Although some prominent casual dining chains have struggled to find growth of late, a new report from GE Capital Franchise Finance concludes that, overall, mature chain restaurants brands are more than holding their own. In fact, they’re growing revenue at a slightly faster rate than the broader restaurant industry, an indication that chains are actually increasing their overall market share.
That’s the upshot of the 2014 edition of GE Capital’s Chain Restaurant Industry Review (CRIR). The company generates its numbers via an array of proprietary data that includes more than 25,000 individual unit-level financial statements and other analytical tools. Most of the findings are released only to GE Capital’s 2,000 customers, primarily midmarket chain restaurant companies. But GE Capital does share some data, giving full-service independents and emerging chains some interesting figures to compare with their own performance numbers.
Top-line results indicate that restaurant patrons are spending more, but dining out slightly less. CRIR numbers show that in 2013, restaurant sales rose 3.1 percent, reaching $440.2 billion. Same-store sales were off slightly—down 0.1 percent—but average guest checks rose 2.6 percent. The study expects this trend to continue, with nominal restaurant sales increasing 3.6 percent this year.
The Chain Restaurant Industry Review pays special attention to the industry’s top 100 chains, which it points out account for 49.5 percent of all restaurant sales and 44.5 percent of total U.S. restaurants units.
“Sales among those on the top 100 list grew 3.5 percent year-over-year, outperforming the overall restaurant industry,” the report notes. “Quick service restaurants (QSRs) grew faster than full service restaurants (FSRs), continuing the trend seen over the past six years.”
CRIR notes two trends that are serious negatives for full-service operators. It reports that the cost of goods sold in the FSR segment has been steadily increasing over the last four years, and that in 2013 labor costs were higher they have been in four years.
Overall, the GE Capital report outlines a slow- to no-growth scenario for the restaurant industry, depending upon the segment in which an operator does business.
But at least one part of the industry remains red-hot: fast casual, where full-service caliber food is served at near-QSR speeds. Sales in this hybrid segment rose 11 percent in 2013 while the number of units increased by eight percent. That’s where operators who want to have operating results better than broad industry averages documented in the CRIR report may have to go if they want to find growth.
"Watch for even more menu and concept diversity in this sector," says Technomic’s Darren Tristano. "Also look for more quick-service restaurants and full-service restaurants to realign their formats and develop new fast casual concepts to compete more aggressively."