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September 2018



Restaurant Research Thermometer

Industry Insights Edition



Restaurants in C-Store Crosshairs


  • C-stores are focused on regaining their share of total food dollars which has declined -28% since 2002. While a big surge in restaurant industry discounting was sufficient to slow the more recent advance in c-store food sales, $30B in annual food sales reveals a solid c-store positioning among those restaurant consumers that may be more interested in an opportunity to save time with one stop shopping for gas, groceries & food than chowing on gourmet fare. These consumers may also appreciate the ability to mix-and-match prepared food with grocery options (including a plethora of bottled drinks & snacks).

  • Casey's General Stores provides a good example of a c-store chain that is now comparable to a $1B+ restaurant chain with a traditional menu built around solid pizza, sub, burger, breakfast sandwich and salad offerings. While the chain's 39% food costs suggests that it has room to drive efficiencies which could be shared with its customers, Casey's is busy remodeling stores & adding digital ordering convenience.


  • Restaurant competitors should further note that Casey's comp expectations for the upcoming 3 years represent multiples of what the $1B+ restaurant chains are currently putting-up.


  • The problem for the restaurant industry is that there are plenty more c-stores where Casey's comes from, and they are all capable of learning how to do food that is good enough...




RR's Subway Report - Executive Summary


Subway is the largest sub sandwich chain by far with the 2nd largest ad spend in all of QSR behind McDonald's with core brand equity in the form of: customization (made-to-order); interaction between sandwich artists & guests; tasty sub sandwiches which include lots of veggies; and bread baked in-house. However, a very long sales and traffic decline highlights the brand's struggles with: stagnation of its menu, marketing & facilities; heightened competition around its fresh/healthy halo with the emergence & growth of upscale sub chains; and a value equation weakened by increased QSR discounting & aggravated by Subway's cumulative menu price increases. Adaptation has not come easy and the brand continues to struggle with finding its true North in terms of where exactly it fits in today's consumer landscape, particularly as it relates to the brand's core middle income demo. Specifically, the brand is challenged to find a proper price value formula that can reverse traffic declines while also restoring store-level profitability. This would require Subway to process more lower priced (i.e. affordable) transactions at faster speeds and could necessitate operational changes. In any case, the chain has finally embarked on a new course with initiatives like: a new premium wrap platform which is a first step in innovating with flavor & quality towards more Millennial friendly fare; a 2019 roll-out of its Fresh Now platform (Signature Flavor & Fresh Pour Beverage stations) which will be fully funded by the franchisor; and an ongoing roll-out of its Fresh Forward remodel decor package which features: vivid color palette; new ordering kiosks; and digital menu boards. The system further benefits from plans to cull and relocate its weakest stores, providing a needed sales boost to existing stores in search of capital to pay for the remodels. In conclusion, while it is difficult to assess how long it will take the chain to reignite sustainable sales given that Subway is currently in the early stages of a brand re-positioning, at least it has overcome the most difficult challenge, that is, to start the process of change.



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RR's Burger King Report - Executive Summary


Burger King is the 3rd largest QSR sandwich player in terms of US system sales with healthy system fundamentals in the form of: a strong value equation; a flame-grilled distinction which includes signature Whopper configurations & various premium "King" burger varieties; ample innovation around core platforms (line extensions) designed to interest core, younger QSR customers; effective marketing; and remodeling with a new tech upgrade component. A promotional focus on its Whopper along with quality upgrades is helping return this key platform to its original flagship menu positioning. The chain is also gaining traction with upgraded chicken products which include its Crispy line and unique Chicken Fries which serve as a unique innovation platform. Marketing is effective at communicating the clear difference of the brand's flame-grilling brand equity relative to competitors' use of flat top grills and a steady stream of hi/lo promotions alternate between strong value platforms, innovative LTOs and premium products. In general, Burger King makes it a point to outperform McDonald's on value with a wide price range of deals with broad appeal. Digital marketing benefits from "trolling" and quirky menu innovation well suited to social media. Customer experience benefits from process/equipment improvements and tighter quality control initiatives to go with remodeling progress that now includes a new tech initiative to upgrade in-store access. All this translates into positive sales comp growth over the last 4.5 calendar years (through 1H18) in a very competitive environment. In conclusion, Burger King is doing a good job of leveraging: affordable value up and down the menu; its flame-grilled brand equity; a little bit of adventure; and a consistent experience to keep them coming back.


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Think'in It Through...


Block Chain Technology for the Restaurant Industry




Special Reports

  • Core brand equity around "Freaky Fast" delivery as the only national sub chain offering in-house delivery.
  • 2,755 units (55 company/2,700 franchised)
  • 142 new units projected FYE 2018 (1 company/141 franchised)
  • New Factory Design new build image represents a 25% cost savings.

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  • Strong brand equity (particularly in core northeast markets) is built on coffee strength bolstered by convenience and fast service.
  • 9,141 units (all franchised) at FYE 2017.
  • 425 new units projected FYE 2018 (all franchised).
  • 2018 new building and remodel design facilitates on-the-go ordering & digital transaction efficiencies which will help improve service speed (the brand’s core competency). 

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Please pass on to your colleagues


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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