F&B Insights

Restaurants Receding and Those Hitting It Out of the Park

The cream always rises to the top is a famous saying suggesting that people or organizations that are the best at what they do become top contenders. Whether skill, work ethic, or moral character, an element of greatness almost ensures they find success in life and business. In the world of dairy, the fluffy, fat molecules float to the surface, and the heavier ones, with water, protein, and minerals, settle below. 

So, what does that have to do with restaurants?

We all need role models, those who have come before us and made great strides in the industry. In some ways, they offer a template for success. In fact, many people have “risen to the top” due to their mentors guiding them through unforeseen hurdles they had already experienced. 

This is one of the fundamental truths on which the EMERGING Fund was born, but that’s for another story. Here, we’re exploring Technomic’s latest industry statistics—the top chains by sales as well as those that closed the most units. Perhaps we’ll catch a glimpse into what takes a brand to the top of its game and what leads to its demise.

The State of Chain Restaurants

According to Technomic’s 2024 top 500 rankings, these chains experienced strong growth in 2023, increasing total sales by $31 billion, resulting in $424 billion for the year. This growth, however, didn’t come from increased traffic. Instead, the increase in revenue came from more units and higher prices. About 4,000 new restaurants entered the market, the fastest growth rate witnessed in the last seven years. Additionally, prices increased by an average of 7.1%. 

The Largest Casual-Dining Chains

Casual dining chains had the lowest sales among all concepts, with a 4.7% increase from 2022. Family dining grew by 5.7%, quick-service by 7.9%, and fast-casual took the lead with an 11.2% increase in sales from last year.

Inflation played a large part in casual dining sales, with consumers going out less to compensate for the everywhere increase in prices. According to Restaurant Business, those who excelled did so because of their performance in operations rather than pushing value and discounts. 

Here’s the top two:

  • Olive Garden: The standout leader was Olive Garden, which had $5.1 billion in sales, an increase of almost 9% from 2022. Its parent company, Darden Restaurants, Inc., includes Ruth’s Chris Steak House, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, The Capital Grille, and others in its portfolio. Olive Garden, however, is by far its biggest brand, with almost 910 units spread around the world. The Never-Ending Pasta Bowl, once again, was partially responsible for the increase in sales. They’ve also slowed price increases compared to other segments, demonstrating a 17% increase in the last four years compared to full-service’s 25% increase. 
  • Texas Roadhouse: Not surprisingly, Texas Roadhouse came in a close second with 628 units and $4.8 billion in sales, an increase of 13.8% from the previous year. Like Olive Garden, the brand focused on retaining traffic by limiting price hikes. They also opened 24 new locations. During an earning call, executives suggested one of the driving forces behind their success was technology, including incorporating Roadhouse Pay. Tablets are placed at each table, enabling customers to pay when they’re ready. The result is quicker turnaround and higher tips.

Restaurants Closing Units

On the other end of the restaurant spectrum are the brands closing the most units in 2023. Coming in at number 10 in this category is Joe’s Crab Shack. A seafood brand that at one time operated over 100 locations is now down to 30. In 2023, they experienced a nearly 19% rate of closures. Their demise stems from making promises they didn’t keep, like no more cooking with trans fats, fats that have proven to increase heart disease and impair mental performance. They also instituted a failed no-tipping policy.

TGI Friday’s has also been reducing its numbers, closing about 36 underperforming restaurants across 12 states. According to Restaurant Business, it closed one out of every five in 2023.

It’s no surprise that the beleaguered Boston Market takes the lead, with over 67% closures in 2023. At one time, this popular brand had 1,200 locations. Now, it’s down to 27. What started as a cut-above fast food also defined itself by its low prices, ultimately leading to a reduction in quality. And the item they’d brought to the public, whole rotisserie chickens, soon became available in every major grocery store, undermining their once unique offerings. 

So, what can we learn from these brands? It’s mission-critical to keep a wary eye on prices and make sure you’re not raising them to the point of affecting traffic and consumer preferences. F&B Insights offers the world’s largest menu database, giving you market pricing on a local and national scale. Receive alerts when someone in your area changes their pricing and ensure you align with what the market can sustain. To learn more about F&B Insights or to sign up for a free 15-day trial, contact F&B Insights today.

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