This is part of Nation’s Restaurant News’ annual Second 100 report, a proprietary census ranking restaurant brands Nos. 101-200 by U.S. systemwide sales and other data. This special report focuses on a smaller, more growth-oriented universe than the Top 100 report.
July 29, 2014
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Carol Krol
Smashburger continued to gain popularity, with a 14.3-percent share of the LSR/Burger market in the Latest Year.
While the Casual-Dining segment continues to dominate total market share among Second 100 brands in terms of total U.S. systemwide sales, that share has dipped marginally in both the Preceding and Prior years as Limited-Service brands steal share with sales and expansion surges.
In the Latest Year, Casual Dining claimed a 40-percent aggregate market share, a decline of 0.1 percentage point from the Preceding Year. More than half of the chains in the segment — 22 of the 42 operators, which range from Maggiano’s Little Italy to Del Frisco’s Double Eagle Steak House — experienced a decrease in Latest-Year segment share among competitors. Twenty chains posted increased or flat segment share results.
In contrast, much smaller segments have seen their aggregate share of Second 100 sales continue to grow. Large market share gains were seen from the LSR/Burger, Bakery-Cafe and LSR/Sandwich segments. Those groupings include upstarts like Smashburger and Freddy’s Frozen Custard & Steakburgers, Corner Bakery Cafe and La Madeleine Country French Café, and Potbelly Sandwich Works.
Smashburger’s star continues to rise, with a 14.3-percent share of the LSR/Burger market in the Latest Year. The chain’s back-to-back share gains have eaten into the share of market owned by LSR/Burger competitors like Fuddruckers and Rally’s Hamburgers.
The Denver-based better-burger chain operated or franchised 240 restaurants at the end of the Latest Year, and it has aggressive expansion plans. In May the chain promoted David Biederman to the newly created position of chief development officer to aid expansion of the franchise pipeline across the East Coast.
Smashburger told Nation’s Restaurant News it had signed franchise agreements with five new groups this year, and existing franchisees have increased their commitments, resulting in a plan for breaking the 300-unit marker this year and adding an additional 61 new restaurants over the next several years.
Both Smashburger and Freddy’s posted robust gains in market share of 2.5 points. The LSR/Burger segment as a whole had the largest overall growth in Second 100 share of market, with a 6.4-percent Latest-Year share, up from 6.1 percent in the Preceding Year.
In the LSR/Sandwich segment, Potbelly posted two consecutive years of increases. Potbelly’s Latest-Year performance stands in contrast to its more recent troubles — namely, a poor first half of 2014, which the company warned Wall Street on earlier this month. Potbelly said it expects a same-store sales decrease of 1.6 percent for its second quarter, and a handful of securities analysts lowered stock price targets for the Chicago-based company accordingly.
Chief executive Aylwin Lewis said the company is disappointed by its most recent quarter and will work on a plan of attack to revive same-store sales.
“We have three main drivers of profit growth: comparable-store sales, operational productivity and profitable new unit development,” Lewis said in a statement. “Two of the three continue to deliver expected results. The obvious opportunity for us is to regain comparable-store sales momentum.”
Lewis added that Potbelly would “vigorously test” new initiatives for its menu, marketing and operations during the second half of 2014.
The remaining Second 100 segments are comprised of a relatively small number of brands, each competing within its segment for market share. Traditional concepts, represented by Family Dining and Buffet, for example, continued to fare poorly in the Latest Year. Family Dining’s share of the overall market slipped two years in a row, as did that of LSR/Mexican, Buffet, Grill-Buffet/Salad Bar and In-Store.
While smaller brands in terms of overall sales, more targeted concepts continued a strong Latest-Year showing in terms of market share gains. LSR/Specialty concept Dickey’s Barbecue Pit, in particular, has experienced healthy gains in segment share for the past two years. Its 17.6- percent share in the Latest Year was up from 14 percent in the Preceding Year. The LSR/Specialty segment, overall, also grew its share of Second 100 sales, gaining nearly 0.2 points on a Preceding-Year share of 8.1 percent to end the Latest Year with 8.3- percent of the universe’s sales.
