Technomic report shows appeal to high-caliber operators, not just consumers, crucial to expansion
Restaurant chains aiming to expand their national footprints even more through franchising should continually focus on the unit economics within the footprint of each store. This increasingly profitable business model will then entice growth-minded franchisees with an increasingly profitable business model. The industry’s fastest-growing brands are doing precisely that, according to the Top 100 Franchisor Restaurant Chain Benchmarking Report, a landmark new study from Technomic Inc.
Slightly less than half of the 100 largest restaurant franchisors boast a sales-to-investment ratio at or above the report’s average of 1.4, and collectively they increased their unit count 3.3% in 2014, the report found. By contrast, the remaining brands with below-average sales-to-investment ratios only managed unit growth of 0.9%. That dynamic will remain a key trend for the restaurant industry, which has pivoted aggressively to franchise-led growth via development deals and refranchising agreements with operators able to fund new locations and remodels of existing restaurants.
Find more information about the Top 100 Franchisor Restaurant Chain Benchmarking Report here:
The fast-casual sector and standout quick-service brands like Chick-fil-A certainly have compelling appeal for consumers, but this report is able to show the leading returns on investment they provide to franchisees and quantify that factor’s role in some chains’ high-octane growth. What franchisors offer their operator partners is just as important as what they offer their guests. Our latest study shows a strong correlation between ensuring franchisee profitability and expanding rapidly.
The report compiles franchise sales figures and key investment numbers—such as fees, royalty structures and average buildout costs—to calculate a sales-to-investment ratio for the largest brands in the restaurant industry. New industry insights from the report include:
- Fast-casual brands tracked in the study boasted the best collective sales-to-investment ratio of all restaurant segments, with 1.7, compared to only 1.1 for quick-service chains;
- The franchisors ranked in the Top 100 report collectively increased their unit count 2.3% in 2014, better than the 2.1% growth for all brands in Technomic’s Top 500 Chain Restaurant Report;
- Chicken-focused brands are among the most formidable franchise opportunities in limited service, as the sales-to-investment ratios for the chicken category were the highest of any subsegment in either quick service (1.7) or fast casual (1.9);
- Despite higher average unit volumes and focused menu offerings, specialized casual-dining chains like Outback Steakhouse and The Melting Pot collectively produce the same sales-to-investment ratio, 1.0, as varied-menu and bar-and-grill brands like Applebee’s and Chili’s.
[View related INFOGRAPHIC: Top 100 Franchisor Restaurant Chain Benchmarking Report]
Technomic Inc. tracks more than 100 franchised restaurant companies and analyzes public filings and franchise disclosure documents to develop return-on-investment metrics for evaluating brands. Franchisors, current and potential franchisees, and suppliers can then interpret that data alongside chains’ sales growth and unit expansion. The report also contains guest perceptions of most chains as measured by Technomic’s Consumer Brand Metrics service.
Additional sales and profitability information for the restaurant industry’s largest companies is available on Technomic’s Financial Dashboard, the firm’s online resource for data pertaining to stock performance, commodities, balance sheet benchmarking and more. Financial Dashboard is searchable, exportable and constantly updated.