The last three months of 2017 were anything but ordinary, based on restaurant industry sales as reported by the relatively small number of publicly traded companies.
Not everybody has reported earnings yet, but enough have done so that we can make a few judgments.
One of those judgments: The quarter wasn’t that bad. It wasn’t spectacular, of course, but most chains have reported a same-store sales increase, and there were more than a few surprisingly good performances.
Here are some winners and losers from the fourth quarter of last year.
Winner: Casual dining
There is no question that casual-dining chains ended the year right. Outside of the nearly 11% same-store sales decline at Sullivan’s, due largely to the end of its lunch business, no casual-dining concept has yet reported a big sales decline.
That, in and of itself, is a major victory for a sector that has been beleaguered for a long time. Indeed, many chains reported surprisingly strong periods. That includes Famous Dave’s and Applebee’s, two chains that have been on the losing end of the customer battle for the past couple of years.
Casual dining is not out of the woods yet. The sector is losing a lot of units and has a lot of struggling concepts, and consumers just aren’t dining that way as much as they once did. But for one quarter, at least, it was on top of the industry.
Loser: Fast casual
Yes, yes, yes. I did just get done proclaiming fast casual to be booming. But among publicly traded fast-casual chains, this is still a difficult market.
The nine chains that report earnings together averaged a 1.91% decline. Chipotle, long among the sector’s leaders, had an especially disappointing 0.9% increase in same-store sales that probably contributed to the decision by CEO Steve Ells to step down.
This is probably a good time to remind you to avoid drawing broad-based conclusions based upon the performance of a handful of chains that happen to be publicly traded. A remarkably small percentage of fast-casual concepts are publicly traded. And those chains happen to have weak same-store sales.
The Dallas-based chicken wing chain was the top performing limited-service chain in the fourth quarter, with 5.1% same-store sales growth.
That was a nice recovery from the first quarter, when its same-store sales declined 1.1%. The chain began advertising, which helped generate customer awareness and quickly helped its sales recover.
Loser: Taco Cabana
Another Dallas-based chain, Taco Cabana, reported a 7.4% decrease in same-store sales in the quarter ended Dec. 31.
Its transactions were down 12.2%.
The company said that sales trends “have remained challenged” in part because the brand’s relaunch had been delayed. But the weak quarter was a fitting end to a tough year in which its system sales declined by an estimated 8.3%, according to Technomic's Top 500 Chain Restaurant Advance Report.
Winner: Big burger
Two of the best-performing companies in the quarter were McDonald’s (4.5% same-store sales growth) and Burger King (5.1%).
Those two chains easily led a quick-service sector that was surprisingly weak, with an average same-store sales increase of just 0.64%. The performance of those two chains has made it difficult for many other burger chains to compete.
Loser: Bone-in chicken
Outside of Wingstop, just about every other chicken chain that has reported has struggled. KFC, which had been growing consistently for three years, reported a 1% decline in same-store sales. Popeyes comps declined 2.5%. Bojangles’ same-store sales fell 3.1%.
In the fourth quarter, consumers just didn’t like chicken on the bone. Unless it was a wing. Then people are all over it.
Winner: Pizza Hut
Hey, Pizza Hut is in the winning category at the end of a year in which it lost its title as the country’s largest pizza chain to Domino’s.
Two percent same-store sales growth is something to build upon, and Pizza Hut would soon become the official pizza of the NFL after wresting control of the sponsorship from Papa John’s. Things are looking up for the Hut.
Loser: Papa John’s
The Louisville, Ky.-based pizza chain was probably glad to be rid of its NFL sponsorship after its 3.9% same-store sales decline in the fourth quarter, which the company has blamed in part on weak TV ratings for football games.
Of course, the chain’s founder, John Schnatter, then blamed player protests for those weak ratings, which embroiled the chain in controversy and resulted in the company’s Twitter feed giving the finger to neo-Nazi groups that had endorsed the chain’s pizza.
Yeah, it was a weird quarter.