This is part of the Nation’s Restaurant News annual Second 100 report, a proprietary ranking of restaurant brands Nos. 101-200 by U.S. systemwide sales and other data. This report is a companion to the Top 100 report.
Better-burger chains like Shake Shack, Freddy’s Frozen Custard & Steakburgers and The Habit Burger Grill drove growth in the Limited-Service segment of the Second 100 last year.
Those three chains, along with another well-known better-burger brand, Smashburger, accounted for $248.7 million, or more than half, of the $456.5 million in sales added by the segment in the Latest Year.
The 29 chains in the segment saw average sales growth of 6.5 percent, nearly two percentage points higher than the Second 100’s average sales growth rate of 4.6 percent.
That was in spite of a disastrous performance of Quiznos, which saw sales drop nearly 25 percent. The Denver-based chain ended the Latest Year with 482 units, 172 fewer than a year earlier. Quiznos ranked 180th in terms of domestic annual sales, down from 145th the Preceding Year.
By contrast, Shake Shack jumped 40 spots, to 137th. The chain opened 22 domestic units in the Latest Year, for a total of 71 locations. Systemwide domestic sales rose 43.5 percent.
Randy Garutti, CEO of New York City-based Shake Shack, acknowledged that the growth was from a fairly low baseline.
“We’re really still a pretty small company,” he said.
But Shake Shack entered several large markets in 2016, including Los Angeles, Dallas, Houston and Phoenix.
“This is a big country, and we’re just incredibly bullish about the opportunity ahead,” Garutti said.
Shake Shack also introduced the Chick’n Shack, a fried chicken sandwich, last year.
“That was a big deal, and a big part of continued growth and excitement of adding more people to the Shack story,” Garutti said.
The Chick’n Shack helped drive traffic and average check, he said, as did limited-time offers, such as the Bacon Cheddar Shack and holiday milkshakes.
Garutti is continuing to develop his staff as the chain expands. It’s reinforcing the corporate culture with Shacksource, an internal online training, scheduling and community building platform that Shake Shack developed with learning management system provider Wisetail several years ago.
“All the things we do now are connected through our app. … If you want to switch a shift, anything,” he said. “That’s just been a really cool way to scale hospitality.”
Annual domestic sales at Wichita, Kan.-based Freddy’s rose 27.5 percent in the Latest Year, moving it up 17 spots on the Second 100 ranking to 119th. The chain also opened a net 59 units, ending the Latest Year with 236 locations.
Like Shake Shack, Freddy’s offered its signature burgers — thin with crispy edges hanging over the buns — and service that frequently wins praise.
The Habit Burger Grill reported domestic sales growth of 25.4 percent in 2016. The chain, which finished the Latest Year with 170 locations, landed at 131st in the ranking, up from 158th in the Preceding Year.
“We characterize 2016 really as a continuation of a growth strategy and process we’ve been on for the last almost 10 years now,” CEO Russ Bendel said.
All three of the fastest-growing Limited-Service chains spent the year focusing on what they do well and opening new locations. For Habit Burger, that meant continuous expansion in the suburbs on the East and West Coasts.
The Irvine, Calif.-based chain’s strategy is to open 25 percent of new locations on the East Coast and 75 percent on the West Coast, as well as in Arizona, Utah, Idaho and Nevada, Bendel said. The chain aims to continue to penetrate further in existing markets, building operational efficiency and supply chain, as well as brand awareness.
“We believe that long-term successful organizations are really ones that understand who they are, what their touch points are with both employees and consumers, and make subtle adjustments rather than radical changes,” Bendel said.
Other fast-growing Limited-Service chains were highly differentiated operations, including Zoës Kitchen, with its healthful Mediterranean focus, the relatively upscale Newk’s Eatery and Chicago cult favorite Portillo’s.
Contact Bret Thorn at [email protected]
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