It helps to be larger.
As if we need any additional evidence to point out just how much of an advantage it is to have size, we have the following chart showing the median change in average unit volume between 2019 and 2022, sorted by their placement on the Technomic Top 500 Chain Restaurant Report. And you will notice a distinct pattern.
In short, the larger the chain, the more likely it was to grow its average unit volumes during the past three years. If we divide the largest group further, the 10 largest chains have grown average unit volumes by a median of 18% since 2019. All 10 chains have grown unit volumes, led unsurprisingly by the 36% AUV growth at Chick-fil-A.
Average unit volumes are a key metric in the restaurant business for a simple reason: The more volumes a restaurant generates, the more likely it is to generate a profit and therefore a return on investment that promotes expansion.
Generally, chain restaurants have done well to generate system sales growth over the past three years. Total sales for the Technomic Top 500 have increased 18% since 2019.
But that can be misleading for multiple reasons. When large chains generate more sales growth, that drives the overall number higher. The largest 500 restaurants have increased sales by nearly $60 billion since 2019. McDonald’s alone has accounted for more than $8 billion of that, or 13%.
Unit count growth also influences those numbers, though in fairness the industry’s unit growth was rather muted over that period.
But when examining the industry’s performance when it comes to average unit volumes, the numbers are more revealing. For one thing, the median average unit volume has grown less than 3% since 2019. That means the typical restaurant in the Top 500 has not kept up with inflation.
This suggests that most of the industry out of the Top 100 restaurants have a way to go before they can say they’ve truly recovered from the pandemic and its high-cost aftermath.
To be sure, many of the chains further down on the Top 500 ranking are struggling concepts or those that are in recovery in some form or another. While chains 251 through 500 may feature high-growth concepts like, say, Handel’s Homemade Ice Cream (38% sales growth in 2022), they are also likely to include brands like the Landry’s-owned Claim Jumper (sales decline of 25.7% in 2022).
Those smaller chains are also more likely to be full-service concepts that had a difficult time during the pandemic. Many of those are not yet in position to generate volume growth.
But it’s also why we say that the industry has some way to go before we can say it has recovered. The largest chains have been able to generate sales within their four walls because they were more likely to have a drive-thru or a mobile app and they were big enough to get attention for these conveniences. Full-service chains have also had the benefit of a financial wherewithal that enabled them to recover more quickly out of the pandemic, like Olive Garden or Texas Roadhouse.
Smaller chains do not have those benefits. And while plenty of them have been able to gain some real traction with consumers over the past three years, many others have not.
In short, the largest chains’ performance has masked the industry’s overall weakness.