NoBull Posts

Lockdowns Tipped the Balance of Power to Employees in Low-Cost Cities

Lockdowns Tipped the Balance of Power to Employees in Low-Cost Cities

Why has consumer spending held up so well during a period of huge and punishing inflation? As it turns out, the long-term impact of the covid lockdowns was most notable for the lowest income demo who saw their hourly wages increase the most relative to all other earners. While this momentum is slowing, this development continues to have important implications for inflation prospects and the start of the 4Q22 corporate earnings season.

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Did Investors Forget about December’s Bomb Cyclone?

Did Investors Forget about December’s Bomb Cyclone?

December’s preliminary retail sales release spooked investors who smell a recession. Normally, this would be a boost to stocks because of expectations that the Fed might start to adopt a more dovish stance. However, this represents the first time that investors have finally come to believe that Powell & company intend to keep interest rates inflated, even if hell freezes over. 

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Noblesse Oblige for the Masses

Noblesse Oblige for the Masses

A healthy society is marked both by a reasonable distribution of wealth along with an investment focus on productive assets that can help all of society. An unhealthy society is marked by a concentration of wealth in the hands of a few who are focused on preserving their ability to purchase self-indulgent pleasures.

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Potential New Home Buyers Seem to be Conserving Cash for Necessities

Potential New Home Buyers Seem to be Conserving Cash for Necessities

KB Home’s 4Q22 results exemplify the impact of depressed consumer confidence levels as evidenced by a sharp pull-back of potential new home orders from first-time buyers that largely have the financial means to complete the transactions (even with elevated mortgage rates). While KB is working hard not to discount its inventory to drive 1Q23 sales, this pullback certainly will have mid-term implications if confidence levels don’t begin to rebound soon.

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Performance Food Group (PFG) Investor Presentation – January 2023

Performance Food Group (PFG) Investor Presentation – January 2023

For some time, the market has been held captive to the Fed’s interest rate hikes and prospects about future actions to fight runaway inflation. Further, the Fed has been telling us that labor costs represent the main inflation culprit. However, comments from a recent PFG investor presentation reveal that the real cause of labor inflation is not something that interest rate hikes can solve.

read more
Small Businesses Are the Lifeblood of Economic Growth

Small Businesses Are the Lifeblood of Economic Growth

Policymakers need to protect and encourage small businesses because of the critical role they play in driving growth during tough economic times. While consolidation may sustain margins and large companies during downturns, the economy needs to grow its way out of our current problems.

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RR Posts

New Unit Investment

New Unit Investment

New Unit Investment Report provides average building cost estimate details (excluding land) for the $1B+ Chains in addition to new store ROI, franchisor incentives, franchise fees and new prototypes.

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Dunkin’ Donuts 2023

Dunkin’ Donuts 2023

Dunkin’s famous coffee, donuts & munchkins are legendary in core Northeast markets and the Dunkin’ way (get in, get out & get on your way) is consistent with its famous “America runs on Dunkin'” tagline. Dunkin’ is progressing in its strategy to execute a more upscale repositioning, allowing the chain to tap into the purchasing power of a new, younger clientele to layer onto a stream of sales from the brand’s core base of middle America.

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KFC 2023

KFC 2023

KFC is a leader in traditional hand-breaded, bone-in Southern fried chicken with considerable brand equity around its Original Recipe seasoning and Extra Crispy option. While KFC’s efforts to improve its relevancy are bearing fruit, the chain must currently deal with material inflationary pressures around chicken prices that are stressing core customers.

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Jersey Mike’s 2023

Jersey Mike’s 2023

Jersey Mike’s is well positioned to continue its outperformance given a reasonably healthy economy by leveraging its core equities around off-premise, a compelling quality/service positioning, a brand commitment to give back to its customers as well as its communities and effective digital/loyalty marketing efforts.

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Pizza Hut 2023

Pizza Hut 2023

Pizza Hut enjoys substantial scale and strong brand equity as the 2nd largest national player in the $1B+ chain pizza segment by domestic system sales.

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Dashboard: Unit Level

Dashboard: Unit Level

After a ruinous 2022 in terms of food cost inflation, moderating 2023 inflationary prospects will still leave food input costs at extremely elevated levels. Fortunately, moderating labor costs suggest that restaurants will not have to pass along as much pricing in 2023 to restore margins. Also, it is notable that restaurant sales benefit from more discipline in terms of price increases relative to the grocery stores.

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Remodel 2022

Remodel 2022

Remodel data and analysis on 50+ national chains, including: (1) remodel progress/system condition; (2) investment costs; (3) post remodel sales increases; (4) franchisor remodel incentives; and (5) program scope.

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Carl’s Jr. 2022

Carl’s Jr. 2022

While Carl’s Jr. is building upon its positioning as a purveyor of tasty burgers, the chain remains challenged to meet the growing demand for value in a tough economic environment given elevated operating costs associated with its West Coast orientation.

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Dashboard: Unit Level

Dashboard: Unit Level

Despite healthy comp growth prospects, unit-level P&Ls remain pressured by substantial food cost inflation (and labor inflation to a lesser extent).

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Lockdowns Tipped the Balance of Power to Employees in Low-Cost Cities

Why has consumer spending held up so well during a period of huge and punishing inflation? As it turns out, the long-term impact of the covid lockdowns was most notable for the lowest income demo who saw their hourly wages increase the most relative to all other earners. While this momentum is slowing, this development continues to have important implications for inflation prospects and the start of the 4Q22 corporate earnings season.

What’s up with Egg Prices?

How does a -3% decline in table-egg production translate into December’s 2x+ egg price increase? That’s a good question for someone…

Could Retail Traffic Declines be Attributed to Excess Mortality Rates?

Traffic declines across the board in both restaurants and grocery stores suggest fewer people eating. The shocking statistic is that 2021 life insurance payouts were much higher for group plans typically associated with young, healthy corporate employees relative to individual policyholders. 

Farmers Need More of the Profit Pie to Fund Needed Capacity Increases

The farmer’s share of a $1 food purchase has been steadily decreasing to just 14.5% of the total, according to USDA data. This provides a compelling clue about why food production has been strained, and correspondingly, why food cost inflation is out of control.

Did Investors Forget about December’s Bomb Cyclone?

December’s preliminary retail sales release spooked investors who smell a recession. Normally, this would be a boost to stocks because of expectations that the Fed might start to adopt a more dovish stance. However, this represents the first time that investors have finally come to believe that Powell & company intend to keep interest rates inflated, even if hell freezes over. 

The Middle Class is Losing Share Post-Covid

A strong middle class is critical to a healthy economy as this cohort spends a larger portion of their income (relative to the rich) on goods & services that drive growth. 

Noblesse Oblige for the Masses

A healthy society is marked both by a reasonable distribution of wealth along with an investment focus on productive assets that can help all of society. An unhealthy society is marked by a concentration of wealth in the hands of a few who are focused on preserving their ability to purchase self-indulgent pleasures.

Potential New Home Buyers Seem to be Conserving Cash for Necessities

KB Home’s 4Q22 results exemplify the impact of depressed consumer confidence levels as evidenced by a sharp pull-back of potential new home orders from first-time buyers that largely have the financial means to complete the transactions (even with elevated mortgage rates). While KB is working hard not to discount its inventory to drive 1Q23 sales, this pullback certainly will have mid-term implications if confidence levels don’t begin to rebound soon.

Performance Food Group (PFG) Investor Presentation – January 2023

For some time, the market has been held captive to the Fed’s interest rate hikes and prospects about future actions to fight runaway inflation. Further, the Fed has been telling us that labor costs represent the main inflation culprit. However, comments from a recent PFG investor presentation reveal that the real cause of labor inflation is not something that interest rate hikes can solve.

Small Businesses Are the Lifeblood of Economic Growth

Policymakers need to protect and encourage small businesses because of the critical role they play in driving growth during tough economic times. While consolidation may sustain margins and large companies during downturns, the economy needs to grow its way out of our current problems.

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