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June 2019 Insights



Restaurant Research Thermometer

Industry Insights Edition



1Q19 Same-Store-Sales Wrap-Up


  • C-store sales continue their steady decline to -9.4% during 1Q19 while total QSR industry sales increased +9.5%, according to government data.
  • The $1B+ chains were not bothered either way as the QSR & FSR segments maintain their low-single-digit growth trends.

  • In any case, the ratio of $1B+ chains reporting positive comps continues to increase which reflects well on the overall industry health.


Source: RR's Qtrly Same-Store-Sales Report (outline)



Drive Revenue and Brand Engagement with AI


  • Mobile app and delivery are emerging industry drivers, however drive-thru remains the most important.   


  • Net sentiment for restaurant apps is negative, showing there is a huge opportunity for improvement. In fact, only 2 brands are getting it right (including Krispy Kreme).


Click above for more information


RR Menu Report Highlights


After years of menu optimization in order to simplify operations, speed-up service and improve food quality, average menu size was relatively unchanged from last year (-1.4% for QSR and +0.2% for FSR) which suggests the industry has finally found a point of equilibrium as the brands balance providing ample menu variety with keeping menu complexity in check. Innovation is currently focused on customization options, new digital ordering platforms and delivery access.



Source: RR Menu Report (outline)


Domino's - RR Executive Summary


Domino's success as the largest US pizza chain (#1 delivery & top 3 carryout with a 36% domestic share among the top 4 players) reflects its tech innovation positioning which is based upon the idea that consumers primarily choose pizza brands by their ordering & delivery options. In essence, Domino’s emphasizes its leading-edge, digital ordering convenience and seamless payments (frictionless & fast delivery) as opposed to "flavor-of-the-month" LTOs. The chain's positioning is also based upon compelling everyday value with deals at the $5.99 & $7.99 price points that have run so long that Domino’s believes they currently contribute to brand equity. Domino's believes that scale enables value and that profit power is better than pricing power and it is notable that Domino's delivery costs are much lower than 3rd party delivery aggregator options with the hope of even lower delivery costs driven by its "fortressing" market fill-in strategy. The brand's impressive 65% digital sale mix benefits from 18 ordering options on its AnyWare platform and its average check is +36% higher than the pizza segment average, reflecting a greater number of add-ons (salads, chicken, stuffed cheesy bread & desserts) and less discounting associated with digital sales. Sales also benefit from the use of effective marketing stunts that reinforce its brand focus and include: “points for pies” which allows customers to receive loyalty reward credits for eating a competitor’s pizza; carryout insurance (replacing pies that are inadvertently dropped, etc.); pot hole paving free for municipalities (smooth ride to protect pizzas in transit); and free “hot spot” delivery to places like public parks, etc. Domino's 20MM member Piece of the Pie Rewards loyalty program effectively drives traffic and its IT and marketing scale represents a key advantage relative to smaller industry players who represent the bulk of Domino's competition and source of market share gains. Notably, Domino's traffic grew +7.4% from 4Q17 to 3Q18. In conclusion, Domino's story remains a real 21st century tale of how an iconic brand is leveraging digital and big data to create an edge in providing convenient access and low prices to American consumers who never grow tired of their pizzas.



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Papa John's - RR Executive Summary

Papa John's recent sales have suffered dramatically because of very bad publicity which sparked the brand's ongoing turnaround. A restoration of consumer sentiment is expected to take 12-18 months and corporate reported in 1Q19 that the brand is not even 12 months past its 2nd big event. The resultant brand overhaul included: the removal of company's founder, CEO & marketing spokesman; a $250MM investment from a turn-around investment fund (Starboard Value LLP); the appointment of new board members including NBA star Shaq O'Neal who will also act as brand ambassador for at least 3 years; and an audit on brand culture & new appointments to enhance diversity. PJ's new positioning around a relentless pursuit of "better" and bringing people together addresses the expectations of Millennials & Gen Z consumers for companies to have an active role in making the world a better place. Long-term growth priorities include: making people a priority; improving brand differentiation; creating accessible value; implementing tech advancements; and improving unit economics. The goal is to create a customer-centric organization which will leverage customer data to integrate and innovate across every consumer touchpoint. Previously, the brand largely followed the founder's singular vision of keeping focused on better pizzas. Essentially, PJ seeks to evolve into a brand management organization with marketing based upon: customer segmentation; customer needs assessment; and customer journey mapping. Its new CMO's mandate is to better connect with customers around the brand's product quality differentiator (fresh original dough, fresh packed sauce, meats without fillers & pizzas with no artificial flavors or colors) and accessible value (making it easier for customers to purchase PJ’s pizza whenever, wherever & however they want) without sacrificing one for the other. These new consumer insight & analytical capabilities will be applied to its Papa Rewards loyalty program via its 4Q18 re-launch and the brand plans to leverage customer data into 1-to-1 marketing designed to drive traffic without relying on blanket discounts across all channels. Trials around a broader menu to better compete with the delivery aggregators and Domino's and tests of how to execute value on the national and local level should help to improve the brand's relevancy. In any case, it is a challenge to translate a pizza+ positioning into a higher check given the commodity nature of this segment which is so reliant on a lower income demo. In conclusion, while Papa John's brand has suffered a tremendous hit, its ongoing repositioning is well designed for the patient so long as the chain can figure out how to do value as a pizza+ player.



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Think'in It Through...


Dude, I just lost 5 bucks dining-in...


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 2019.



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