As the industry continues to lament casual dining’s struggles, it’s not the only segment hurting for both sales and units. So it stands to reason that the chain restaurants likely to pull ahead of the pack are not the ones setting sales records, but those managing to prevent a slow and steady decline. And much of that water-treading is falling to the limited-service realm. Read on to see how.
Slower growth as success
In its annual preliminary peek behind the curtains, Technomic’s Top 500 Advanced Chain Restaurant Report reveals that limited-service chains’ sales grew 4.4% in 2016. Though faring better than the 3.6% growth of the industry overall, they’re still down about 1% from the prior year. However, the segment isn’t letting modern struggles like real estate woes and a lack of “A” locations slow expansion, as unit growth among LSRs is up 1.9% for the full year.
Fast casual still a force
As expected, fast casual remains the shiny spot for the industry, growing sales 8.1% in 2016. While that number is the highest among all segments, it’s the first time fast casual has dipped below double-digit sales growth in recent years. As the segment matures, emerging cuisines such as Mediterranean are gaining steam while players in larger and highly competitive spaces—like build-your-own-pizza concepts—are starting to thin out.
Though fast casual remains a relatively small segment compared to the rest of the industry, it has driven those making gains throughout to step up their service, menu, value equation and more, and will likely continue to do so. “Expansion in the fast-casual market [has] pushed operators to be more nimble, focused and convenient,” Darren Tristano, chief innovation officer for Winsight, parent of Technomic and Restaurant Business, said in a release.
Signs of what's to come? ...
At fast-food spots, unit growth has stayed relatively flat, and sales dipped to 3.7% in 2016, down from 4.6%. That slow bleed, though, isn’t as notable as the flood at full-service spots, which saw total sales slow from 4% to 1.4% and unit growth down to less than 1%. (Notably, fine-dining and polished-casual brands saw higher sales increases than full service overall.)
Could these early results be proof of the talked-about anti-chain movement that’s causing concepts like Taco Bell to adopt a more local, indie feel at some units? Or is it a one-year fluke?
... Most likely.
“Many of the issues that reared their head in 2016 and slowed industry growth show no signs of abating in 2017 and will continue to challenge restaurant operators,” says Kevin Schimpf, manager of industry research for Technomic. “Labor issues, increased competition from nontraditional foodservice and location oversupply are just a few of the operational hurdles that will likely result in 2017’s performance prospects looking relatively similar to 2016.”