Top 500 Chains

Faltering casual dining slowed restaurant sales in 2017

But all other sectors showed sales growth last year, according to the Technomic Top 500 Chain Restaurant Advance Report.

Chain restaurant sales growth slowed for the second consecutive year in 2017 as long-term problems among casual dining concepts deepened, according to Technomic’s Top 500 Chain Restaurant Advance Report.

Sales among the 500 largest U.S. restaurant chains rose 3.2% in 2017, a slowdown from the previous year’s growth of 3.8%. Unit count growth slowed down, too, to 1.1% from 1.8% growth in 2016.

But the biggest problems were among casual-dining chains, and particularly among varied-menu casual-dining chains that had dominated the sector for years but have been leading its decline more recently.

Casual-dining sales among the Top 500 grew just 0.1% in 2017, while unit count declined by 1.4%.

“If you dig through the numbers, it certainly was full service dragging this down,” says Joe Pawlak, managing principal with Technomic. “And if you look even closer, it was casual dining that was dragging it down.”

The problems were most acute among some of the sector’s biggest names: Applebee’s sales declined 7.5%. Based on the chains’ respective growth rates, it is likely that Olive Garden this year will surpass Applebee’s as the country’s largest casual diner.

Chili’s, meanwhile, declined by 3% in 2017, while TGI Fridays sales fell 5.1% and Ruby Tuesday’s sales plunged 15.2%. Ruby Tuesday’s unit count fell by 17.1% last year, to 558. At one point a decade ago the chain had close to 1,000 locations.

“Casual dining is still in a slump,” Pawlak says. “We still think small chains and independents are performing at a better rate. Consumers want a unique experience when they go sit down at a restaurant.”

Technomic Top 500 Chain Restaurant Advance Report

Technomic’s Top 500 measures chain restaurants based on systemwide sales. Information for the list comes from numerous sources, including publicly available data, companies’ self reports and Technomic’s own data. The advance report includes numerous estimates, many of which are based on Technomic’s Transaction Insights data.

The Top 500 chains represent 57% of total restaurant spending, Pawlak says.

McDonald’s, as it does every year, sits alone at the top, with $37.5 billion in systemwide sales last year. But its unit count has been falling in recent years, including a 0.5% decline last year to 14,080, according to Technomic.

It is still dominant—larger than the combined sales of Starbucks, the second largest chain, and Subway, the third largest, along with No. 10 Pizza Hut.

But Starbucks is now half the size of McDonald’s in terms of system sales, thanks to 9.1% sales growth last year and a 5.8% increase in units. Starbucks is now likely to be larger than McDonald’s in terms of unit count: The Seattle-based coffee giant had 13,930 locations at the end of the year, just 150 fewer than McDonald’s.

Both are considerably smaller than Subway based on unit count. But the Milford, Conn.-based sandwich giant is also shrinking: Its unit count declined by 3.1% last year to 25,908. System sales were 10.8 billion, down 4.4% from the year before, according to Technomic data.

Overall, quick-service sales grew a healthy 3.1% among chains in the Top 500, while unit count grew 0.6%.

But leading all sectors last year was the fast-casual sector, where sales grew 8.9% and unit count increased by 5.4%.

That was something of a surprise, given challenges in fast-casual same-store sales last year. But the growth was only moderately slower than the year before. “We expected a little bit more of a decline,” Pawlak says.

He believes some of that could be credited to Chipotle, which saw total system sales grow by 14.6% in 2017.

In fact, the burrito chain’s system sales are now where they were in 2015, when a series of food safety incidents hammered same-store sales—which fell 20.4% in 2016.

But while same-store sales increased 6.4% in 2017, the chain’s sales growth came largely from additional units. Chipotle increased unit count by 11% last year and another 7.6% in 2017. As such, its system sales were $4.4 billion in 2017—roughly the same level as 2015.

“We expected Chipotle a little lower,” Pawlak says, noting that it “overperformed” compared with other fast-casual chains.

Indeed, among the largest 50 chains, only Raising Cane’s (30.2%), Jersey Mike’s (18.2%) and Wingstop (16.2%) grew system sales at a rate faster than Chipotle.

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