Limited Service Restaurants Lead Canadian Chain Growth

According to Technomic’s just-released 2013 Top 200 Canadian Chain Restaurant Report, Canada’s 200 top-grossing chain concepts posted domestic systemwide sales growth of 4.4 percent in 2012, on unit growth of 2.8 percent.

Unsurprisingly, limited-service concepts drove that expansion, tallying a 5.1 percent increase in sales (to nearly $20.6 billion) and a 3.0 percent hike in units. Tim Hortons, Canada’s longtime chain leader in both sales and units, outperformed the LSR group overall in 2012 with nominal sales growth of 6.2 percent to $5.9 billion. When we parse LSR sales by menu category, however, we see that growth among limited-service concepts wasn’t universal.

The bakery-café, frozen-dessert, family-casual and bagel subsegments within the LSR category each recorded sales declines. The fact that bakery cafes—which saw a 2.2 percent drop in sales and a 10.1 percent drop in units—are still struggling to gain a foothold in Canada is notable, given that in the U.S., bakery-cafes outperform the already-strong limited-service category. U.S. bakery cafes on Technomic’s list of the Top 500 U.S. Chain Restaurants posted impressive U.S. systemwide sales growth of 10.4 percent for 2012, on unit growth of 7.7 percent.

So which subsegments were most responsible for Canadian LSR chains’ net sales gain? Leading the way were non-coffee beverage/snack concepts (10.2 percent sales growth), Asian/noodle concepts (10.1 percent) and coffee cafes (6.6 percent).

Burger, sandwich and Mexican LSR concepts in the Top 200 also posted sales growth of at least 3 percent. In comparison, only two full-service subsegments—varied-menu and family-style—saw sales increases north of that level. Full-service Italian, seafood and Asian/noodle concepts in the Top 200 recorded declining sales. In addition, the 2.5 percent nominal sales growth posted by FSRs in the Top 200 as a group was almost a percentage point lower than the growth seen in 2011.

What can we take from this? First, Canadian consumers’ appetite for quick and convenient niche concepts—better-burger or snack specialists, for example—seems to be growing. Mexican and Asian LSR concepts saw sales growth that exceeded unit growth, pointing to increased interest in newer or more-novel flavor profiles delivered in a speedy setting.

Second, in full-service, varied menus rule. Chains that offered varied menus outperformed those specializing in any one type of food. Steak chains, although they fared better than Italian, seafood and Asian full-service concepts, realized only modest sales growth of 1.2 percent, despite unit expansion of 3.8 percent.

Full-service concepts looking to avoid veto votes from dining parties might do well to examine their menu mix to determine whether there are opportunities to diversify both the types of foods and beverages offered (flavor profiles, proteins, formats/portion sizes, etc.) and price points. Starters and shared plates may offer operators a good option for tackling both of these: In a survey for Technomic’s 2012 Canadian Menu Positioning Consumer Trend Report, 80 percent of Canadian consumers polled said they would order shareable meals or snacks more often at casual-dining restaurants if such options were offered.

We expect the Canadian foodservice industry as a whole to achieve a nominal sales growth rate of 3.9 percent for 2013. LSR growth is expected again to outpace FSR growth, but gains are expected to moderate over the year. Those concepts that innovate on the menu side and deliver enhanced convenience for customers, be it through speedy service, call-ahead/online ordering or a mobile-device-friendly website, will be best poised to grow sales in a highly competitive marketplace.

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Jessica Cravero

As Senior Business Development Associate for Technomic, Jessica Cravero is responsible for marketing and providing support of online resources, reports and custom studies to Technomic clients - which include manufacturers, distributors, operators and financial institutions. Jessica works to provide Technomic clients with key industry data that is actionable to their strategic and tactical business planning process. Additional responsibilities include managing Technomic’s Canadian Restaurants Trends & Directions Conference and the Canadian Foodservice Planning Program.

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