The nation’s largest restaurant chains added new locations and generated positive same-store sales in 2015, helping them to their best year in the post-recessionary period, according to Nation’s Restaurant News’ Top 100 research.
The 100 largest restaurant chains’ aggregate U.S. systemwide sales increased 5.9 percent to $248.3 billion in the Latest Year, the strongest growth since 2006 and one of the biggest jumps in NRN’s Top 100 history. Over the past two years, Top 100 aggregate U.S. sales have grown 10.7 percent.
“The 2016 report shows the highest growth in 10 years of the Top 100 study,” said Alan J. Liddle, NRN data and event content director, and database manager for the Top 100 project. “The Top 100 chains had some pretty good momentum in unit growth and solid same-store sales. That was a good combination.”
One of the biggest stories this year was Domino’s. Unit growth — in addition to 12 percent, full-year same-store sales growth — helped Domino’s jump into the Top 10 largest chains by total sales, leapfrogging Applebee’s Neighborhood Grill & Bar, Panera Bread and KFC to get there. Domino’s move knocked Applebee’s out of the top 10 for the first time since 2000, removing any Casual-Dining chain from the top 10 rankings. It wasn’t that Applebee’s had a bad year — its U.S. systemwide sales rose 3.5 percent in the Latest Year, easily besting its 1.3-percent growth from the Previous Year. It was just that Domino’s had a great year.
Casual Dining drops down Top 100
That no Casual-Dining chain remains in the 10 largest brands is a shift symbolic of the sector’s lost luster. Changing consumer behavior is contributing to the segment’s performance.
“If you look at lifestyles these days, people are cramming a lot more activity into their day and feel a lot of times that they don’t have an hour or 90 minutes to spend on dinner. They have 20 minutes to spend on dinner,” Liddle said.
The segment has been losing market share to its Limited-Service competitors for years, struggling through declining traffic and frequently declining sales.
“Certainly price point can be an issue because the Casual-Dining price point is higher than Quick Service and Fast Casual,” Liddle added. Plus, there are greater costs involved in building and operating Casual-Dining restaurants, he said.
Indeed, of the 25 strongest-growing chains in the Latest Year, by total sales, only three were Casual-Dining concepts, and only one of them — Dave & Buster’s — was among the top 10 fastest-growing concepts.
At the same time, six of the 10 concepts that reported a decline in U.S. systemwide sales for the Latest Year were Casual-Dining chains.
Applebee’s could lose further ground in the coming years, as high-growth Fast-Casual chains Panera Bread, No. 12, and Chipotle Mexican Grill, No. 13, are right behind, both within $300 million of Applebee’s U.S. system sales. Chipotle had its own challenges in 2015. The chain’s food-safety outbreaks resulted in a 30-percent plunge in same-store sales in the first quarter of 2016, and could keep the chain from moving further up future Top 100 rankings. 
Large chains expand units
The Top 100 restaurant chains operated 195,741 total U.S. locations at the end of the Latest Year. Franchisees operated 148,388 of those locations. The total number of locations in the Top 100 increased by 1.7 percent in the Latest Year, and increased 4.3 percent over the past two years.
Restaurant system sales growth comes from new locations, as well as same-store sales improvement. And in 2015, restaurants were the beneficiaries of unusually low gas prices that started to decline at the end of 2014. Those low gas prices and unseasonably warm winter weather drove consumers to restaurants, leading to strong same-store sales in the beginning of 2015.
“Larger chains had a much better year last year,” said Larry Miller, co-founder of the MillerPulse monthly restaurant same-store sales index, which focuses on the largest concepts.
The performance of the Top 100 was notable because the last three months of 2015 were especially weak — same-store sales growth was 1.7 percent or less in each of the last three months of the year.
And Miller noted that much of the sales growth in 2015 came not from traffic, in the form of additional customers, but from growth in average check. Restaurants added sales either by raising prices or discounting less.
Same-store sales at the biggest concepts have been relatively weak so far in 2016, based on various sales indexes. Miller suggested that the lack of strong traffic growth in 2015 was a precursor to this year’s so-far disappointing performances.
U.S. unit growth was spread evenly throughout the Top 100 chains. In fact, it was generally lacking among chains at the very top of the rankings. The two chains with the most locations shrunk in the Latest Year — McDonald’s declined by 91 locations, and Subway closed 145 units.
The decline in the number of U.S. locations contributed to a 3.4-percent decline in U.S. systemwide sales at Subway, the third largest chain in the country. That follows a 2.6-percent decline in the Preceding Year, and came during a year in which the chain faced a public relations nightmare when its longtime spokesman, Jared Fogle, was sent to prison over child sexual abuse charges.
But Subway and McDonald’s weren’t the only large chains to see unit counts stagnate. Three other top 10 chains — Burger King, Pizza Hut and Wendy’s — reported either flat unit count growth or absolute declines in the Latest Year.
One concept that is adding units again is Domino’s. The pizza chain has enjoyed several years of same-store sales growth, but had been generally stagnant in terms of unit count. That changed in the Latest Year, when it added 133 U.S. units to give it 5,200 U.S. locations. That was the largest number of new U.S. stores for the chain in 13 years.
“Stores get built because capital moves toward where there’s a strong return, and there’s a very strong return building Domino’s Pizza stores right now,” said CEO Patrick Doyle during a conference call in April.
Another big chain that could make some noise in the future is Chick-fil-A, where U.S. systemwide sales have increased more than 35 percent in the past two years to $6.7 billion in the Latest Year, a remarkable rate for a concept that size.
One thing that won’t change anytime soon: McDonald’s place at the top. The burger giant, with $35.8 billion in U.S. systemwide sales for the Latest Year, is more than twice the size of Starbucks, the next largest chain, with $15.9 billion in U.S. sales.
Put it another way: McDonald’s is slightly smaller than Starbucks, Subway and Burger King combined. It’s also larger than the cumulative sales of the Top 100 chains from Nos. 51 through 100.
Some things just don’t change.
Contact Jonathan Maze at [email protected]
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