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August 2018



Restaurant Research Thermometer

Industry Insights Edition



Recap of 2Q18 Investor Calls



Source: Quarterly Concept & Comp Update Reports (click for outlines)


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What the Banks Say about Franchisee Health 


  • The banks are perhaps the best barometer for assessing franchisee financial health.
  • According to results from RR's recent lender survey, the banks are still bullish about this space although they are understandably tightening underwriting standards in response to margin pressure. 




Source: RR's Finance Update & 1H18 Valuations (click for outline)


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RR's Taco Bell Report - Executive Summary


Taco Bell is extremely well positioned as the only $1B+ national QSR Mexican player (category of 1) with core equity around abundant value, craveable innovation and a bold flavor profile. The brand is extremely dialed-into the Millennial demo with a very targeted menu & marketing strategy and this cult, Millennial lifestyle "hipness" brand entertains with playful & engaging story ads that include compelling fake trailers for fake movies with sequels that provide viewers with a reason to stay-tuned. Taco Bell promotes the trial of new things with unique and compelling innovation, driving traffic & social media posts (buzz marketing). Further, the brand enjoys perhaps the strongest price/abundance value equation in QSR (price points ranging from $1 menu platform to $5 bundle meals) and Taco Bell seeks to celebrate value (Feast for a Dollar) rather than apologize for it. Healthy comp growth reflects strong brand positioning and its AUV is at an all-time high (capacity benefits from a menu that addresses multiple dayparts including breakfast, lunch, dinner, Happier Hour & late-night) and store-level profits are close to an all-time high. Efforts to develop frictionless guest access includes: order-ahead app functionality; plans to install 2 self-servicing kiosks in all restaurants by the end of 2019; a $200MM investment in Grubhub to help expand its delivery well beyond its existing reach with system-wide implementation expected by 1Q19; and relaunch of its brand website (Ta.co) where customers can order, rapid re-order & customize orders. 2018 is expected to be a record setting year for domestic restaurant openings and existing stores benefit from remodeling progress. In conclusion, Taco Bell's strengths continue to far outweigh whatever few weaknesses we can find as the chain continues to represent one of the most relevant QSR brands in the 21st century.



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RR's Arby's Report - Executive Summary


Arby's enjoys unique positioning as a QSR chain with a credible deli format that bakes beef roasts in-house before freshly slicing the meats to create Fast Crafted, made-to-order hot deli sandwiches which offer a compelling fast casual-like alternative to burger, chicken-only and cold-cut sub concepts. Sandwiches are distinguished by: generous stacks of quality meat toppings (big, meaty sandwiches); and leading-edge protein variety which extends well beyond Arby's core roast beef heritage. The selection of gourmet Market Fresh sandwiches & salads expands the concept's appeal to more upscale, health conscious consumers (eliminating the veto vote). The brand's positioning is effectively communicated by its “We Have the Meats” campaigns and its focused core menu simplifies operations while innovative LTOs (including monthly new news) drive trial and add variety. Having said this, flattish 2017 comps reflects the brand's vulnerability as a premium player in a hyper competitive price environment and a steady layer of value LTOs could help its positioning. Also, a lack of a national breakfast platform could be hurting sales especially given the industry's growing emphasis of offering breakfast all day. 2018 efforts to simplify innovation may have been needed to improve service given deteriorating 3rd party customer satisfaction surveys. In conclusion, while Arby's is well positioned as a QSR player that can serve as a credible alternative to a NY deli, the brand may have to sharpen its focus around value given our current operating environment.



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Think'in It Through...


It's getting hot out there...




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

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

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Restaurant Research Resources


Thermometer Dashboard

Thermometer Insights

Research Notes


Report Announcements

New Product News

Menu Pics

Industry Events


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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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