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Fast food maintains its dominance

Despite the growing presence of fast-casual chains, the typical QSR remains popular.
Restaurant Business

top 500


Fast food is not dead. In fact, fast food is very much alive, and some of the largest and most well-known quick-service chains are leading the charge.

Three of these QSRs, McDonald’s, Starbucks and Chick-fil-A—the first-, second- and seventh-largest restaurant chains in the U.S., according to Technomic’sTop 500—generated more than $1 billion in system sales growth in 2017.

The sales growth of three of the Top 10 chains—McDonald’s, Starbucks and Chick-fil-A—represents a third of the combined growth of all Top 500 restaurants.

McDonald’s, year after year the largest restaurant chain in the U.S., regained some momentum in 2017 by adding $1.25 billion in U.S. system sales—despite reducing units by 0.8%. Chick-fil-A grew by $1.12 billion to just over $9 billion in system sales, a robust 14.2% increase. And then there is Starbucks, which added nearly 800 locations last year, helping it grow by $800 million to nearly $18 billion.

All told, U.S. consumers spent more than $191 billion at fast-food restaurants in 2017, up 3% from 2016. That represents nearly 62% of all sales generated by Top 500 chains, the same as the year before. Their share of total traffic, however, is much higher—closer to 80%.

Fast-food restaurants are built to serve a lot of customers, thanks to their combination of convenience, low prices, consistency and a large number of locations. Those attributes play well with today’s consumers, despite the presence of rapidly growing fast-casual chains. As much as consumers are evolving, busy diners and families still have a need for cheap, quick food.

But quick-service chains have also been innovative in recent years, developing new menu items in a bid to keep consumer attention. That’s made them social media stars.

Taco Bell, which this year surpassed Burger King to become the fourth-largest restaurant chain in the U.S., has done so in part by introducing items such as the chicken-shell Naked Chicken Chalupa and Nacho Fries.

Quick-service chains also tend to be pioneers on the technology front. Perhaps no two companies represent this better than Starbucks and Domino’s. Starbucks has generated immense growth with its popular loyalty program and mobile app. Domino’s, meanwhile, overtook Pizza Hut as the largest pizza chain with tech innovations that enable ordering  via car, smartwatch, TV or Amazon’s Alexa.

To be sure, not all of the largest chains have been growing. Subway saw both unit count and system sales declines in 2017. Sales fell by $500 million to $10.8 billion, while unit count declined by 3.1%. And Pizza Hut’s system sales fell by 4.2%, more than $200 million, following the closure of more than 170 locations.

The coming years could see further changes in the Top 10.

To be sure, nobody is going to catch McDonald’s anytime soon: It still generates more than twice the system sales of Starbucks. But the coffee chain’s recent expansion means it could surpass the burger chain this year in terms of total locations: Starbucks finished 2017 with 13,930 units, compared to 14,036 for McDonald’s. That would make Starbucks the second-largest chain by number of restaurants, behind Subway.

Then there is Chick-fil-A. The chain has surged up the ranking for years, thanks to strong consumer ratings that have helped it expand and generate same-store sales growth. The company leapfrogged Dunkin’ Donuts to become the seventh-largest chain last year and could potentially outpace Wendy’s and Burger King in 2018.

The growth trends appear unlikely to end anytime soon. Consumers,
after all, still love their fast food.

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