Another round of gas price inflation appears likely. | Photo: Shutterstock.
This is from the weekly restaurant finance newsletter The Bottom Line. To get this in your inbox every Monday morning, click here.
Gas prices are back above the $4 level, and will likely continue to increase for the next few weeks as the price at the pump catches up with the price of oil.
This is not a spike on the level of last spring and is unlikely to have quite the same impact. In addition, consumers have likely adjusted to the reality of elevated prices by now.
Yet elevated gas prices will likely keep a lid on traffic as it limits consumer spending power. It’s also possible that fuel surcharges, which have become more commonplace of late, will remain in place for a while, increasing costs for operators.
Mostly, $4 gas reveals the limited spending power of large numbers of U.S. consumers. For many consumers, wages have not kept up with prices for things like housing, college tuition, or other necessities. And so little things such as another $1 per gallon charge for gas can greatly influence spending elsewhere.
Because the U.S. restaurant market is so saturated, it is dependent upon the spending for all consumers to generate any growth. Right now that growth is limited, at best.
This week’s financial news
The cyclospora outbreak is so bad for Taco Bell that it is bringing back the Enchirito. But it’s hurting more than just the Mexican fast-food chain. And it is revealing a lot of problems in the U.S. food safety system.
Domino’s same-store sales rose just 0.1%, but its order count grew, which means it’s selling cheaper pizzas. That’s the market for you.
If Mark King is as good at turning around burger chains as he is at providing quotes in interviews, Jack in the Box will be just fine.
Burger King is rethinking its manager role to provide more hospitality. It is also guaranteeing the Whopper. But Tom Curtis thinks the chain is only about 20% there with its comeback.
Speaking of hospitality, I wrote about surging Handel’s ice cream, its “analog” experience, and why it works.
My colleague Joe Guszkowski thinks Texas Roadhouse should do delivery. I do not agree with him.
But he did do a great story on Denny’s relationship with record-breaking rower Kelsey Pfendler.
Number of the week
Handel’s is the country’s oldest growth chain. It just turned 81 last year, but its system sales are up more than 600% over the past decade.
Quote of the week
“I don’t want to come and go. (Franchisees) deserve some stability. I’m in no hurry to leave.” -Jack in the Box Chairman and Interim CEO Mark King.
On the blog
I wrote about Texas Roadhouse and the food safety system. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive I chatted with Ashish Seth about M&A. On The Week in Restaurants we talked about the World Cup, Cracker Barrel and Domino’s.
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.
