10 ways restaurants have changed since the Great Recession

With a decade past since the downturn, RB’s The Bottom Line takes a look at how the industry has grown and changed.

The Bottom Line

Just about a decade has passed since the collapse of Lehman Bros. heralded the financial crisis at the center of the biggest economic downturn in nearly a century.

That Great Recession proved to be a reset for restaurants. The period was the worst in the industry’s modern history, as consumers up and down the economic ladder cut back on spending and ate cheaply when they did. 

But the reset didn't last. And in the years since, the industry has flourished. But the changes haven't been all about growth. Consumers have changed how they use restaurants, and companies have responded. Entire sectors have struggled to adapt to this new reality.

Here are 10 ways restaurants have changed since the Great Recession.

1. There are a lot more restaurants.

It’s easy to forget that during the recession, many wondered whether there was too much supply. But throughout the recession, total unit count actually grew. And it’s grown ever since. The number of restaurants has grown by 16% since the start of the recession, according to federal data. There are now more than 630,000 restaurants in the U.S.

2. Independents have persisted.

The total number of locations in Technomic's Top 500 Chain Restaurant Report has grown by 15% over that same period, suggesting that independents and upstart chains have actually outperformed chains over that period. That’s a surprise given the challenges indies faced during and after the downturn.

3. People are spending a lot more at restaurants.

Annual restaurant industry sales were expected to be nearly $799 billion in 2017, according to the National Restaurant Association. That would have been a 36% increase since 2010. Monthly restaurant sales, according to federal data, rose 50% between February 2008 and February 2018.

4. The industry is a bigger piece of the economy.

Restaurants have added more than 2 million workers over the past decade and now employ 11.8 million people, according to federal data. Put another way: The percentage of U.S. workers who are employed at a restaurant grew from 6.9% to 8% over that time.

5. The fast-casual sector has become a major force ...

It’s tough to believe, but chains like Shake Shack, Blaze Pizza and MOD Pizza, three of the fastest-growing chains in the U.S., barely existed, if at all, back in 2008. In 2008, the fast-casual sector represented 7% of sales generated by restaurants in the Technomic Top 500. Last year, that percentage was 13%. The sector has had a major impact on the restaurant industry.

6. ... While casual-dining restaurants are less viable.

Casual-dining restaurants have averaged 1.6% unit count growth over the past 10 years and 2.3% sales growth, according to Top 500 data. That suggests that an increase in supply, not demand, generated that industry’s growth, ultimately hurting unit economics. The result? The number of casual-dining locations in the Top 500 fell by 1.5% last year.

7. Technology is a big deal these days.

Restaurants were once known as Luddites, unable or unwilling to add technology. But consumer-facing technology has become a must as the industry has grown more competitive. Mobile app development with more sophisticated loyalty programs, self-order kiosks and third-party delivery are all changing how consumers interact with their restaurant.

8. Restaurant chains are more expensive.

In 2010, 3G Capital bought Burger King for a valuation multiple of 8 times earnings before interest, taxes, depreciation and amortization, or EBITDA, a price considered high at the time. Burger King’s current parent company, Restaurant Brands International, paid a multiple of more than 20 for Popeyes in 2017.

9. Franchising is more popular.

In 2008, McDonald’s operated more than 2,000 of its nearly 14,000 U.S. locations, or about 15% corporate ownership. Last year, the company operated fewer than 900 of its more than 14,000 locations, or 6.3%. It’s a common refrain in the business, as companies such as Burger King, Yum Brands, Wendy’s, Applebee’s, TGI Fridays and many others have sold corporate stores to franchisees.

10. And franchisees are more sophisticated.

With so many companies refranchising, some sophisticated operators have taken advantage, growing unit count by leaps and bounds with a combination of private-equity investment and cheap loans. Companies such as Applebee’s, Taco Bell and Panera Bread owner Flynn Restaurant Group, Pizza Hut and Wendy’s operator NPC International and Burger King owner Carrols Restaurant Group now generate more than $1 billion a year in revenue.

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