Sales at the country’s largest restaurant chains surged in the fourth quarter, salvaging what was an otherwise dim year for the industry, according to the first Technomic Chain Restaurant Index.
Sales at the 200 largest restaurants grew 4.4% in the last three months of the year, helping those chains grow by 2.4% overall in 2017, according to Technomic.
Industry sales improved as the year went on, mostly as consumers grew more confident about the state of the economy and of their own finances.
“Consumer confidence at the end of 2017 was very high,” says Sara Monnette, vice president, innovation with Technomic. “Consumers were feeling optimistic about the end of the year and their outlook going into 2018 was strong, particularly in light of the passage of tax cuts that would put more money in their pockets. Retail holiday sales were also strong the last few months of the year—and when people are out shopping, they are undoubtedly using restaurants as well.”
The Technomic Chain Restaurant Index is a monthly look at restaurant sales based on data from Technomic’s Transaction Insights, a data product that uses information from a panel of 3 million consumers each month, representing more than 18 million visits to foodservice companies.
Transaction Insights analyzes sales at the 200 largest restaurant chains based on the Technomic Top 500 Chain Restaurant Report. The top 200 restaurant chains represent 52% of all U.S. restaurant spending.
The Technomic Chain Restaurant Index can show trends over time while providing historical perspective on the U.S. restaurant industry and the performance of four major segments: quick service, casual dining, midscale and fast casual.
Technomic is owned by Winsight, the parent company of Restaurant Business.
The data analyzes overall sales, so it doesn’t factor out unit count growth. But it provides an overall, monthly look at total restaurant performance, showing where customers are getting their food and drinks when they dine out.
Monnette says that many chains saw improved sales throughout the year as more Americans went to work and the stock market improved.
“Throughout the year, the U.S. experienced strong job growth and an uptick in the stock market, which helped to drive consumer confidence,” she says. “This sentiment, in turn, boosted spending. Many chains picked up more sales and traffic as the year went on, compared to the same time period in 2016.”
Some chains reversed in the fourth quarter otherwise poor annual sales performance. Chains like Applebee’s and Red Lobster, for example, were weak through most of 2017, but turned positive in the last three months. More than half of the 200 chains tracked saw definitive improvement.
“Of the 200 chains we tracked, 113 had a stronger fourth quarter compared to the full year, by at least one percentage point,” Monnette says.
Among industry sectors, the largest gains in the fourth quarter came from midscale concepts, otherwise known as family dining.
Those chains, which specialize in breakfast and have lower check averages, saw 8.5% sales growth in the last three months of the year and 2.2% growth for the full year.
On the other hand, casual-dining chains continued losing customers and sales despite a broad improvement in the industry toward the end of 2017—though the rate of decline slowed considerably.
Sales at casual-dining chains declined by 0.7% in the fourth quarter, and by 2.6% for the year.
But traffic continued to be a problem: Total casual-dining traffic declined by 3.2% in the fourth quarter, and 4.9% for the full year.
The continued decline in sales for such concepts, after more than a decade of weakness, demonstrates consumers’ continued move away from everyday dine-in concepts.
Indeed, limited-service chains continued to lead the way in 2017, as fast-casual concepts regained some growth in the last three months of 2017 while quick-service concepts continued to grow.
For the year, fast-casual chains’ sales grew 5.7%, a slowdown from previous years when double-digit growth rates were common as the concepts added units and posted positive comparable-store sales. But those same-store sales clearly slowed at many fast-casual chains in 2017, helping lead to a slowdown even as chains like Noodles & Co., Potbelly and Pie Five closed locations.
Things seemed to improve in the fourth quarter, however. Total sales at fast-casual chains increased 7.5% in the fourth quarter, with traffic up 3.8%.
Quick-service restaurants grew, too, with total sales growth of 3.2% for the year and 4.9% for the fourth quarter, all on improved traffic. QSRs make up about two-thirds of total sales among chains in the top 200, and include some of the world’s biggest chains—McDonald’s, Subway, Taco Bell, KFC, Burger King and Wendy’s, among others.
Those chains’ traffic grew by 2% in 2017, including 3.5% in the fourth quarter. The companies have been focusing more on discounts and other deals to lure customers, and it clearly worked last year.
About the Technomic Chain Restaurant Index (CRI):
The Technomic CRI is a longitudinal performance tracker of the top restaurants in the United States, calculated using third-party transaction data from a nationally representative sample of more than 3 million consumers and a proprietary modeling framework based on both publicly available sales data, proprietary sales data, and years of industry expertise.
Methodology:
Technomic leverages third-party transaction data from a nationally representative sample of more than 3 million consumers. All of these consumers’ electronic transactions, across nearly 1,000 merchants and including the 200 leading restaurant chains, are captured within our data. Technomic then leverages our own restaurant chain financial data, both proprietary and publicly reported, to model total customer transactions, including cash transactions, and project out to the total U.S. population.
The Technomic CRI showcases segment and industry trends over time and provides historical perspective on how the restaurant industry in the U.S. as a whole is performing along with performance of four major operator segments—quick service, midscale, fast casual and casual & fine dining.
More Information:
https://www.technomic.com/membership-programs/transaction-insights
About Technomic
Technomic Inc., a Winsight company, delivers a 360-degree view of the food industry. It impacts growth and profitability for clients by providing consumer-grounded vision and channel-relevant strategic insights. Its services range from major research studies and management consulting solutions to online databases and simple fact-finding assignments. Its clients include food manufacturers and distributors, restaurants and retailers, other foodservice organizations, and various institutions aligned with the food industry. Visit Technomic at www.technomic.com.
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