Size may not matter so much in foodservice

by Erica Shaffer
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Technomic Top 500 infographic
Click image for a full-size view of Technomic's Top 500 highlights.

CHICAGO – Some of the largest foodservice chains in the United States struggled to make headway with consumers in 2014, while menu-focused competitors and emerging fast-casual concepts captured market share, according to preliminary results from the Technomic Top 500 Chain Restaurant Report. Technomic is a leading market research firm specializing in food-industry trends.

Cumulated sales for the 500 largest foodservice chains advanced 4 percent to an estimated $274.4 billion in 2014. That same year, those large chains also grew their overall unit count by 2.2 percent to more than 220,000 locations.

But four of the five largest brands struggled in overall sales, Technomic found. McDonald’s, Subway, Burger King and Wendy's saw estimated declines in 2014. The biggest losers were Subway at 3.3 percent and 1.1 percent for McDonald’s. The top-five brands accounted for a 0.3 percent increase in annual sales, when combined with Starbucks which recorded growth of 8.2 percent in sales and surpassed Subway into the No. 2 ranking behind McDonald's, Technomic reported.

“Brands focused on being the best, not the biggest, were the real winners in this year's Top 500,” said Darren Tristano, executive vice president of Technomic. “In many cases throughout fast-casual and specialized segments within quick-service and casual dining, narrowly focused menus and straightforward models for service and pricing have let brands put forward a value proposition and an image of high quality that definitely appeal to consumers.”

Taco Bell sausage and egg waffle breakfast sandwich
Leading foodservice chains struggle to resonate with customers while upstarts like Taco Bell make inroads in market share.

For example, Subway's sales decline reflected a 3.1 decrease in the chain's estimated average unit volume offsetting an estimated 2.9 increase in unit count to 27,205. But limited-service sandwich chains, such as Jimmy John's Gourmet sandwiches and Firehouse Subs, have reaped the most benefits within the segment with unit growth rates in the high teens and annual sales growth of 17.9 percent for Jimmy John's and 24.7 percent for Firehouse, Technomic noted.

“They are seizing market share, and big names like McDonald's and Subway will continue to lose share if their loss of focus continues to erode brand standards,” Tristano said.

The limited-service burger category posted a 1.3 percent gain in sales in 2014. Technomic noted that Wendy's and Burger King turned to non-burger offerings such as chicken nuggets to stave off competition from Taco Bell, Dunkin' Donuts and Starbucks. Meanwhile, Wayback Burgers, Smashburger and Shake Shack showed consistent unit and sales growth gains of more than 20 percent.

The limited-service segment overall is poised for growth, according to Technomic. The segment registered a 4.2 percent gain in sales in 2014, while fast-casual sales surged 12.8 percent. The Mexican and Asian/noodle categories in particular benefited from the growth spurt in the limited-service segment, Technomic said.

10 flavors of Wingstop chicken wings
Casual-dining "wing houses" fared well in 2014, according to Technomic.

“Within fast-casual, brands with a customizable menu that allows guests to build their own entrées grew even faster than chains with standard made-to-order menu items,” Technomic said in its report.

Adding to the limited-service landscape is a burgeoning “QSR-plus” segment in which chains offer foods higher in perceived freshness and quality, but without the fast-casual price points, according to Technomic. QSR-plus chains Chick-fil-A, In-N-Out Burger, Culver's, El Pollo Loco, Potbelly Sandwich Shop, Pita Pit and Freddy's Frozen Custard & Steakburgers logged a collective 9.2 percent sales gain in 2014, Technomic said.

In the full-service segment, casual-dining "wing houses" fared well in 2014. For example, Buffalo Wild Wings registered sales increases of 16.7 percent. Brands catering to a mostly male clientele, like Twin Peaks and The Tilted Kilt had sales of 44.7 percent and 19.1 percent, respectively, according to Technomic.

Meanwhile, the steak category led growth in the full-service segment with a 5.5 percent gain in sales, with chains like Texas Roadhouse, LongHorn Steakhouse and Fogo de Chao setting the pace.

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