25). Food Institute Focus
INDUSTRY TRENDS
Indoor Dining Remains a Challenge During the Pandemic
Indoor dining continued to present a problem for restaurant operators during the pandemic.
New Jersey's governor scrapped plans to restart indoor dining on July 2 and postponed the move indefinitely. He attributed the change to finding that some restaurants were overcrowded and many people not wearing masks, and he cited concerns that there will be a spike in coronavirus cases. The New Jersey Restaurant and Hospitality Association said the state is punishing the entire industry for the actions of a few instead of using enforcement, reported NorthJersey.com (June 29). Full Story

Meanwhile, California closed bars, wineries, and indoor restaurant dining for three weeks in Los Angeles and 18 counties to address a concerning spike in coronavirus cases and hospitalizations. The state is also creating strike teams of regulators that will crack down on non-compliant businesses, reported The Wichita EagleFull Story

Additionally, New York City decided it would not allow indoor dining as part of the Phase 3 reopening plan. The mayor reversed course due to fears that the confinement could result in a spike in coronavirus cases and the city is witnessing a drop in compliance with social distancing guidelines, reported The Globe and MailFull Story

The closures seem warranted for high-density areas as higher restaurant spending in a state predicted a rise in new coronavirus infections three weeks later, with in-person restaurant spending "particularly predictive," according to a JPMorgan analysis of 30 million Chase cardholders and Johns Hopkins University's coronavirus case tracker. Conversely, the study found higher spending at supermarkets predicted a slower spread of the virus, reported CNBC (June 26). Full Story

Additionally, buffets and salad bars remain closed due to the pandemic. Stew Leonard Jr. noted his grocery chain's food bars were unlikely to reopen soon due to consumer sentiment, and health officials advised suspending the model as it can lead to crowded customers and repeated touching of utensils, reported The Wall Street Journal (July 7). Full Story (WSJ Subscription Required)

In response, restaurants are reducing their menus to streamline their operations. Denny's removed dishes like the Sizzlin' Supreme Skillet, Choconana Pancakes, Spicy Sriracha Burger, Fit Slam, and Slow-Cooked Pot Roast from its dine-in menu through fall, while IHOP switched to a two-page, disposable menu. Meanwhile, Dave & Buster's reduced its 40-item menu to 15 offerings, and its CEO doesn't expect it will go back to the original menu, reported CNN (June 23). Full Story

KFC Explores New Technologies Abroad and At Home
KFC is exploring a variety of strategic initiatives in 2020, including forays into new technologies and expanding upon a prior test of plant-based chicken.

The company is testing two new technologies in its Russian markets. First, the company opened an automated restaurant in Moscow. After the food is cooked, a robotic hand puts the order into a box that can be opened by a code given to the customer. To pay for the food, customers can use a credit card or biometric data after completing a registration process, reported New York Post (June 22). Full Story

Additionally, KFC partnered with 3D Bioprinting Solutions to develop a 3D-printed chicken nugget. The company will test the product in Russia in the fall, with the nuggets expected to mimic the taste and appearance of the traditional variety at a fraction of the environmental cost, reported Business Insider (July 20). Full Story

"Crafted meat products are the next step in the development of our 'restaurant of the future' concept. Our experiment in testing 3D bioprinting technology to create chicken products can also help address several looming global problems. We are glad to contribute to its development and are working to make it available to thousands of people in Russia and, if possible, around the world," said Raisa Polyakova, the CEO of KFC Russia and Commonwealth Independent States.

Domestically, KFC partnered with Beyond Meat Inc. to launch plant-based Beyond Fried Chicken to southern California stores in Los Angeles, San Diego, Orange County, and other locations starting July 20. The company previously tested plant-based menu items in Charlotte and Nashville, reported MarketWatch (July 17). Full Story

It should be noted KFC isn’t the only company testing robotic components in the kitchen. White Castle will begin testing an automated robot named Flippy to help cook sliders and fries. The Miso Robotics-made robot could help the company ensure social distancing in the small kitchens it operates, reported Forbes (July 14). Full Story

Can Ghost Kitchens Save Restaurants?
The "ghost food hall" concept could be a lifeline for restaurant owners to help carry them through the health crisis, reported The Washington Post (July 20). Full Story

The concept combines the ghost kitchen model, which serves meals exclusively by delivery, and the traditional seating arrangements and variety of products typical of a food hall.

In Washington DC, Ghostline—an establishment that gathers several chefs cooking in different styles to offer takeout, delivery, and limited patio seating—will open for business Sept. 1, without serving customers inside.

Besides Ghostline, Pasadena, CA-based Kitchen United and Houston-based Click Virtual Food Hall seem to be among the only other ghost food halls in the U.S.

In May 2018, Kitchen United opened its first location and has since expanded to Chicago, Austin, and Scottsdale, AZ. Each of the "kitchen centers" houses several restaurant brands with their own space, equipment, and cooking staff, while Kitchen United employees maintain the space and handle the logistics of pickup and delivery.

“Our Kitchen Centers thrive when our restaurants thrive and the restaurants thrive when they’re busy,” CEO Jim Collins said. “That means making sure they’re the right size (about 10 kitchens), in the right areas (high population), and that the restaurant brands and cuisines offered in our locations are already popular with nearby consumers.”

Having several chefs at a ghost food hall makes the project cheaper and decreases financial risk, according to Rick Camac, dean of restaurant and hospitality management at the Institute of Culinary Education. Ghost food halls can rely on limited menus, smaller staffing, and commissary kitchens where cooks share bulk items like oil and salt.

Globally, cloud kitchen revenue is estimated to climb to almost $72 billion by 2027 from $43 billion last year, according to Allied Market Research.

In Asia, Singapore's Kishin RK—a 36-year-old heir to a multi-billion dollar property empire—is creating a network of 1,000 cloud kitchens across the continent, as well as Europe and the U.S., reported Bloomberg (July 20). Full Story

“The investment into cloud kitchens is an opportunity to look at real estate with a different lens and create revenue from a space which may not be as relevant anymore,” said Kishin, who founded the food technology company TiffinLabs.

TiffinLabs will rent kitchens in restaurants and those used by catering firms, including a revenue-sharing deal, and then roll out its own brands like Publico Pasta Bar and Huraideu Korean Fried Chicken. Chefs and other kitchen staff will be employed and used to produce multiple cuisines from a single site.

The first kitchen should open in the fourth quarter and TiffinLabs plans to have more than 30 restaurant concepts serving over 15 cuisines in at least 10 countries within the next 12 months, according to its website.

Ghost kitchens and halls could be a viable option for restaurant operators in the future as about 10% of independent operators could shutter operations by the end of 2020, according to financial services firm Stephens, reported The Wall Street Journal (July 21). Full Story

New York City-based Eden restaurant is an example: The restaurant closed permanently July 18 after finding outdoor seating and takeout orders were not enough to bolster the business. Indoor dining has been halted at nearly 90,000 restaurants across the country, according to the National Restaurant Association, while plans to resume indoor dining in places including New York City and New Jersey are also in limbo. Food Institute Focus

Chipotle Embraces Innovation on Many Fronts
An early adopter of online ordering and digital membership clubs, it should come as no surprise that Chipotle Mexican Grill is working to find innovation amid the challenges stemming from the coronavirus pandemic.

In fact, the company is in growth mode, as it will hire 10,000 workers over the next few months, with jobs ranging from hourly crew positions to salaried management positions. The company plans to include the Chipotlane at 60% of new restaurants and will open its 100th location with a drive-thru in Sunbury, OH, later in July. Full Story

Also known in prior years for its steadfast commitment to a static menu, the company is looking at new products to interest customers. On July 15, the company started to test cilantro and lime cauliflower rice at 55 restaurants in Denver and throughout Wisconsin. The product includes grilled cauliflower with cilantro, lime juice, and salt, and costs $2 more than traditional rice, reported Forbes (July 13). Full Story

“One out of every three customer requests is for cauliflower rice. Sometimes it’s not rocket science and we should just give customers what they’re asking for,” said Chris Brandt, Chipotle’s CMO.
Additionally, Chipotle inked a partnership with Tractor Beverage Co. to supply four flavors of noncarbonated, organic drinks to the company's 2,600 restaurants, including regular and hibiscus lemonade and mandarin and berry agua frescas. Additionally, 5% of the profits will be donated to causes that support farmers. Full Story

Meanwhile, to help those who supply its restaurants, the company launched a virtual farmers' market for producers in its supply chain. The service gives farmers individual online storefronts where they can sell meat, dairy, grains, and other products directly to consumers. Chipotle said the goal is to provide suppliers a new stream of revenue and enhance their commitment to sustainable farming practices. Full Story

Executives on the Move:
  • Tyson Foods named Dan Turton SVP of global government affairs. Full Story
  • Additionally, Tyson Foods named Johanna Soderstrom EVP and chief human resources officer. Full Story
  • Dine Brands named Tony Moralejo as president of international and global development and Justin Skelton as chief information officer. Full Story
  • The ONE Group Hospitality appointed Maria Woods as general counsel and corporate secretary. Full Story
  • Restaurant Technologies named Aris Nissen as chief technology officer. Full Story
  • Waitr Holdings appointed Mark D'Ambrosio chief sales officer, David Cronin chief engagement officer, and Thomas Pritchard as general counsel. Full Story
  • Domino's announced Jeffrey Lawrence, EVP and CFO, will retire when his replacement is found. Full Story

Foodservice Expansions, Acquisitions, and Closures:
  • Zinburger will not reopen most of its East Coast locations, except for its Marlboro, Bridgewater, and Clifton, NJ, restaurants, reported Atlanta Business Chronicle (June 22). Full Story
  • Smoothie King plans to open 25 to 30 stores in Florida over the next few years, reported Jacksonville Business Journal (June 23). Full Story
  • Perkins Restaurant & Bakery will close its last seven locations in the Milwaukee, WI, region, reported Milwaukee Business Journal (June 23). Full Story
  • CEC Entertainment, the parent of Chuck E. Cheese, filed for Chapter 11 bankruptcy and plans to use the proceedings to continue talks with stakeholders and landlords and to restructure its balance sheet. The company plans to maintain operations at its Chuck E. Cheese and Peter Piper Pizza locations during the process, reported St. Louis Post-Dispatch (June 25). Full Story 
  • Meanwhile, Chuck E. Cheese will close 45 locations permanently after filing for Chapter 11 bankruptcy protection in June. The closures include 11 that were closed prior to the pandemic, reported MassLive.com (July 9). Full Story
  • A&W Restaurants signed development agreements with 10 new franchisees. Full Story­­­
  • Dickey's Barbecue Pit launched a franchise website. It provides information, such as available markets, international opportunities, brand facts, opening processes, and basic qualifications for ownership. Full Story
  • Black Angus Steakhouse began reopening some locations, offering delivery, takeout, and dine-in by reservation only. Full Story
  • NPC International Inc., the franchisee of Pizza Hut and Wendy's, filed for bankruptcy while its stores will continue to operate. Rising labor costs and struggling to compete with delivery rivals such as Domino's contributed to the decision to file for Chapter 11 protection. The company has $903 million in debt, reported Bloomberg (July 1). Full Story
  • Pret a Manger Ltd. plans to cut at least 1,000 jobs due to the pandemic. Additionally, it will close 30 UK stores as it restructures its business, reported Bloomberg (July 6). Full Story
  • Dunkin' will close 450 locations within Speedway gas stations by the end of 2020 as its partnership with Hess comes to an end. The company's CFO noted the locations represented less than 0.5% of its annual systemwide sales in 2019, reported MassLive.com (July 6). Full Story
  • Four Corners Property Trust acquired an Oklahoma-based LongHorn Steakhouse property for $1.8 million, an Illinois property with a BP gas station and Dunkin Donuts for $3.3 million, and a Carrabba's property in South Carolina for $1.6 million.
  • Starbucks Corp. required all customers to wear facial coverings at company-owned cafe locations in the U.S. starting July 15. In regions where local government mandates on mask-wearing are not present, customers can use drive-thru, delivery, and curbside pickup options if they decide to not wear a mask. Full Story
  • Tim Horton's partnered with Grubhub in select regional markets. Full Story
  • El Pollo Loco revamped its plant-based Chickenless Pollo to be vegan. Full Story
ECONOMIC PULSE
Total customer transactions at major U.S. restaurant chains continued to decline, with sales down 14% in the week ending July 12 when compared to the year-ago period, according to The NPD Group. NPD noted the decline worsened compared to the week ending July 5, which were down 11% year-over-year. Quick-service restaurants were down 13% year-over-year while full-service sales slumped 26% compared to the same period in 2019. Full Story

“Last week when quick-service restaurants drove the improvements in restaurant customer transaction declines, I highlighted the apparent divergence in trend between quick-service and full-service restaurants, supported by sound reasoning about on-premises and off-premises models, the pace of reopening and reclosing, and the resurgence in COVID -19 cases around the country,” said David Portalatin, NPD food industry advisor.

Meanwhile, the U.S. economy could drop 6.6% in 2020 due to the COVID-19 pandemic, according to the International Monetary Fund (IMF). IMF believes the U.S. economy will rebound to 3.9% growth in 2021, but unemployment would remain elevated through the year, reported CBS News (July 17). Full Story

Selected Restaurant Results:
  • Darden Restaurants' same-store sales were nearly cut in half during the fiscal fourth quarter as dining room closures from the pandemic weighed on its revenue. However, the company expects its business to pick up in the next three months. Olive Garden, which accounted for more than half of Darden's revenue, saw its same-store sales shrink by 39.2% during the quarter. Its fine dining segment reported even steeper declines, with its same-store sales plunging 63.1%, reported CNBC (June 25). Full Story
  • Burger King same-store sales are holding steady. Sales dropped in March as customers stayed at home, but fast food is now seeing a stronger recovery rate than elsewhere in the industry. Shares of parent company Restaurant Brands were up less than 1% in early trading June 29, reported CNBC (June 29). Full Story
  • Popeye's chicken sandwich attracted customers into trying the rest of the menu, parent company Restaurant Brands CEO Jose Cil said. Introduced in August, the chicken sandwich has become a cornerstone of the chain's performance as U.S. same-store sales were up 40% in late May, reported CNBC (June 29). Full Story
  • Papa John's International Inc. reported North American same-store sales jumped 24.4% and international sales increased 6% for the five-week period ending June 28, with the company citing increased demand due to the COVID-19 crisis. For the second quarter overall, same-store sales increased 28% in North America and 5.3% for its international segment, reported MarketWatch (June 30). Full Story
  • Shake Shack reported same-store sales dropped 48% during second quarter 2020. Same-store sales were down 64% in April, and 42% in both May and June. Additionally, six Shake Shack locations remained closed, reported Forbes (July 7). Full Story
  • Domino's Pizza Inc. reported a 16.1% increase in U.S. same store sales in the second quarter, with international same store sales up 1.3%. Total revenue was $920 million, up from the $811.6 million reported in second quarter 2019 and the FactSet consensus of $915 million, reported MarketWatch (July 16). Full Story
PARTNER NEWS
Foodservice Forum Goes Virtual
Due to the rapid escalation of the COVID-19 pandemic, Cleveland Research Company has made the decision to move our annual Foodservice Forum from a physical conference to a virtual event this year. On September 29-30, we will have CRC analysts and guest speakers presenting real-time updates and thought-leadership on the future of our foodservice industry.

We’re excited to announce that Meté Gumus, Managing Director/General Manager of FoodServiceDirect.com, will be our keynote speaker.

In addition, CRC analysts will provide a macroeconomic update and inform attendees on key foodservice industry topics such as: 
  • Trends within foodservice distribution, restaurants, and non-commercial
  • How to engage operators in a post-COVID world
  • Impact of COVID-19 on food-at-home vs. food-away-from-home

Our goal is to leave attendees with actionable ideas for the opportunities and challenges facing the foodservice industry today, so you can better grow your business in the coming year.
 
You can view the full agenda/speaker bios and register on our website. We’d love to have you join us!
P&G Launches CleanPLUS Experience Program
P&G Professional has recently launched their CleanPLUS Experience Program, aimed at helping restaurants and their guests during COVID-19. Both external and internal P&G research found that a majority of restaurant patrons expect more thorough cleaning—and 58% would prefer to see the brands used to clean.

Through the CleanPLUS Experience Program, guests and employees can be reassured that all restaurant areas are cleaned and disinfected using P&G Professional products that have been trusted by Americans for generations, such as Dawn Professional, Spic & Span, Comet, and Safeguard. Many may have seen last week’s press release by Dunkin’ Brands announcing it became one of the first partners for the P&G Professional CleanPLUS Experience Program for its nearly 12,000 U.S. locations.

Traditional sanitization/disinfection products may clean and/or disinfect, but do not keep working after initial contact, leaving surfaces vulnerable to re-contamination. New Microban technology provides 24 hours of protection from bacteria growth even after multiple touches*.

Available in RTU sizes, Microban is marketed and distributed by P&G Professional.

*When used as directed, effective for 24 hours against Staphylococcus aureus & Enterobacter aerogenes bacteria

For any questions or interest on P&G or the CleanPlus Experience for chain operators, please contact James Kennedy via email at kennedy.jh@pg.com. For any distribution needs or questions, please contact Taft Sales via email at mailto:sales.tl@pg.com.
Get Ready for the Food Institute 2.0
The Food Institute has been serving the food industry for more than 90 years with news, market data, and trends in the foodservice, manufacturing, and retail sectors. In 2020, the company has undertaken new initiatives to better serve our members and the industry at large:

  • We launched the Food Institute Podcast series, featuring interviews with top industry executives.
  • A Weekender Newsletter debuted to provide a review and preview of key events impacting the food industry.
  • Our new website will be deployed soon to include more interactive content.
  • We revamped our Food Institute Report for professionals and e-members to better focus on industry research and major food trends. 

Please consider becoming a member, sponsor, or advertiser with the Food Institute by visiting http://www.foodinstitute.com/joinfi, or by e-mailing Managing Partner and CEO Brian Choi at brian.choi@foodinstitute.com.
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