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Fast-casual chains are still growing

Though growth slowed last year, they continue to pace the industry, thanks to more units.
Photograph courtesy of Chipotle

top 500

The fast-casual sector’s growth might be slowing. But it’s certainly not stopping. Fast-casual chains continued to drive and build sales in 2018, and the segment’s unit growth far outpaced the rest of the industry. In fact, it made up the vast majority of the industry’s unit growth as fast-casual operators expanded into more markets. 

Overall, fast-casual chains in Technomic’s Top 500 Chain Restaurant Report generated $42.2 billion in total U.S. sales in 2018, up 8% from the year before. That represents a modest slowdown from 2017, when fast-casual sales rose 8.6%. Still, that percentage easily bested any other industry sector’s growth in 2018. 

While 8% is a solid increase, it was actually somewhat surprising. “We thought it would be lower,” says Joe Pawlak, managing principal at Technomic. “That was a lot better picture than we anticipated when we started looking at the data.” One of the reasons: Some chains’ struggles led to a perception that the sector would slow down even more.

Fast-casual chains emerged more than a decade ago with the promise of higher-quality food in a limited-service format. In the wake of the recession, they represented much of the industry’s overall growth as the concepts attracted investment capital and aggressively added units.

That unit-count growth continued last year, even if it slowed modestly when compared to previous years. And the sector continued to dominate the industry’s total unit development.

To wit: The 500 largest chains as a whole added 1,569 restaurants in 2018. The fast-casual sector alone added more than 1,200 locations. That means almost four out of every five restaurants opened by Top 500 chains in 2018 was a fast-casual concept. 

The sector’s largest, most mature concepts continued to add units: 
•    Panera Bread retook its spot in the Top 10. It was the 10th-largest chain in the U.S. in 2018, thanks to 4.7% sales growth to $5.8 billion.
•    Chipotle Mexican Grill was not far behind. The Newport Beach, Calif.-based chain’s sales rose 8.7% to $4.8 billion.
•    Sales for Panda Express, the third-largest fast-casual chain, rose even faster—by 13.1% to $3.5 billion, taking it up three spots to No. 21 on the ranking.
•    Five Guys Burgers and Fries (No. 39, up 12.5%) returned to growth last year. 
•    Sales rose 15.3% at Dallas-based Wingstop, No. 45 on the ranking.

Many other chains continued to boast strong overall sales and unit growth, too. Fast-growing Raising Cane’s (No. 46) increased sales 22.5% to $1.2 billion, and Jersey Mike’s (No. 48), grew sales 17.5% to $1.1 billion. Several other chains increased sales by at least 40%: Mission BBQ (No. 268, up 40%), Chicken Salad Chick (No. 278, up 43.8%), Cava Grill (No. 331, up 67.9%) and Halal Guys (No. 445, up 63.7%), among others. Additionally, most of the country’s fastest-growing chains are fast casuals, including MOD Pizza, which surged to No. 105 on the ranking from No. 137 last year thanks to its 44.8% growth, giving it nearly $400 million in sales.

Still, not all fast-casual chains saw the same positive results. In fact, several saw sales fall more than 10%, including No. 128 Pei Wei Asian Diner, where sales fell 10.5% to $306.4 million, and Bruegger’s Bagels (No. 214), which  generated $155 million in sales, down 10.6%.

Source: Technomic Top 500 Chain Restaurant Report 

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