Are the top 500 chains open more or less compared to 2019? Are operators focusing on renovations? What restaurant company is turning its employees into owners? We answer these questions and more This Week in Foodservice.

Sales among the top 500 restaurant chains increased 7.8% in 2023, per data from Technomic. The two key drivers of that increase were higher prices and more units, Technomic noted. The top 500 chains now operate 233,490 locations, which is approximately 6,000 more than in 2019. The story notes that average restaurant prices increased 7.1% last year.

While conducting similar research, Chicago-based Datassenital outlined a few other notable changes among the top 500 chains. Specifically, the five market segments that added the most units in 2023 were all in the limited-service segment and they are: salad/healthful, which saw a 10.5% increase in units, coffee at 5.8%, regional/global cuisine-oriented chains at 4.7%, snack/dessert-themed restaurants at 4.3% and Mexican-themed restaurants at 3.0%.

In addition, Datassential noted that between 2019 and 2023 54% of the top 500 chains have reduced their operating hours, compared to 27% of chains that have expanded their operating hours. And 20% of the top 500 chains have not changed their operating hours. Overall, the top 500 chains were open 2.6 hours less per day in 2023 than they were in 2019.

Looking at dayparts served by the top 500 chains, Datassential reports that 54% offer breakfast, 99% lunch and 96% dinner. In addition, 23% of the chains serve the early morning daypart, which runs from 4 a.m. to 7 a.m. and 16% are in the late-night daypart, which begins after 9 p.m.

Another interesting nugget from Datassential points out that chains that rely more heavily on drive-thrus had slower unit growth, but higher sales growth compared to those concepts that are not as drive-thru oriented.

Overall, a variety of macroeconomic factors continue to make the operating environment challenging for all restaurant operators, including the top 500 chains. For proof, look no further than the fast-casual chain Rubio’s. In filing for bankruptcy for the second time in four years, Rubio’s cited increased food and utility costs over the past three years, as this Restaurant Dive story notes. A tight labor market and the $20 per hour minimum wage for fast food workers also made things more challenging.

Foodservice News

• Taco Cabana is rolling out a new prototype in Texas. At 2,541 square feet, the location is smaller than the chain’s previous prototypes, which measured more than 3,500 square feet, per a Nation’s Restaurant News story. The restaurant will use a single makeline to serve both the drive-thru and front-counter customers. The chain feels this approach, which represents a change from previous prototype designs, will conserve space and optimize labor.
• Renovations remain a focal point for many operators, per a study from restaurant development + design magazine. Readers of the magazine said interior renovations and additions were the areas where they had seen the most investment thus far in 2024. Upgrading outdoor dining and patio areas was second in the study.
• Some chains are betting that consumers have big appetites for bite-sized snacks. Chains like KFC and Wendy’s have recently added bite-sized snacks in the form of apple pie poppers and mini cinnamon rolls, as The Food Institute reports. These menu items appeal to on-the-go customers and can help drive incremental revenue for operators.
• Working from home impacts the way consumers use restaurants during the lunch period. Overall, 35% of customers say they are less likely to eat lunch from a restaurant when working from home, per data from Technomic. And 37% say they are just as likely to use a restaurant for lunch when working from home and 28% say they are more likely to use a restaurant for lunch when working from home.
• AI ordering technology may still have a future role at McDonald’s. The burger giant has ended its two-year test of AI ordering technology, per various published reports. That said, the chain is exploring other options and hopes to make an announcement about voice ordering technology by the end of the year, per a Yahoo! Finance story. One of the key objectives of this initiative and others like it is to see if this technology can successfully take customer orders in the drive-thru which would free staff to perform other tasks. This would be similar to the way kiosk ordering has evolved within many quick-service restaurants.
• As many restaurants struggle with higher labor costs, one multiconcept operator is turning its business and its employees into owners. Edible Beats implemented a 100% employee stock ownership plan for its more than 325 associates, per a FSR Magazine story. Company founder Justin Cucci views the ESOP “as an innovative way to reward their hard work and foster a sense of ownership and pride in our collective success …”
• What’s the secret sauce in successful menu development? “Strategic variety,” says Karen Malody of Culinary Options. This means having “just enough food types to meet the needs of a diverse customer base without adding unnecessary content just to appear to have variety,” Malody told RestaurantOwner.com. “Without concept clarity, an understanding of what the financial needs are to remain open, and how the concept needs to be positioned in the marketplace, an intelligent menu cannot be developed.”

Economic News

• Retail and foodservice sales increased 0.1% in May compared to the previous month, per the advance estimate from the U.S. Census Bureau. Sales were 2.3% greater than May of 2023. This was less than the 0.2% increase Dow Jones had estimated, per CNBC. Sales at eating and drinking places declined 0.4% from April and represented the lowest monthly sales volume since October 2023, per the National Restaurant Association. While overall restaurant sales dipped in recent months, average menu prices continued to rise. As a result, real restaurant sales lost ground relative to 2023 levels. After adjusting for menu price inflation, eating and drinking place sales fell to their lowest monthly level since April 2023, the NRA added.
• Inflation slowed last month as the Consumer Price Index was unchanged in May, after rising 0.3% in April, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index increased 3.3%. Economists had projected a 0.1% increase for May and the annual inflation rate would come in at 3.4%, per a CNBC story. Food at home prices was flat for the month, while food away from home prices increased 0.4%. Over the past 12 months, food away from home prices increased by 4%, which is 3% greater than food at home prices.
• The Producer Price Index for final demand declined 0.2% in May, the U.S. Bureau of Labor Statistics reported. This beat economists’ projections, which called for a 0.1% increase in the PPI, per a Reuters story. Final demand prices increased 0.5% in April and edged down 0.1% in March. On an unadjusted basis, final demand advanced 2.2% for the 12 months ending in May.

• Industrial production increased 0.9% in May, per the U.S. Federal Reserve. Manufacturing output posted a similar gain of 0.9% after declining in the previous two months. Unfortunately, some economists doubt this momentum will be sustained due to due to ongoing higher interest rates and softening demand for goods, per a Reuters story via Yahoo! Finance. At 103.3% of its 2017 average, total industrial production in May was 0.4% greater than its year-earlier level. Capacity utilization moved up to 78.7% May, a rate that is 0.9% less than its long-run (1972–2023) average.
• For the week ending June 8, initial jobless claims increased 13,000 for a total of 242,000, per the U.S. Department of Labor. This represents a 10-month high in the number of weekly claims, per a Yahoo! Finance report. The 4-week moving average was 227,000, an increase of 4,750 from the previous week. Some saw these results as an indication that the job market is starting to cool and that could eventually lead the U.S. Federal Reserve to lower interest rates.