Technomic: Fast-casual brands ahead of industry growth

Staff Writer
Fast-casual restaurants such as Chipotle and Five Guys are expanding much more quickly than the largest restaurant chains

Sales and unit growth at the country’s largest fast-casual chains continue to outpace that for the overall restaurant industry, according to the latest Fast-Casual Top 150 Chain Restaurant Report from Technomic.

The Chicago-based industry research firm found that the 150 largest fast-casual brands combined to grow their sales 8.4 percent to $21.5 billion in 2011, compared with a year earlier. That rate of growth increased from a 6.6-percent gain in 2010.

By comparison, sales grew for the 500 largest restaurant chains across all industry segments by an aggregate 3.5 percent in 2011.

Fast-casual brands expanded their unit counts far more aggressively than the restaurant industry as a whole, Technomic found. In 2011, the 150 largest fast-casual chains had an aggregate unit count growth of 5.2 percent, compared with a 0.7-percent increase for the 500 largest restaurant chains across all segments.

Technomic executive vice president Darren Tristano said fast-casual chains retain their hold on a “sweet spot” for restaurants, with reputations for fast service, fresh food, fair price points, and well-built takeout and catering operations.

“More success in fast casual is [leading] to greater frequency and competition in the segment,” he said. “If I’m not going to Chipotle for lunch, I’m going to another fast-casual chain like Five Guys.”

Technomic noted that two leaders of different fast-casual segments, Panera Bread and Five Guys Burgers and Fries, stood out with 2011 sales growth of 10.1 percent and 32.8 percent, respectively.

Panera had the most sales in the bakery-café segment with $3.3 billion in 2011, while Five Guys led the “better burger” sector with $950 million in annual sales. Chipotle Mexican Grill’s $2.3 billion in sales in 2011 paced the Mexican category, while Panda Express led the Asian segment with $1.5 billion.

Zaxby’s, Jason’s Deli and Donatos Pizza topped the chicken, sandwich and pizza segments, respectively, with annual sales of $840 million, $525 million and $166 million, respectively.

Tristano said a significant portion of the top chains’ sales growth is coming from higher unit counts and traffic, rather than growth in average unit volumes.

“As you increase the number of units, it gets harder to grow the average unit volume,” he said. “Look at Subway: It’s hard to get that level of volume when you’re competing with yourself. Five Guys is doing it through a price increase and likely through traffic. If there were cannibalization, there wouldn’t be such a large sales increase.”

He pointed out Chipotle as an example of a fast-casual chain that continues to grow same-store sales with continued smart marketing and a service style that gains efficiency through investments in online ordering.

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“If there are 30 people in line at Chipotle at lunch, customers know they’ll still get through it in a relatively short time,” Tristano said. He added, “Chipotle is the place to get a nearly one-pound burrito for around $6; it is really on par with the type of food and flavor profile, cost, and quantity people are looking for.”

Contact Mark Brandau at mark.brandau@penton.com.
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