Technomic Top 500: The biggest chains stood out in a tough 2020

Sales at the 500 largest chains fell 8% last year and they closed a lot fewer units than expected, but the 50 largest chains performed far better than everyone else.
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Sales at the 500 largest chains in the U.S. declined more than 8% last year, according to Technomic’s 2021 Chain Restaurant Report, as chain restaurants closed fewer locations than expected and gained share in a restaurant industry hammered by the pandemic and its dining room closures.

Yet that number doesn’t necessarily demonstrate exactly how bad most of the chain restaurant business had it in 2020. Much of the Top 500’s performance was concentrated in the 50 largest chains, which were more likely to generate sales growth—and even strong sales growth—thanks to their already heavy use of drive-thrus, delivery and digital sales that proved vital for the industry and its consumers last year.

Still, chain restaurants overall performed better than their independent cousins, with far fewer closures and a greater likelihood of sales increases.

The 500 largest chains generated $304 billion in sales last year, down $27 billion from the year before. Nonetheless, said Kevin Schimpf, senior research manager at Technomic, they gained share. “As many small chains and independent restaurants struggled to simply stay in business over the last year, market share for the industry’s largest chains expanded significantly,” Schimpf said.

A few key points from this year’s Top 500:

Wendy’s overtook Burger King to become the nation’s second largest burger chain. The chain’s introduction of breakfast in 2020 proved to be a winner for the brand. The chain’s system sales rose 4.8% last year to $10.2 billion, according to Technomic.

Casual dining chains were hit hard. There are no casual dining chains in the Top 20 this year and Olive Garden overtook Applebee’s to become the largest full-service chain in the U.S.

Subway continued its freefall. The sandwich giant’s system sales plunged 18.5%--and unit count fell 7.5%--taking it all the way down to No. 8, with $8.3 billion in sales. It is only slightly ahead of No. 9 Domino’s, where sales surged 17.6% last year.

Chick-fil-A continues to thrive. Overall, chicken chains continued to do remarkably well last year, with strong performances by Popeyes (up 20%) and KFC (up 4.3%). No other big chain did better than Wingstop’s 31% system sales growth. None of that seemed to stop the Chick-fil-A train, where sales rose 13% to $13.7 billion.

McDonald’s is typically dominant. The burger giant remains, by far, the largest restaurant chain in the U.S. and somehow grew more dominant last year. Its $40 billion in system sales now account for 13% of the sales for the entire Top 500.

The 10 biggest restaurant chains

Source: Technomic Top 500 Chain Restaurant Report

Technomic, a sister company of Restaurant Business, ranks restaurants based on system sales, counting all of the sales generated by restaurants whether they are company-run or franchisee owned.

Last year’s ranking was particularly volatile, as the pandemic led to massive shifts in consumer behavior and restaurants responded.

But the biggest chains clearly outperformed everyone else. The median sales change for the 10 largest chains, for instance, rose 0.1% last year while the typical change for the 50 largest chains was a 0.8% decline.

While that is not much—and indeed in most years that would be a massive problem—it was far better than everyone else. The median sales change for the other 450 chains on the ranking was a decline of 19.4%.

So, while the Top 500 as a whole performed comparably well, the typical restaurant chain in the Top 500 saw sales go into freefall in 2020, and at a level relatively similar to the overall decline in industry sales.

The biggest surprise may be the lack of unit closures, however. The typical restaurant chain last year had a roughly flat unit count, though the total number of locations in the Top 500 dropped by 2%, or about 4,500 locations.

Yet 40% of those closures came from one restaurant chain, Subway, where nearly 1,800 locations closed up shop last year.

A lot of the top chains’ outperformance can be attributed to takeout. Thirty-seven of the 500 largest chains are either fast-food or fast-casual restaurants. Twelve of the 50 largest chains operate either chicken or pizza-focused restaurants, most of which performed strongly in 2020. And then there’s Sonic, the drive-in burger chain that had the best year of any Top 500 chain not named Wingstop. Its sales rose 21% last year to $5.7 billion.

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