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What’s driving the nation’s fastest-growing chains

Technomic: Menu innovation a key ingredient to building market share

Growth chains of all kinds, from large brands like McDonald’s to small concepts like Roti Mediterranean Grill, rely on menu innovation and differentiation to steal share from competitors as the restaurant industry’s growth as a whole stalls.

Technomic Inc. held its Growth Chain Conference this week in Chicago and outlined the state of foodservice, latest consumer trends and growth chain case studies, including looks at Red Mango, Smashburger and Brick House Tavern and Tap. About 60 restaurant industry executives were in attendance Wednesday at the University of Chicago’s Gleacher Center.

The takeaways showed a still wary consumer, especially as unemployment remains high and gas prices rise, but a modestly improving restaurant sector. Technomic’s latest estimate for the industry shows a 2.6-percent nominal growth rate for the balance of 2011. With inflation running close to that number, real sales growth this year looks to be close to flat, the market research firm said.

In the midst of those challenges, some restaurant chains will succeed through growth. More U.S.-based chains will look abroad, greater investments in remodeling will be made and daypart expansion will continue, Technomic said. While there are “growth chains” in all sectors of the restaurant industry, the hottest growth sector, by far, is fast casual.

“This category has essentially blown through the recession without skipping a beat,” Darren Tristano, Technomic executive vice president, said in a statement ahead of the conference. “The real pressures are now coming from other types of concepts that have taken note and are positioning themselves alongside their fast-casual counterparts. Quick-service restaurants are revamping their offerings and decor in an attempt to provide value beyond low prices and take back market share.”

The fastest-growing fast-casual chains, by unit count growth rate from 2000 to 2010, were Pei Wei Asian Kitchen, Noodles & Company, Chipotle Mexican Grill, Qdoba Mexican Grill and Panera Bread, Technomic’s research showed.

Among concepts with sales under $100 million, and looking at just one-year unit growth rates from 2009 to 2010, the fastest-growing chains were Five Guys Burgers and Fries, Chipotle, Noodles & Company, Einstein Bros. Bagels and Wing Stop.

The fastest-growing smaller chains, with sales between $25 million and $100 million, based on one-year unit growth rates, included Smashburger, Zoës Kitchen, Freebirds World Burrito, Pret A Manger and The Habit Burger Grill.

Looking closely at these chains, Technomic said similarities included menu innovation, from flatbread sandwiches at Noodles & Company to the Stuffed Saladwich at Einstein. New menu items from all growth chains were key to their sales performance, Technomic said, from Dunkin’ Donuts’ new snack line to McDonald’s beverages, and from Korean BBQ steak tacos at California Pizza Kitchen to healthful beverages like the Skinny Rita-tini at Bonefish Grill.

"Chains in the restaurant industry need to look at what the growth chains are doing...and provide a better quality, continuously improving experience if they want to gain market share," Tristano said.

At the conference, Technomic also listed some concepts to watch from various industry segments. Those included:
Roti Mediterranean Grill
Cadillac Ranch
Genghis Grill
Naked Pizza
Maoz Vegetarian

Contact Sarah Lockyer at sarah.lockyer@
Follow her on Twitter: @slockyerNRN

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