Restaurant Chains Cry: 'Where's the Beef?'

Two interesting trends emerge from Jack in the Box Inc.’s FQ408 conference call (JBX). How much are chains like McDonald's and Burger King Hurting?

Rising food costs:

Overall, food and packaging costs were about 180 basis points higher than the same quarter of last year, led by higher beef costs, which increased by more than 18% in the quarter. Alone, beef negatively impacted restaurant operating margin by approximately 100 basis points.

Shortening was up almost 60% and potatoes were up 8%. Combined, these commodities contributed to a 7% increase in overall food costs for the quarter.

Beef is our single largest food cost accounting for nearly 20% of our spend. The high beef costs we're seeing are primarily driven by still high trim prices which are running over 50% higher in quarter one than a year ago, with 50's at about $0.81 a pound versus $0.53 a pound last year in the quarter. However… we expect moderation in the price of 50's as we move through the rest of the year.

California improves as other markets slow?

California became negative quarter two of ’08. So in quarter four we’re almost, in fact all the major California markets became positive. What we’re seeing system wide now in the east in the Texas markets the same store sales slowed down slightly and that’s because they were rolling over very high numbers in ’07 10% plus in ’07.

 

Comments

[joyboy:]

What has happened to my favorite casual resturant...Steak&...

I wish they would locate in the Clear Lake area or Kemah or Seabrook or Galveston Tx.

Alas, their stock has dropped like a bad habit..any hope here?

2008 Nov 20 07:38 PM

[Stone Fox C...:]

CA is improving... hmmm

2008 Nov 21 04:10 PM

[sbenard:]

With food commodity prices having declined by 50% or more in the past 6 months, why haven't prices at the grocery store come back to previous levels also? I recently wrote about this phenom on my blog, but I frankly don't have a good answer. I hope that over time, competition will moderate the prices of groceries, just as the prices for the commodities have come down that those groceries were based upon.

2008 Nov 25 01:33 PM