Top 500 Results Are In: LSRs Win Big

Results from our recently released 2016 Top 500 Chain Restaurant Report reveal a powerful story of sales growth and comebacks at many leading restaurant chains. Total Top 500 sales grew 5.0%, up from 4.2% growth in 2014 and 3.5% growth in 2013. The limited-service segment drove much of this success, charting a 5.5% sales increase against full-service’s 3.6% increase. From booming fast-casual pizza chains to a comeback from big burger chains, helped in part by all-day breakfast gains, the limited-service sector is a foodservice force to be reckoned with.

Fast-casual chains continue to shape the face of foodservice. This subsegment grew sales 11.5% in 2015, far above quick-service chains’ 4.4% growth. In fact, for the first time ever a fast-casual chain joined the top 10 ranking. Panera Bread ousted Applebee’s for the 10th spot. Consumers are demanding better, cleaner ingredients with increasingly loud voices, and fast-casual chains are meeting these demands head on. Fast-casual pizza concepts top the charts in sales growth: Blaze Pizza, MOD Pizza and Pieology Pizzeria are three of the five fastest-growing chains of last year. As a result, the former two chains have now entered the Top 500 ranks.

Specialty, chicken and better burger are three other fast-casual categories demonstrating noteworthy growth patterns last year, especially in light of the fact that chicken and burger are relatively mature markets. Specialty, single-focused concepts are finding success selling a best-in-class product, while chicken concepts are able to offer affordable, healthful products despite rising commodity costs. Better burger chains continue to thrive thanks to premium, customizable menus, national expansion (via public offerings) and brand loyalty.

Full-service chains are still struggling to recoup losses in a recovering economy, but select adult beverage-focused and upscale casual-dining chains are attracting affluent diners and millennials, and they are gaining share as a result. In particular, sports bars and steak chains are excelling among their full-service peers. Quickly growing FSR chains are able to differentiate their concepts, provide a fun and entertaining atmosphere and oftentimes offer a specialized menu, from handcrafted burgers to locally made wine. Family-style chains also performed relatively well last year, with a 3.1% sales increase, largely thanks to value platforms and lower gas prices driving traffic among lower-income consumers.

AS I SEE IT, as select legacy brands continue to struggle with nominal sales growth and public perception, they will look into exploring new restaurant segments and menu categories. Brands will increasingly ask the question: diversify with fast casual or innovate from within? Cracker Barrel Old Country Store will likely succeed with its well-matched, quirky biscuit fast-casual spinoff, while Chipotle Mexican Grill may want to improve its current core market footing before facing off against big-name better burger chains. Chains will need to evaluate their own risks and benefits, but regardless of their decision, fast casual will continue to grow at lightning speed.

Note: This content originally appeared in the April 2016 issue of Technomic’s Foodservice Digest newsletter

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Darren Tristano

Darren Tristano is President of Technomic Inc. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations.

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