Data

• U.S. Chain Systemwide Sales
• Growth in Chain U.S. Systemwide Sales

Aggregate U.S. systemwide sales grew at foodservice chains in the 2014 Nation’s Restaurant News Second 100 by the same percentage in their latest fiscal years as they did in the preceding year. However, their larger Top 100 adversaries bested them with better year-over-year growth.

Anchored by 42 brands in the Casual-Dining segment, the Second 100 chains — or those ranked Nos. 101 to 200 on the basis of U.S. systemwide sales — generated combined estimated or reported Latest Year sales of $23.4 billion, a 2.7-percent increase compared with the Preceding Year.

By comparison, the NRN Top 100 chains highlighted in June increased their aggregate Latest-Year sales by 3.2 percent for a total of $222.1 billion.

The Second 100 chains as a group experienced a significant slowdown in the rate of new store development in the Latest Year. They expanded their total base of U.S. sites by a slim 1 percent, or a net 184 locations, to 19,266 units total. Preceding-Year unit growth was 1.5 percent.

SPECIAL REPORT:
SECOND 100

Analysis:

• Editor's letter
• Top 10 growth chains
• Market share trends
• Unit-level trends
• Company analysis
• Limited-Service segment
• Casual-Dining segment
• LSR/Specialty segment
• Pizza segment
• Family-Dining segment
• Beverage-Snack segment
• Bakery-Cafe segment

>> GO TO ALL SECOND 100 RANKINGS AND DATA >>

The Top 100 had a more robust 2.3-percent unit growth in the Latest Year, increasing its total U.S. location count to 188,817.

While Second 100 chains maintained their sales-growth momentum in the face of the Top 100’s might, they didn’t maintain their share of sales. The second-tier’s piece of the combined Top 200 sales pie dipped to 9.5 percent in the Latest Year, compared with 9.6 percent in the Preceding Year and 9.8 percent in the Prior Year.

Many casual-dining chains have seen their growth hampered in recent years by more frugal diners, improving quick-service restaurant menus, better supermarket convenience foods and the rise of fast-casual concepts looking to combine near-fast-food service times and table-service food quality.

Executives at Brinker International Inc. — parent of the Second 100’s top-ranked chain, No. 101 Maggiano’s Little Italy — last year referred to casual dining as “a fairly lethargic category,” and some Second 100 data supports that assertion.

Though it claims 42 percent of Second 100 chains, the Casual-Dining segment generated 40 percent of the roster’s total Latest-Year sales. That is down from a 40.7-percent share two years earlier. As a segment, it grew combined Latest-Year sales by 2.4 percent, compared with growth rates ranging from 3.5 percent to 8.6 percent for six other major segments — Bakery-Cafe, Beverage-Snack, LSR/Burger, LSR/Sandwich, LSR/Specialty and Pizza — and the “Other” group comprised of five smaller segments.

Malcolm Knapp, president of Malcolm M. Knapp Inc., which produces the Knapp-Track report on casual-dining business trends, said the abundance of casual-dining chains in the Second 100 “is a marker that there really is a market for them.” Talk that “casual dining is dead” is off base, he said.

Casual-dining strategies

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In fact, four of the top 10 Second 100 chains ranked by growth in Latest-Year systemwide sales are casual-dining brands: newcomer and No. 1 Twin Peaks, No. 5 brand Seasons 52, No. 6-ranked Bar Louie and No. 9 Bahama Breeze. Within that group, growth in Latest-Year systemwide sales averaged 35.9 percent.

Data

• Market Share by Segment
• Company U.S. Foodservice Revenue
• Growth in Company U.S. Foodservice Revenue

That’s not to say the segment is without its challenges. Knapp said that as consumer demands change, casual-dining concepts must be more flexible in food and service options, particularly around the lunch daypart and dinner takeout business. He indicated that casual-dining concepts can excel at serving diners who want to socialize. Another area where they can stand out is food quality, by virtue of their table-service formats, bars and higher sales volumes that support greater investments in facilities and culinary teams.

Now, more than ever, casual-dining operators have the knowledge and tools to become more relevant to consumers and build sales, Knapp said. Recent advances in cooking equipment, better understanding of how remodels can build sales and how social media can foster guest loyalty, and the availability of technologies that give patrons more control over their experience — such as tabletop tablet computers for self-ordering and payment — can help operators leapfrog their competition.

Going forward, Knapp said, casual dining’s top performers will be the ones “who figure it out” and give consumers “the experience they want, when they want it” by capitalizing on the latest tools and technology.

Second 100 chains of all types found it tougher to increase their U.S. systemwide sales in the Latest Year for a variety of reasons. Those factors included extreme weather, the federal government shutdown and its impact on consumer confidence, heightened discounting intended to spur guest traffic, and bankruptcies, such as by Champps Americana-parent F&H Acquisition Corp.

Average growth in systemwide sales among all Second 100 chains decelerated to 3.9 percent in the Latest Year compared with 5.4 percent in the Preceding Year.

In the Latest Year, 61 Second 100 chains grew their domestic sales by an average of 10.1 percent, while 39 generated lower sales, with the decrease averaging 5.8 percent.

Improvements in store-level output were also harder to come by in the Latest Year, as 60 chains increased their estimated sales per unit, or ESPU, compared with 80 brands from the same roster that bettered that metric a year earlier.

Estimated sales per unit breakdown

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Among the chains that increased their ESPU, the average rate of growth fell from 4.2 percent in the Preceding Year to 3.5 percent in the Latest Year. Within the group of chains with lower ESPU, the average rate of erosion was 3.5 percent in the Latest Year and 5.7 percent in the Preceding Year.

Data

• Estimated Sales Per Unit

Across the entire Second 100, average growth in NRN’s proprietary ESPU metric was 0.7 percent and 2.2 percent in the Latest and Preceding Years, respectively.

Second 100 newcomer Del Frisco’s Double Eagle Steak House helped raise the average for growth in ESPU with a Latest-Year increase of 10.2 percent, to $14.5 million. Del Frisco’s ESPU — the highest associated with any 2014 Top 200 chain — was 5.7 times larger than the Second 100’s overall average ESPU of $2.5 million and was 41.2-percent greater than the $10.2 million showing of Top 100 leader The Cheesecake Factory.

Whether a result of losing sites to larger chains with greater real estate acquisition resources or a reflection of the contraction that has sent some chains backsliding out of the Top 100 into the second tier, Second 100 chains struggled to build their base of U.S. locations in the Latest Year. The slowdown in the Second 100’s average rate of growth in U.S. systemwide units to 2.7 percent in the Latest Year from 3.9 percent in the Preceding Year only hints at the problem.

In the Latest Year, 44 chains added to their domestic store base, with an average increase of 11.2 percent. Seven ended the year with the same number of locations, and 49 lost — on average — 4.7 percent of their net unit count.

Data

• U.S. Units
• U.S. Unit Growth Rates
• U.S. Franchise Unit Growth

Seventy-four of the 2014 Top 100 chains added to their U.S. store base in the Latest Year, up from 72 chains a year earlier.

The top five Second 100 chains in terms of net number of domestic units added in the Latest Year were Dickey’s Barbecue Pit, which added 113 locations; Marco’s Pizza, with 103 additions; Smashburger, tallying 54 new units; Second 100 first-timer Menchie’s Frozen Yogurt, which expanded by 44 units; and Potbelly Sandwich Works, with 37 additional units. That quintet had Latest-Year average growth in total U.S. units of 25.9 percent, and its combined gain of a net 351 locations accounted for 49.8 percent, or nearly half, of the net 705 locations added by Second 100 chains that built store base during the year.

Despite all the potential roadblocks to growth for second-tier chains, five expanded into the Second 100 from below in the Latest Year.

Joining No. 182 Twin Peaks, No. 197 Del Frisco’s and No. 199 Menchie’s on the Second 100 newcomer list was Freddy’s Frozen Custard & Steakburgers, No. 195, an LSR/Burger player with a signature treat offering, and Bakery-Cafe brand La Madeleine Country French Café, our No. 200 chain.

Miller’s Ale House, No. 119, also joined the Second 100 this year after a sales disclosure by its owner shed light on its true size.

Contact Alan J. Liddle at [email protected].
Follow him on Twitter: @AJ_NRN.