2008 Restaurant Report Card

According to a new report by Technomic, the 500 largest U.S. restaurant chains registered slower growth rates of 3.4% in 2008. System-wide sales for these Top 500 rose to $230.2bn, up $7.6bn over the previous year. Sales growth the previous year had been 5.0%, and the downturn can be traced to the recession and slowed expansion by chains under pressure to cut back (1.8% expansion vs. 2.6% in 2007). The big growth areas were the limited-service Bakery Cafe, Coffee and “Other Beverage,” along with the perennial favorite, Hamburger. Panera Bread (16.2%), Starbucks (6.9%) and Burger King (6.6%) led the growth estimates. McDonald’s grew an estimated 4.4% on sales over $30bn).

Subway continued its domination of the expanding “Other Sandwich” classification with 17.1% sales growth on total sales of $9.6bn, far outstripping the 9.1% of the rest of the “Other Sandwich” chains combined, and making it the second-largest restaurant chain in the U.S. and pushing Burger King into third (followed by Starbucks and Wendy’s). Limited-service chains accounted for over 80% of all U.S. “fast food” restaurants, with the group expanding by 4.5%. The “Asian” category grew at 12% with the California-based Panda Express the leader at 14.6% growth on sales of $1.18bn. The “Fast Casual” category continued to expand, and the “Mexican” segment saw Chipotle Mexican Grill and Qdoba Mexican Grill posting robust system-wide sales growth (20.7% and 17.8% respectively). Chicken leaders were Wingstop (23.6% growth) and Zaxby’s (17.9%).

Full-service chains accounted for only 39% of all U.S. restaurants, with the group growing at an anemic 0.9% rate. Only the “Asian” sub-category of this group showed robust growth of 9.3% with the leaders Arizona-based P.F. Changs China Bistro (8.7% growth on sales of $928MM). The real shocker, though, was in the "Varied Menu" category, which fell from 5.4% growth the prior year to a paltry 1.5%. Fast casual chains took much of their market share in the “lunch” day part, along with unit closures and retailers offering dinner options. Only the Italian sub-segment showed promise (3.4%). Mexican, Steak and Seafood all were below-average with sales declines of 1.8%, 0.7% and 0.4% respectively. Family-style restaurants had modest growth of 0.5%.

It’s not surprising that the strong got stronger, with the top 10 fastest-growing chains’ sales accounting for $4.9bn (24% more than 2007) and with unit counts up 22%. Four chains with sales above $2bn had double-digit growth, including Subway (17.1%), Panera Bread (16.2%), Chick-fil-A (12.2%) and Olive Garden (10.2%). Of the four, only Olive Garden is a full-service chain. The scale of performance also was enormously varied, with Buffalo Wings & Rings showing an 89% growth, while Bennigan’s Grill and Tavern suffered a 33% sales decline following its bankruptcy and closure of many outlets. Only 56% of the Top 500 restaurant chains had at least nominal sales increases, while 213 suffered sales declines (vs. 129 the year before). International growth outstripped US levels significantly, up 13.4% overall vs. 3.4% domestically. International unit growth outpaced domestic growth 9.9% to 1.8%.

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