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'Better-burger' brands top burger segment growth

Technomic: More than half of the top burger chains are fast-casual operators

Fast-casual burger chains — so-called “better burger” purveyors — lead all burger chains in terms of unit growth.

In a new report, market research firm Technomic Inc. found that of the top 75 burger chains in terms of sales, more than half were fast-casual brands in the “better-burger” segment. The entire burger group’s annual sales rose 1.6 percent in 2010 to $65 billion, and most of the unit growth came from better-burger upstarts, the Chicago-based research firm said.

“This is an interesting time in the burger segment,” said Technomic executive vice president Darren Tristano. “We are seeing very high growth rates from smaller brands, and a steady stream of new better-burger entries making their presence felt, while, at the same time, some of the larger brands are struggling to maintain their footholds.”

“Better” doesn’t necessarily mean “bigger,” however, as fast-casual brands make up only 2.6 percent of sales in the burger-chain group, despite comprising more than half the chains listed. The hamburger category’s big three national chains — McDonald’s, Burger King and Wendy’s — account for 75 percent of limited-service burger sales in the United States.

“This segment contains some of the real giants of the industry,” Tristano said, “so even a brand growing 150 percent per year is going to be dwarfed in pure dollars by McDonald’s, Wendy’s and Burger King.”

Of the three largest brands, McDonald’s has consistently grown same-store sales over the past year, often making up for softness from its rivals. In the second quarter, McDonald’s comparable sales rose 4.5 percent in the United States, compared with a 5.3-percent domestic decline at Burger King and a 2.3-percent increase in North America for Wendy’s, whose same-store sales had been flat or negative the previous four quarters. All three chains have kept their menu innovation strategies active as a way to grow sales.

'Better burgers' find benefits

Limited menus have actually benefited fast-casual brands, Tristano said, while much of their sales growth is due to the break-neck pace at which they are expanding their unit counts.

Shake Shack and Smashburger ranked first and second, respectively, in terms of unit count expansion, with Shack Shack growing 133 percent to seven units in 2010, and Smashburger growing 116 percent to 93 locations. Mooyah Burgers & Fries was third, followed by Five Guys Burgers and Fries, Freddy’s Frozen Custard & Steakburgers, and The Habit Burger Grill.

RELATED: Breaking down better burgers

Bobby’s Burger Palace, from celebrity chef Bobby Flay, added a fifth unit in 2010, and landed in seventh place, with a 25-percent growth rate and more than $10 million in annual systemwide sales — Technomic’s cutoff for unit-growth rankings. Jake’s Wayback Burgers, The Counter and Fatburger rounded out the top 10.

Even with robust growth among the fast-casual brands, the limited-service burger segment’s total unit count growth slowed to 0.2 percent in 2010, down from 0.5 percent, 0.7 percent and 0.9 percent the previous three years, respectively. However, that expansion rate was higher than that of the entire limited-service sector or restaurant industry.

And while fast-casual chains are differentiating themselves from quick-service burger brands by limiting their menus, the report noted, better-burger concepts also are competing well against casual-dining chains by serving alcoholic beverages at lower price points.

Contact Mark Brandau at [email protected].
Follow him on Twitter: @Mark_from_NRN

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