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This is from the weekly restaurant finance newsletter The Bottom Line. To get this in your inbox every Monday morning, click here.
If you only looked at the stock market, you’d think everything was just fine. The S&P 500 Index is up more than 10% so far this year, despite a springtime bout of bearishness brought on by the Iran War.
But various economic data give a different picture. We rounded up a lot of that last week, but in short, the economy is bumping along at slow pace. Wealthy people, boosted by that market, are propping up spending while the bulk of consumers are cutting back because their incomes are slowing.
This two-sided economy has been the story of the past two and a half years. Prices for a lot of things, not just restaurant prices, have frustrated consumers, and they’re pushing back hard. Fast-food restaurants have dealt with this more than most, and they’re fighting one of the worst value wars we’ve ever seen.
It’s why first-quarter same-store sales were weak.
Where we tend to fret, because that’s what we’re good at, is what happens when somebody kicks the stick that’s been propping up this economy for so long. What will happen if investors suddenly frown on all this AI?
It’s not that far-fetched, either. A lot of people are skeptical or downright angry about technology. For now, corporations continue to invest in it, but what happens if they don’t see the returns they expect? There’s already evidence that restaurants aren’t seeing them.
Regardless, the economy has done the restaurant industry no favors. Until consumer income outpaces the cost of living for a broad number of people, not just the rich ones, the industry will continue to fight this value war.
This week’s financial news
Wendy’s finally hired a CEO and it was a good decision.
Fat Brands was sold in four pieces, mostly for debt. What happens now should be interesting.
Ghai Restaurants just bought a bunch of Taco Bells in Houston, and its reason for doing so says a lot.
We took a few extra dives into Top 500 data and found that fast-casual chicken chains may be outgrowing their demand. We also found that average check had only a modest at best impact on sales results last year.
We also looked at 7 Brew, which is absolutely insane.
Plant-based meat was a fad and that fad is over.
Wait. Tommy Bahama’s has a restaurant chain?
Indiana is forcing I Heart Mac and Cheese to refund some franchise fees.
Tropical Smoothie Café believes it has plenty of growth to come, and it has good reason to think that.
Number of the week
7 Brew is one of the most remarkable growth stories the restaurant industry has seen, coming out of literally nowhere to become the fourth-largest coffee chain in the country. And so far, at least, it has the unit economics to back its growth.
Quote of the week
“Today, everyone is getting hit with rising costs. Food prices are up. Delivery prices are up. And a hundred other costs are moving in the same direction.” -Julia Wrin Piper, CEO of Clover Food Lab, which shut down last week.
On the blog
I wrote about Wendy’s, 7 Brew, plant-based fads, Top 500 data, same-store sales and other topics. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive I spoke with Michelle Korsmo on the economy and with Robert Byrne on pizza. On The Week in Restaurants we had a great discussion on relevant CEOs and then on health and restaurants.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.
