ATLANTA A recent survey of casual-dining and quick-service franchisees indicates they are optimistic about growth in restaurant sales in 2010, despite declines this year, and many are planning to open more units in the New Year.
SunTrust Robinson Humphrey Inc., an Atlanta-based investment banking firm, surveyed some of the largest franchise operators across the United States, receiving 69 responses representing nearly 5,000 restaurants — 3,883 quick-service locations and 1,012 casual dining units.
Those franchises were “more optimistic about sales than we expected,” Christopher O’Cull, an analyst with the SunTrust Banks subsidiary, said in a report released last week. In addition, about 46 percent of the surveyed franchisees said they expected to add to their unit counts in 2010. Only 19 percent of those polled expected to reduce system size with closures.
Those results are turnabout from the prevailing trends of 2009, when sales fell and large franchised systems were weakened by unit closures, bankruptcies and slowed or halted expansion plans, mostly because of the macro-economic environment and the lending lockdown that was so prevalent this year.
With year-to-date same-store sales results estimated to be down 5.5 percent in casual dining and down 1 percent in quick service, the report found that “almost half of the franchisees responding to the survey are targeting 2010 same-restaurant sales to be flat to up year-over- year.” Casual-dining chains were less positive about 2010 than quick-service operators, the survey found.
Casual-dining franchisees anticipate same-store sales to hit a range of between negative 2 percent and positive 2 percent, which the SunTrust report said was “better than the current segment trend.”
Among surveyed franchisees anticipating above-average same-store sales growth in 2010 were those in the McDonald’s, Papa John’s and Popeyes systems.
The sales upticks will likely be driven by deal-induced traffic gains and some selective menu prices increases, the survey indicated.
“We surmise operators anticipate promoting lower priced items or discounting, but still [will] raise prices hoping to find some inelastic users,” O’Cull said.
Most operators were anticipating 2010 cost inflation to range between flat and an increase of 3 percent.
Finally, franchisees were asked what they would label as the most important, or most desired, franchisor service. Top responses included new product development, local marketing, and improved menu and price management.
Contact Ron Ruggless at [email protected].
