We’ll admit, this was a weird quarter. It’s difficult to truly get a handle on the state of the industry, at least judging by the earnings reports from publicly traded restaurant companies, most of which have now reported.
But let’s see who came out on top during this round of reports, and which companies would rather take a mulligan.
Winner: Upside surprises
The most surprising thing was the number of surprises. Quite a few companies reported topline results that bested expectations.
Maybe a bigger surprise is that, on average, same-store sales last quarter were better than they were in the second quarter: 2.9% in 3Q compared with 2.8% in 2Q. While that is not much, it’s also not a slowdown, which is what I would have expected given comparisons and all the economic slowdown talk.
Loser: Traffic
Yeah we wrote about this. But for the most part, traffic was down. It was mostly down at casual dining restaurants that lost customers to quick-service and fast-casual chains. So, while sales on average did well, for the most part it came through pricing strategies and not from an increase in actual customers.
Winner: Carrols investors
Burger King franchisee Carrols Restaurant Group’s stock is up more than 400% so far this year, as its finances came back from the brink as sales recovered and traffic returned to growth and investors got on board.
This has been good for its investors. Cambridge Franchise Partners, its largest shareholder, owns about 27% of its stock. That was worth just under $20 million at the end of 2022. Right now it’s worth more than $113 million. Take a look at this chart:
Loser: Noodles
In February, Noodles & Co. raised prices by 5%. The result was an annual price increase of 13%.
Such double-digit price increases have become somewhat commonplace over the past year or so as restaurants look to recover lost margins. But at Noodles the result was a disaster: Steeply falling sales and the departure of CEO Dave Boennighausen.
Winner: Wingstop (again)
I feel like a broken record. But few publicly traded restaurant chains are killing it quite like Wingstop is. It had the best sales quarter of any chain, up 15.3%.
We admit we were skeptical when the chain started selling chicken sandwiches. We are not skeptical anymore.
Loser: Bloomin’ Brands directors
If the owner of Outback Steakhouse was hoping to fend off Starboard Value, its last quarter probably didn’t help all that much. The chain’s same-store sales have underperformed its competitors, including the 1.1% decline in the second quarter (compared with a plus-8% for Texas Roadhouse).
Winner: Chili’s
The bar and grill chain wasn’t the top performing casual dining concept (that went to Texas Roadhouse). But it appears to be thriving under Brinker International CEO Kevin Hochman.
And it apparently sells a lot of tequila.
Loser: Applebee’s
On the other hand, Applebee’s appears to be losing some momentum in the bar and grill chain wars. The chain’s same-store sales underperformed Chili’s by more than 800 basis points. It has to hope for a turnaround quick or things may not be that good in the neighborhood.
At the moment, it seems, the pendulum in the bar & grill world has swung in Chili’s direction.
Winner: Cava
The fast-casual Mediterranean chain has thrived since it went public earlier this year. In this case, it proved that being easy on the price hikes can work to generate strong traffic.
Of course, it will have to prove that it can maintain this kind of momentum once it gets past its IPO halo. And not all chains can do that. But its early results have been strong.