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Five of the six largest fast-casual chains posted sales gains in double digits in 2023, led by Wingstop, Jersey Mike’s Subs, and Raising Cane’s, each up more than 20%.

Unit closures, rise of fast-casual restaurant chains pressure full-service sales

Casual and midscale chains battle to rebound from 2020

Evidence of the pandemic’s lingering impact on the restaurant industry is perhaps most evident in the underperformance of the casual and midscale dining segments.

While many limited-service operators thrived in the pandemic and continued to grow and optimize their operations, full-service operators have battled to rebound from the unit closures and loss of traffic they incurred in 2020.

Data from the Top 500 shows that sales of full-service operators in the Top 500 grew only 5% in 2023, lagging the industry’s 7.1% rate of menu-price inflation. Since 2019, sales among these full-service operators have grown at an average annual rate of just 2.4%, according to Technomic.

These operators, particularly in the midscale and casual-dining segments, suffered extensive unit closures in 2020 and 2021, and have yet to recover their pre-pandemic market presence. Data from the Top 500 Report shows, for example, that unit counts last year at midscale operators were about 4% below 2019 levels, and unit counts at casual chains were still 2.5% below 2019 levels.

Those figures compare with 2.5% unit growth among Top 500 chains overall from 2019 to 2023, as limited-service operators have more than made up for the relatively minimal declines they incurred in 2020. Fast-casual operators in particular appear to be supplanting a role historically filled by midscale and casual dining restaurants, offering a somewhat elevated level of food and experience, with the added value of convenience.

The fast-casual operators in the Top 500 tallied sales growth of 11.2% in 2023, and at the same time grew their presence in the market, with unit counts growing by 4.4% to 35,517 locations, or 14.7% more than 2019. Five of the six largest fast-casual chains posted sales gains in double digits in 2023, led by Wingstop, Jersey Mike’s Subs, and Raising Cane’s, each up more than 20%.

“I think the full-service segment is still clawing its way back from the pandemic,” said Andy Barish, an analyst with Jefferies. “There were a lot of closures in 2020 and 2021, and it’s just been a tougher environment, particularly for the smaller chains. Whatever growth is going on in full-service is being offset by closures among the smaller or less relevant players.”

Although fine-dining chains accounted for only 5% of full-service sales in the Top 500, the segment was a bright spot for the industry, in part because consumers continued to indulge for special occasions and because of some lingering pent-up demand.

Special occasion dining grew significantly in 2023, according to data from OpenTable. For example, Valentine’s Day and Mother’s Day restaurant business grew 9% and 6%, respectively, year-over-year, while diners’ spending on those days grew by 15%, compared with non-holiday spending.

“We’re happy to splurge in exchange for a bigger price-point commitment, so long as we’re getting service and flavor,” said Robert Byrne, director of consumer and industry insights at Technomic, which recently identified Ruth’s Chris Steak House, the largest operator in the fine-dining segment, as the No. 1 operator in its America’s Favorite Chain report.

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All data courtesy Technomic Ignite Company data. Looking for more data? Click here to access the complete Technomic Top 500.


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