For the first half of 2014, it seemed like the only chain that performed well was Chipotle, and everybody else was just sort-of limping along, hoping for better weather or better employment or better anything.
But things seemed to turn around in the third quarter. Maybe it was lower gas prices. Maybe rising employment levels are finally getting consumers to go out more often like various surveys say they want to. One way or the other, it seems like a number of concepts found the trick to getting more customers in the door.
That said, improvement in the period was hardly broad-based, and many concepts still saw a decline in customers.
Yet for the most part, there were more winners in the quarter. Most restaurant chains (and business segments) that we track at Nations Restaurant News had positive sales during their late summer periods, ending either in August or September. And ultra-strong sales were far more common. In other words: Chipotle wasn’t so alone.
Here are the period’s winners and losers. Same-store sales are in the U.S., unless otherwise noted.
Pizza chains: Not long ago, more than a few observers wondered whether consumers had somehow lost their appetite for pizza. Boy was that wrong. All but one pizza chain reported positive same-store sales in the late summer. Both Domino’s (7.7 percent) and Papa John’s (7.4 percent) reported strong same-store sales in their fiscal third quarters. Even Pizza Inn enjoyed (4.6 percent) enjoyed a good quarter. Only Pizza Hut (down 2 percent in the U.S.) struggled. And, by the way, the one fast-casual pizza concept we have numbers for is going gangbusters: Pie Five Pizza Co.’s same-store sales were up 17 percent in the company’s fiscal first quarter, ending September 28.
Chicken: Another item once thought headed for the restaurant scrap heap was bone-in chicken, but several concepts are selling plenty of it. El Pollo Loco (up 7.9 percent), Popeyes (7.2 percent) and Pollo Tropical (5.9 percent) are all performing well. Even KFC in the U.S., which has been struggling for years, was up 2 percent in the period. No wonder Charlotte-based chicken chain Bojangles is considering an IPO.
Breakfast: People really like to eat in the mornings. Consider McDonald’s, which struggled to a 3.3-percent same-store sales decline in its fiscal third quarter. Despite that, its breakfast business actually improved. Interest in breakfast is helping to boost the fortunes of family dining chains such as IHOP, Denny’s and Cracker Barrel. Likewise, chains that sell coffee like Starbucks (5 percent) and Dunkin’ Donuts (2 percent) and the U.S. business at Tim Hortons (6.8 percent). Guess this is why Taco Bell started selling waffle tacos.
Steak: Consumers are apparently shrugging off high beef costs, at least when they eat out. Most concepts specializing in steak have had strong quarters. Outback Steakhouse (4.8 percent) Capital Grille (3.9 percent) LongHorn Steakhouse (2.8 percent) Del Frisco’s (6.5 percent) Ruth’s Chris Steak House (4.8 percent) and Texas Roadhouse (5.9 percent) are all luring diners.
Chipotle: 19.8 percent same-store sales growth in the third quarter.
Latin American fare: Apparently, Chipotle isn’t taking all of the customers. Qdoba (7.7 percent) as well as the aforementioned El Pollo Loco and Pollo Tropical plus Chuy’s (3 percent) and Taco Bell (3 percent) show consumers enjoy a little spice.
McDonald’s: Much has been made of the chain’s sales decline this year. Less is made of this: That decline is a massive opportunity for the chain’s competitors. Not only does McDonald’s enjoy $2.6 million average unit volumes, it has more pure locations than any restaurant chain domestically but Subway. It’s safe to say that much of the above winners’ sales came at McDonald’s expense.
Asia: Think consumers in China aren’t worried about western brands right now? Look at these numbers: Yum Brands’ China same-store sales fell 14 percent. McDonald’s sales in its Asia-Pacific/Middle East/Africa division fell 9.9 percent (and likely much worse in China). And while Papa John’s didn’t report its China numbers, company executives said during their quarterly earnings call that they had to close eight units in that country and suggested that China is “a challenge.” Western brands in China have been hurt after a subsidiary of a U.S. company allegedly repackaged expired meat.
Italian: Pasta-centric chains have definitely been struggling of late. Noodles & Company has been struggling, but its same-store sales growth improved to 1.7 percent in the third quarter. But others aren’t so lucky. Olive Garden’s same-store sales fell 1.3 percent for its fiscal first quarter ending August 24. Macaroni Grill’s third-quarter same-store sales fell 8.5 percent. Bravo! Cucina Italiana (down 6.7 percent), Brio Tuscan Grille (down 5.2 percent) and Carrabba’s Italian Grill (down 1.2 percent) have all struggled. One potential reason? Diners cutting back on gluten are avoiding pasta.