2015 Second 100: Sales rise for Limited-Service segment2015 Second 100: Sales rise for Limited-Service segment

Finely-tuned operations and a focus on customer service drove the success of the fastest-growing Second 100 Limited-Service chains, executives of those chains said.

Aggregate U.S. systemwide sales for the Limited-Service segment — made up of eight burger chains, six sandwich chains and six Mexican chains — topped $5 billion in the Latest Year, up 3.7 percent from $4.8 billion a year earlier. The chains averaged 7.7 percent year-over-year growth in sales, outpacing the 5.6 percent average for all Second 100 chains.

While the total U.S. unit count for the Limited-Service segment fell 4.5 percent in the Latest Year, from 6,071 restaurants to 5,796, that result was heavily weighed down by Quiznos, which lost 434 stores in the Latest Year. Excluding Quiznos’ performance, the group’s aggregate unit count would have increased 3.4 percent.

Much of the segment’s momentum came from strong performances by the burger players, which had an average year-over-year sales growth rate of 14 percent, compared with 2.3 percent for Limited Service/Sandwich chains and 4.8 percent among the Limited Service/Mexican players.

Standouts were The Habit Burger Grill, Freddy’s Frozen Custard and Steakburgers, and Smashburger, which took the No. 1, 2 and 4 ranks, in the segment, respectively, in terms of sales growth. The chains took the top three in terms of unit growth as well.

Smashburger, meanwhile, had year-over-year sales growth of 19.4 percent and 20 percent unit growth rate to end the Latest Year with $256.5 million in domestic systemwide sales and 288 units.

Three other Limited-Service chains — Cafe Rio Mexican Grill, Charley’s Grilled Subs/Charleys Philly Steaks and Potbelly Sandwich Works — also had double-digit sales growth in the Latest Year.

Executives at the best-performing chains credited employee training and a positive company culture for their success.

“At the end of the day, you have to have a concept that has compelling enough box economics for people to invest in [and] that resonates with customers — but you’ve got to have great people,” said Habit Burger Grill CEO Russ Bendel.

 “The Habit has always been a very strong, high-level operating company that really resonated well with, first, employees, and then with customers,” he said.

 “We have a lot of touch points that are focused on the ongoing professional development of the management teams and the hourly teammates,” he added.

The Habit Burger Grill, making its Second 100 debut, posted year-over-year domestic sales growth of 45.9 percent — the largest sales jump of any chain in this year’s Second 100 — and grew its unit count by 25 stores, a 29.4 percent gain, to end the Latest Year with 110 units.

Freddy’s Frozen Custard & Steakburgers’ 29.8 percent year-over-year gain in units — to end the Latest Year with 135 stores — led the Limited-Service segment, and represented the third highest rate of unit growth boosting among all Second 100 chains. It also grew domestic sales by 38.4 percent to $200.6 million, making it the second fastest-growing chain in the Limited-Service segment and the fourth fastest-growing chain in the full Second 100.

Bill Simon, CEO of Freddy’s said the overall satisfaction of both customers and staff is vital to his chain’s success as well.

Since he started doing focus groups with his guests in 2007, he said they have consistently found that the guests’ favorite part of eating there is the people.

“We continue to get comments that the staff seemed happy to be there,” he said.

Store-level management at the mostly franchised chain — who spend 31 work days in in-store training — are encouraged to interact directly with customers, Simon said.

“We didn’t know that you weren’t supposed to provide good service in a limited-service restaurant,” he said. “It really was a recipe for success.”

So is the relatively simple menu, he said, which is mostly burgers — thin 1/6th pound patties that cook quickly — along with frozen custard, Vienna Beef hot dogs, grilled chicken and chicken tenders.

“The menu overall is quite limited. It makes it attractive to franchisees, we’ve learned,” he said.

Contact Bret Thorn at [email protected].
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