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July 2018



Restaurant Research Thermometer

Industry Insights Edition



Measuring the Incrementality of Delivery

  • If delivery is truly incremental, we would expect to see restaurants taking share from total food sales over time as they continue to grow this channel.

  • So far, restaurants have been taking only minor share of total food away from home which reflects higher menu pricing relative to the grocery stores. 


Source: RR & government data


McDonald's Launches Price War on its App

  • McDonald’s is offering rock bottom pricing on its app through the end of December. Each day, customers can choose from any $1 offer.
  • What does this mean for the competition??



Insight from RR Unit & Sales Growth Analysis Report


  • 2017 aggregate systemwide sales growth slowed and was below the 10-year historical average due to weak net unit growth and only a modest same store sales increase.

  • The annual gross unit development rate for the $1B+ chains remains well below pre-recession levels and actual 2017 new unit development fell short of initial year projections for the first time since 2007.
  • Closure rates spiked to the highest level since 2009 which reflects that the 2017 store-level EBITDAR average for the $1B+ chains was at the lowest level since 2008.
  • The 2017 franchise transfer rate exceeded the development rate for the 6th year in a row, which reflects: a continued move towards franchisee consolidation (in search of scale based cost efficiencies); high construction costs; and the difficulty in securing acceptable sights.

Source: RR's 2018 Unit & Sales Growth Analysis (click for outline)



RR's Applebee's Report - Executive Summary


Applebee's (directed by a new, well-seasoned & collaborative management team) is implementing a well-conceived turnaround plan that includes: culinary innovation (with investments in food quality and back-of-the-house simplifications); a renewed value orientation with a return to its middle-market DNA; efforts to leverage high brand awareness as an affordable destination during happy hour & late night, re-igniting alcohol beverage innovation as a driver of high margin incremental sales; accelerated rollout of off-premise channels; and improved guest insights to ensure a strong correlation between test results and end-market performance. The goal is to move Applebee’s away from the perception that casual dining food is processed, microwaved or comes from a package in order to tap into growing demand for real bars and upscale burger restaurants. To this end, its menu strategy seeks to: re-establish culinary culture around broadly appealing, mainstream America flavor profiles that: embrace variety (something for everyone); restore abundant & indulgent value; include guest-driven, ops-validated innovation; and address quality & value gaps. This includes a return to crowd favorites like riblets and low cost bar drinks (which had been removed as part of its failed upscale positioning). Fortunately, new brand leadership recognizes that value for the money is critical given that the brand's core middle-income customer base remains financially strained (value seekers drive 50% of transactions) and the brand's value positioning benefits from its signature 2 for $20/$25 platform and a return to low price drink deals. While long-term system comps have badly under-performed, recent sale trends are outperforming. All-the-same, the system must still deal with the affects of its cumulative sales decline which includes a system low unit level EBITDAR margin and, correspondingly high closure rates. In conclusion, while Applebee's has embarked on a sensible reboot to re-establish its roots as a relevant value player in traditional American fare, stakeholders will require patience as the system works hard to recover from a rather substantial fall.



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RR's Friday's Report - Executive Summary


Friday's new management has developed a sensible positioning strategy which includes developing: world class hospitality; frictionless operations & service; personalized guest experience inside & outside of restaurants; and award winning facilities. This is designed to build upon the chain's core brand equity generated by its bar focus which creates an energetic, social atmosphere (In here, it's always Friday) where guests gather together with friends for fun and celebrations. Friday's social/bar heritage works well with Millennials who represent 40% to 45% of guests and its bar theme helps provide an exciting experience which prompts consumers to counter their cocooning home dining instincts. Further, a very large 25% mix for alcohol sales helps to increase check and margin with drink specials helping to drive incremental sales. Plans to pulse-in 3-5 new product intros every month should help drive traffic and 50%+ of the menu has been upgraded with a complete menu overhaul expected by FYE18 (which includes continued menu simplification to offset the added complexity from an increased LTO cadence). The new "Fire-Grilled Meats" platform upgrades include: Ribs (featuring a +30% meatier, juicier rib); and an updated Burger Bar menu featuring a new patty blend of chuck & brisket. Having said all this, the new management team has its work cut out for itself given that this smaller scale player (11th largest national $1B+ casual chain) has suffered mostly negative comps since the 2008 Great Recession which reflects the system's fundamental challenges, particularly as it relates to value in our opinion. The brand's nearly $18 average check before tip and lack of an everyday value platform may impede frequency given consumer price sensitivity and a high level of competitive discounting. Sales challenges have translated into a system low AUV and EBITDAR dollar amount and gross closures have exceeded gross openings over the last 9 years. In conclusion, while Friday's has a lot going for it because of its unique bar positioning in the crowded casual chain dining space and because of its new management team which is well capable of executing its well-conceived turnaround plan, there is still more work to do around value (which we believe is forthcoming) necessary for Friday's to join in the progress that its competitors have made in better meeting today's consumers where their wallets are at.



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Think'in It Through...

  • Amazon's new grocery store format allows customers to shop with an app, eliminating human interaction.




Special Reports

  • Founded 1983
  • 2,755 units (55 company/2,700 franchised)
  • 142 new units projected FYE 2018 (1 company/141 franchised)
  • $792k MM franchisee AUV

Email RR for Pricing and Report Order Info


  • Founded 1956
  • 1,338 units (79 company/1,259 franchised)
  • 163 new units projected FYE 2018 (8 company/155 franchised)
  • $720k franchisee AUV

Email RR for Pricing and Report Order Info










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Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research’s analysis and opinions are not a guarantee of the future performance of any company or individual franchisee.  RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment. Copyright 2018.



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