It’s safe to say that restaurants ended 2014 on a high note. Of the 55 publicly traded restaurant chains that we track and have reported late-year earnings so far, only four of them reported declines in same-store sales.
As such, the late-winter quarter in the restaurant world was much like the modern generation’s version of Musical Chairs in which everybody is a winner.
Yes, the business was a lot easier in the fourth quarter of 2014 than it was in the fourth quarter of 2013. Gas prices were a lot lower. Employment was a lot higher. And weather was certainly a major factor. Still, plenty of evidence suggests that consumers unleashed a bit of the “pent-up demand” for restaurants that the National Restaurant Association talks about.
Nevertheless, let’s discuss some of the notable winners and perhaps mention a loser or two from the most recent quarter:
Winners
Family dining: Perhaps the most remarkable element of the restaurant industry improvement in 2014 was the performance of family dining. As a whole, the chains we track that have reported— Bob Evans Restaurants, Cracker Barrel Old Country Store, Denny’s franchised units and IHOP — averaged same-store sales of 5.6 percent. That was among the best performances in the industry.
Family dining is full of older, well-established concepts with aging customer bases. Not long ago, they’d been suffering from declining unit counts and weak sales. But now they’ve outperformed every other sector we track except for fast casual.
Cracker Barrel said its same-store sales increased 7.9 percent its fiscal second quarter, ending Jan. 30. IHOP’s same-store sales rose 6.1 percent in its fiscal fourth quarter ending Dec. 31. And Denny’s franchise same-store sales increased by 4.6 percent. Family diners seem to have found their footing.
Burritos: We spent last year routinely exclaiming the wonder of how Chipotle Mexican Grill could consistently report same-store sales well above 15 percent. And yet it kept doing it, including the 16.1 percent mark in the fourth quarter. In 2014, it was Chipotle’s world, and we all just lived in it.
But its biggest competitor showed some fight. Qdoba reported same-store sales of 14 percent in its fiscal first quarter ending Jan. 18. While it remains a fraction of the size of its competitor, Qdoba in 2014 at least proved it could hold its own on the sales front.
Domino’s Pizza Inc.: It’s funny to think now that six years ago some of us were asking whether consumers have lost their taste for pizza. Since then, the only thing that pizza chains like Domino’s have done is prove that sentiment horribly wrong. While the sector as a whole performed strongly again in the fourth quarter, Domino’s easily led the pack with 11.1 percent same-store sales growth. Oh, and it recently debuted a smartwatch app.
McDonald’s competitors: McDonald’s Corp. same-store sales fell 1.7 percent in the U.S. in the fourth quarter. That has been a major boon to other QSR chains, every one of which reported sales growth. That includes Burger King in the U.S., where same-store sales rose 4.2 percent. Wendy’s franchise restaurants were weaker but their sales still rose 1.6 percent. Jack in the Box sales rose 4.4 percent. And Sonic Drive Ins’ sales through February 28 have risen an astounding 11.5 percent. Yes, consumers are eating fast food. They’re just not eating it from McDonald’s.
Losers
Asia (again): When we analyzed winners and losers in this space back in December we noted that Western chains were struggling in Asia. Nothing has happened to change that since. Yum Brands’ same-store sales in China fell 16 percent. McDonald’s Asia sales fell 4.8 percent. It’s not just China, either. McDonald’s is really struggling in Japan and executives said Thursday that they don’t know when sales will normalize there. And Yum Brands’ sales in India fell 10 percent in its fourth quarter.
Discount lovers: Several chains are working to eliminate discounting. That includes Bob Evans, which is dumping buy-one, get-one offers and might eliminate discounting altogether. It also includes Minneapolis-based Famous Dave’s, where corporate-owned same-store sales fell 4 percent and franchisee sales fell 2.6 percent — based on the company’s elimination of discounts.
