Many of the major U.S. foodservice operators working to build sales and profits as a safeguard against unforeseen expenses in their most recent completed fiscal years found time to be no ally, as recessionary pressures mounted with each passing month.
The 36th Annual Nation’s Restaurant News Top 100 census of the largest foodservice chains ranked by U.S. systemwide sales shows that the country’s mightiest multiunit operators in their last finished fiscal years pushed up their aggregate total take by 3.85 percent, to $208.11 billion. However, that rate of growth was down substantially from the 5.47-percent year-over-year gain that group managed in the preceding period.
Aggregate U.S. revenue among the separately tracked Top 100 companies, or multiconcept and multi-chain organizations ranked on the basis of domestic revenues, rose by 9.79 percent, to $123.33 billion. Much of the latest-year gain was tied to full-year results from entities acquired by Top 100 companies part-way through the preceding year and, in comparison, the increase paled next to the 16.48-percent growth rate of a year earlier.
The second installment of NRN’s annual census, the Second 100, noting the trials, tribulations and triumphs of chains and companies ranked Nos. 101 through 200, will be published in the July 27 issue of NRN.
McDonald’s, given its strong same-store sales performance of the past two years and the three-to-one sales advantage it has over its nearest rival, continued its reign as king of the Top 100 chains, with latest-year U.S. systemwide sales of $29.99 billion. Its continued domination is of little surprise, even in a year with plenty of unpleasant ones. Certainly classifiable as an eye raiser, however, would be Subway’s reported $1.41 billion year-over-year gain in U.S. systemwide sales, to $9.64 billion, to unseat from the No. 2 spot Burger King, with estimated latest-year U.S. sales of $9.26 billion.
The U.S. foodservice operations of Britain’s Compass Group PLC remained atop of the companies rankings, with estimated latest-year foodservice revenues of $7.72 billion, which represented a 10.93-percent enhancement of its preceding year’s total. Darden Restaurants Inc., on the strength of its Olive Garden casual-dining chain and the incremental sales of the LongHorn Steakhouse chain it acquired in the preceding year, hung onto its No. 2 position with a 6.72-percent rise in latest-year revenues, to $7.10 billion.
Starbucks Corp. retained its No. 4 spot in the companies ranking, with latest-year revenues of $6.49 billion, helped, in part, by its September 2008 fiscal year-end. That close for its fiscal period gave it all of the sales leverage of the preceding and prior years’ aggressive new-unit development, but only a taste of the same-store sales challenges that would follow it into 2009, not to mention the impact of the closures of hundreds of domestic units underway since last fall.
Contrary to the long-standing assertions of Mick Jagger and his rocking Rolling Stones mates, time was not on the side of many Top 100 operators in the latest year, much as it has not been kind to nearly the entire industry in recent months.
Top 100: growth of top 5 chains and companies(Percentage change*, Latest Year vs. Preceding)
| SYSTEMWIDE SALES GROWTH | |
| Chipotle Mexican Grill/Chipotle | 22.27% |
| Buffalo Wild Wings Grill & Bar | 20.85% |
| Zaxby’s | 18.00% |
| Subway | 17.17% |
| Panera Bread | 16.25% |
| TOTAL UNIT GROWTH | |
| Chipotle Mexican Grill/Chipotle | 18.75% |
| Panda Express | 18.60% |
| Jason’s Deli | 15.25% |
| Buffalo Wild Wings Grill & Bar | 13.59% |
| Zaxby’s | 12.71% |
| REVENUE GROWTH | |
| DineEquity Inc. | 461.57% |
| Blackstone Group LP | 320.07% |
| gategroup | 167.63% |
| Texas Pacific Group | 151.21% |
| LRI Holdings Inc. | 74.38% |
Among the 20 2009 Top 100 chains that had fiscal year ends falling between July and October 2008, 20 percent had higher rates of actual or estimated systemwide sales growth in the latest year, compared to the preceding period; 60 percent had year-over-year growth, but at a slower rate than the previous 12 months; and 20 percent suffered decreasing systemwide sales. Of the 67 chains with fiscal year ends on or near Dec. 31, 2008, 19 percent had higher systemwide sales growth rates, 45 percent saw their rates of growth slow, and 36 percent experienced decreasing sales.
Fast forward six months, and the actual or estimated results for the 13 Top 100 chains with fiscal years ending between January and June 2009 indicate that nearly half, or 46 percent, had lower systemwide sales in the latest year compared to the preceding one; and only 15 percent improved their rate of year-over-year growth.
“Hot dogs, frozen yogurt and whole pizzas have been our [sales] drivers. Anything on the menu at $2.99 to $3.99 is not moving at the same volume, as [the year] before,” Alan Bubitz, vice president and general manager of food courts, bakeries and delis for Costco Wholesale Corp., said recently.
Costco’s 394 in-store food court and snack bars saw domestic systemwide sales for the fiscal year ended last August climb by 11.82 percent, to $492.0 million, moving it from the Second 100 into the Top 100. But repeating such growth in the current fiscal year may be tough, as Bubitz noted in early June, “In the last three months, we’re seeing that the [store] traffic and the amount of money people are spending have flattened out.”
Also new among Top 100 chains this year are the Jason’s Deli sandwich chain, the Bon Appétit Management Co. contract foodservice operation and casual dining’s Famous Dave’s barbecue chain.
Newcomer companies to the Top 100 include convenience store operators Casey’s General Stores Inc. and Sheetz Inc., and investment group Apollo Management LP, which entered the census through the co-purchase with Texas Pacific Group of casino and resort operator Harrah’s Entertainment.
Like the stars that rose out of the Second 100, the Top 100 had a number of established organizations that shined in the latest year, as revealed by the graphs, tables and articles throughout the Top 100 section.
Eleven Top 100 chains saw double-digit growth in latest-year systemwide sales, including Chipotle Mexican Grill, Panda Express, Buffalo Wild Wings Grill & Bar and Zaxby’s. Those four chains were also among the 10 chains with the highest rates of year-over-year growth in total units.
Perhaps an indication of the advanced maturity of some industry segments, as well as the general economic slowdown, the rate at which Top 100 chains, as a group, opened new restaurants slowed to 1.58 percent in the latest year, from 2.25 percent a year earlier. That result marked the third time in as many years that net new unit development growth fell below 3 percent, which contrasts with the growth rates of from 3.08 percent to 5.02 percent registered by the Top 100 classes of 2003 through 2006.
At the end of the latest year, the aggregate base of restaurants operated or franchised by Top 100 chains was 195,227.
Refranchising efforts, as well as the closure of restaurants for conventional business reasons, resulted in a 0.23-percent contraction in the total number of company-operated locations, to 71,280 units, among Top 100 chains at the end of the latest year. Yum! Brands Inc. was one of the companies with an aggressive refranchising agenda. Among other developments, it transferred to franchisees or closed a total of 328 Long John Silver’s quick-service seafood restaurants to render that 1,022 chain entirely franchisee operated by year’s end.
Despite such refranchising achievements and the redoubled efforts of franchisor sales teams industrywide, the rate of growth in franchised restaurants slowed in the latest year to 2.66 percent, from 2.74 percent in the preceding 12 months. When the latest year ended, franchisees of Top 100 chains operated, in aggregate, 123,047 units.
Chick-fil-A, Panera Bread, Papa Murphy’s Take ‘N Bake Pizza and Subway also achieved double-digit systemwide sales growth in the latest year. Contributing to their sales increases were growth rates for estimated sales per unit, or ESPU, that placed those operators among the top 10 chains ranked by that metric, a group that also included Buffalo Wild Wings and Costco.
Such ESPU improvements were not easily won in the latest year, as just 39 of the 85 chains ranked by that measure showed growth. That compares with growth in estimated sales per unit by 59 of 85 chains in the preceding period.
On the company side of the census, all of the top 10 organizations, in terms of year-over-year growth in U.S. revenues, benefited significantly, if not entirely, from acquisitions, including No. 1 DineEquity Inc.
DineEquity marked a 461.57-percent increase in revenues, to $1.34 billion, thanks, in large part, to having booked its first full year of revenues from the Applebee’s Neighborhood Grill & Bar chain acquired late in the preceding fiscal year. No. 2, Blackstone Group LP, with a 320.07–percent increase, to $1.13 billion, likewise benefited from its first full year of estimated foodservice revenues from the Hilton Hotels chain acquired in the preceding year. Also a Blackstone boon: nine months of revenues from multiunit Burger King franchisee Heartland Food Corp., which Blackstone bought early in its latest year, along with Heartland-parent GSO Capital Partners.
The statistical accomplishments or challenges of 2009 Top 100 chains and companies aside, the latest fiscal years tracked by the census almost universally were branded by hard decisions and hard work among executives and unit-level workers.
The 483-unit Golden Corral chain owned by Investors Management Corp., traditionally a strong contender in the buffet segment, saw minor erosion in its systemwide sales and estimated sales per unit in the latest year. It worked through that challenging environment to continue refining a new 20-percent larger “Pavilion” prototype restaurant design that, in tests at four locations, has contributed to 25 percent to 40 percent higher unit volumes compared to the “Strata” prototype now in use, chain officials said.
Golden Corral’s new San Antonio restaurant achieved a 30-percent increase in the variety of products if offers by using the Pavilion design’s five distinct cooking stations, including those specializing in Asian, Mexican, Italian, seafood and American family favorite foods. Bob McDevitt, the chain’s senior vice president of franchising, said “years of customer research” drove the new design and menu, as it indicated guests “wanted a new buffet experience that appealed to all of their senses.”
James Olson, chief executive of large KFC franchisee Harman Management Corp., said such things as changing markets and short-term leases prompted his company to close 11 restaurants in recent months, rather than spend the estimated average of $500,000 each to bring them up to new franchisor-mandated specifications.
Explaining how his company has cut costs and tried to protect the income of workers who otherwise might have seen hours reduced in this economy, Olson said, “[Outside] services that are used when things are booming are being brought back in house.”— [email protected]
