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Joe's Crab Shack Jenifer Christiano

2017 Second 100: Casual-Dining continues to cede market share

Better-burger chains pick up the slack

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.

Casual-Dining chains lost market share in the Latest Year, and nowhere was that more evident than in the Second 100.

Casual-Dining chains lost overall share of Second 100 sales, and in general saw Estimated Sales Per Unit decline, according to the data, continuing a long-term trend in which consumers have shifted spending toward quicker, cheaper restaurants. 

The Casual-Dining chains that ceded share of sales among the Second 100 did so largely to segments such as Pizza, as well as better-burger chains, which have been viewed as taking market share away from the traditional, sit-down restaurants typically found in Casual Dining.  

On average, Second 100 Casual-Dining chains saw Estimated Sales Per Unit decline 0.8 percent.

As a result, the segment’s share of the Second 100 fell. Casual Dining represents just under 38 percent of the $26.3 billion in sales generated by the Second 100 chains. That’s a decrease from just over 39 percent in the Preceding Year, and more than 40 percent the Prior Year. 

Chains with wait staff tend to dominate the Second 100. Nearly half of sales generated by restaurants on the ranking come from Family-Dining or Casual-Dining chains. By contrast, giant Limited-Service chains tend to dominate the Top 100 ranking.

The Second 100 is a mix of mid-sized regional concepts, up-and-coming chains and companies on the downswing of their life cycles. While chains on this ranking aren’t necessarily trading share with one another, the Second 100 provides a window into the state of the industry by showing who is gaining — and who is losing. Casual Dining is definitely losing.

Many of the sit-down chains on the Second 100 are facing difficult sales challenges, and some are themselves in freefall. 

Consider Famous Dave’s of America Inc., which last year was No. 95 on the Top 100. In the Latest Year, it fell to No. 102, dropping into the Second 100, after estimated system sales fell to $422 million in the Latest Year, from $480.4 million in the Previous Year. Domestic systemwide sales fell 14.5 percent over a two-year period in the Latest Year. 

Then there’s Joe’s Crab Shack, which was No. 110 in the Second 100. The chain’s Latest-Year sales were $366.3 million, an 11.5-percent decrease from the Previous Year, when it notched $414.1 million, and a 15-percent decrease over the past two years. 

Both Joe’s Crab Shack and Famous Dave’s have struggled with falling sales. The chains have closed locations. Joe’s Crab Shack has filed for bankruptcy and is being sold. Famous Dave’s replaced its CEO and is refranchising restaurants  while it works to recover lost sales.

On the other hand, the LSR/Burger segment gained share due to strong performances by a handful of better-burger chains that continue to grow,  in part by taking share from many Second 100 Casual-Dining chains. 

The LSR/Burger segment includes chains like Freddy’s Frozen Custard & Steakburgers, which has seen system sales increase from $200.6 million two years ago to $340.5 million in the Latest Year. 

It also includes rapidly growing Shake Shack, whose sales have more than doubled over two years, from $120.5 million to $277.3 million in the Latest Year.

Consumers still appear to be willing to dine out at Family-Dining chains, but they’re choosy about which ones. Overall, the Family-Dining segment’s market share has declined from 10.2 percent of sales two years ago to 9.7 percent in the Latest Year. 

But Family-Dining chains’ Estimated Sales Per Unit increased an average of 2 percent in the Latest Year, and grew 4.2 percent in the Preceding Year. 

The growth leader, by far, was First Watch, whose Estimated Sales Per Unit increased nearly 13 percent in the Latest Year, in addition to an 8-percent increase in the Preceding Year. The breakfast-and-lunch chain now has unit volumes of nearly $1.4 million, an increase from $1.1 million two years ago.

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

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