2015 Second 100: Zoës Kitchen leads growth in Specialty LSR segment2015 Second 100: Zoës Kitchen leads growth in Specialty LSR segment

While it may be challenging to compete with larger burger and sandwich brands that have broad consumer appeal, certain specialized limited-service chains find that operating in the spaces between gives them an edge.

The NRN Second 100 LSR/Specialty chains continued to experience solid growth, with the seven qualifying brands posting aggregate U.S. systemwide sales of more than $1.8 billion, an increase from $1.6 billion two years prior.

These seven chains are not only performing well, but are outpacing the rest of the Second 100. In the Latest Year, LSR/Specialty posted 10.1-percent average sales growth, nearly double the 5.6-percent average sales growth of the entire Second 100. Additionally, the segment’s average growth in estimated sales per unit, or ESPU, was 3.1 percent, compared with 2.5 percent for the entire Second 100.

“The real advantage of these specialty concepts is there is a low saturation point,” said Dennis Lombardi, executive vice president of foodservice strategies at Dublin, Ohio-based WD Partners. “The downside of that is, what’s the frequency of wanting to eat that type of food?”

There seems to be no issue convincing consumers to frequently eat at Zoës Kitchen, the Plano, Texas-based fast-causal Mediterranean chain with a menu of such signature items as hummus, Greek Salad, Chicken and Orzo Soup, Chicken Kabobs, and Chicken and Slaw Pita.

In terms of sales growth, Zoës Kitchen is the fastest-growing LSR/Specialty chain, and the third fastest-growing chain of all Second 100 brands. In the Latest Year, Zoës Kitchen grew systemwide sales by 40.7 percent, over nearly 39-percent growth the Preceding Year.

“Zoës clearly has a lot of white space around it,” Lombardi said. “It’s very much on point with fast casual and fresh.”

Menu innovation, expansion of lunch and dinner offerings, and strong catering options are among Zoës sales drivers, executives told Nation’s Restaurant News last year.

The chain, which held an initial public offering of stock in April 2014, continued its steady unit growth, adding 30 units in the Latest Year, bringing it to a total of 132 locations. The chain’s ESPU rose 6.4 percent to $1.5 million.

“The concept continues to resonate with the consumer,” Zoës Kitchen CEO Kevin Miles told Nation’s Restaurant News in June. “We’re trying to bring Mediterranean mainstream.”

Also growing rapidly is Dallas-based Dickey’s Barbecue Pit, which maintained its position as the second fastest-growing chain in terms of sales growth in the LSR/Specialty segment, and the sixth fastest-growing chain out of all Second 100 brands.
 
The chain’s domestic systemwide sales increased 36.9 percent in the Latest Year, on top of a 36.8-percent increase the Preceding Year. The sales growth was aided by aggressive unit expansion. The 74-year-old chain, which didn’t start franchising until the mid-1990s, has added about 100 units in each of the last few years. Also contributing is a 5.8-percent growth in ESPU in the Latest Year.
 
Lexington, Ky.-based Fazoli’s seems to have corrected its course in the Latest Year after veering off in the Preceding. The LSR/Italian concept moved to fourth place from sixth, in terms of year-over-year system sales growth. The brand booked a sales increase of 4.3
percent in the Latest Year, which was a swing from a 6.4-percent decrease in sales in the Preceding Year. Fazoli’s is the sixth-largest brand in the LSR/Specialty segment, with $219.6 million in sales.

Wienerschnitzel, the Galardi Group-owned chain known for chili dogs and chocolate-dipped ice cream, held on to the fifth place in terms of sales growth, with a 4.1-percent increase in the Latest Year. The brand’s aggregate sales totaled $232.9 million on 322 units in the Latest Year.