Chains of Command
In an industry routinely described as mature, huge growth still is possible
By Patricia B. Dailey, Editor-in-Chief -- Restaurants & Institutions, 7/1/2006
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Counted one by one, simple mathematics shows vastly more independent restaurants in the United States than those that fall under the banner of large chain. Statistics from the National Restaurant Association indicate that seven of 10 are single-unit, independently owned operations, the fabled mom-and-pop shops that long ago set the foundation that today solidly supports the $511 billion foodservice industry.
But it’s a ratio that doesn’t reflect the disproportionate influence of chain operations. From nearly all perspectives, chain restaurants stand dominant—in the national landscape, consumer mindset and in their financial girth. They make news—both good and bad—set trends, shape tastes and account for a huge chunk of total industry sales. In short, what chain restaurant companies do and how they perform matter on many levels to operators across all industry segments.
Since 1964, Restaurants & Institutions annually has chronicled the growth, development and powerful sway of the Top 400 chains. With this issue, the saga continues, the latest installment in a tale of titans and champions, gainers, losers and entrepreneurs. Although numbers give the story its structure, those objective measurements represent only part of the plot. Beyond them lie people, trends, strategies and directions that, moving forward, will contribute positively or negatively to each brand’s success.
Much can be gleaned from this issue’s pages. Insights and discoveries that come from close examination add up to a wide-angle portrait of commercial foodservice that offers strong indications of what likely will unfold in coming months.
In an industry routinely described as mature, huge growth still is possible. In its third year on the Top 400 list, Bonefish Grill (it debuted in 2004 at #282 and last year ranked #148) moved to #135, catapulted there by 66.6% sales gains on 47.6% unit growth. Potbelly Sandwich Works and Smokey Bones Barbeque & Grill also inhabit the 50%+ growth space, with 55.4% and 54.6% sales growth respectively.
By increasing its net units by only 1%, McDonald’s added more new stores (270) than all but KFC, Subway, Starbucks, Domino’s Pizza and Dunkin’ Donuts.
Salads, premium coffees, ciabatta bread and a world of ethnic flavors added sales muscle to many menus.
Five concepts—The Cheesecake Factory, Del Frisco’s Double Eagle Steak House, Fogo de Chão, Nobu and Smith & Wollensky—boast average unit volumes that exceed $10 million. Rainforest Cafe and Maggiano’s Little Italy aren’t far below that mark, averaging $9.2 million and $9 million respectively.
Sixteen chains crossed into 400 land for the first time, displacing an equal number. Segment-wise, the newcomers are a diverse collection; a pair each landed in burgers, seafood, steakhouses, sandwiches, chicken, casual and Mexican, with one each in Asian and treats.
The R&I Top 400 tells many stories, not just that McDonald’s remains omnipotent, but that 399 other concepts—representing nearly 259,000 units and $259.5 billion dollars in sales—contribute mightily to a vast and vibrant industry.
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