When diving into the data behind the Top 500 chains, there are always a few surprises. This year was no different. Granted, we knew it was a rough year for chains in general. But what was pretty mind-boggling was the extent to which a few chains were able to impact the numbers for the overall industry.
The best example: Chipotle (No. 16). The fast-casual segment is still relatively small, compared to QSRs—sales for all fast-casual restaurants in the Top 500 combined equal about that of McDonald’s.
Still, the successes or failures of one big fast-casual brand have the ability to drastically shift results. A big story to come out of the data this time around was fast casual’s overall sales growth in 2016 dipping below 10%. But take Chipotle’s sucking chest wound of a year out of the equation, and that balloons back to 11.2% growth.
Even with Chipotle, fast casual’s 8% growth is nothing to sneeze at. Maybe that’s why so many full-service chains are still putting dollars behind new limited-service growth brands. Many have launched spinoffs—Cracker Barrel (No. 31) launched biscuit-focused Holler & Dash, Red Robin (No. 40) opened (and then closed) Red Robin’s Burger Works and, most recently, a Hooters franchisee (No. 53) opened the more takeout-forward Hoots hybrid. But can offshoots really work for these legacy brands in the long term?
Or, conversely, is cautious investing the way to go when operators feel the need to diversify to grow their businesses? The Cheesecake Factory (No. 35) hitched its growth wagon to Fox Restaurant Concepts’ health-focused Flower Child, and P.F. Chang’s (No. 51) has also invested in a Fox brand. Buffalo Wild Wings similarly put dollars into fast casual PizzaRev (No. 478). But this isn’t always the answer, either. Chipotle, for example, got out of its ShopHouse Asian Kitchen chain, and Buffalo Wild Wings is converting a few of those PizzaRev units into smaller BWW stores that will focus on takeout.
Moral of the story: There’s not a magic elixir chain operators can take at the moment to help cure the hemophilia. At this point, there’s a persistent anti-chain mentality among diners … kind of. Consumers seem to be amenable to regional brands, as long as they don’t go too national too fast. While they may be chains, these emerging concepts typically maintain a local, edgy vibe that still resonates with modern diners.