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July 2019 Insights



Restaurant Research Thermometer

Industry Insights Edition



Net Unit Development is Slowing


  • System-wide sales for $1B+ chains continue to outperform comps as the chains continue to drive positive net development.

  • In any case, net unit growth continues to trend down as the closure rate ramps-up in a challenging operating environment.
  • Actually, net unit growth during 2018 was the lowest in at least 17 years. 


Source: RR's Unit & Sales Growth Report (outline)



Drive Revenue and Brand Engagement with AI


  • Overall conversations about vegan meat offerings is on the rise.   


  • Of the top QSR brands with a new vegan meat offering, the sentiment of their consumers is trending positive.


Click above for more information




Slow Development Reflects Store-Level Profits 


  • Favorable average COGs trends for the $1B+ chains reflect commodity price deflation, modest menu price increases and less discounting more recently.

  • As everyone knows, labor is another story with wage pressure driven by increasing minimum wages and a tight labor market.

  • With inflation from labor and other operating costs more than offsetting food cost savings, the average EBITDAR margin is currently at the lowest level in at least 16 years.
  • This clearly correlates to slowing net unit development.


Source: RR Unit Economics Report (outline)


Applebee's - RR Executive Summary


Applebee's benefits from a return to its Eatin' Good In the Neighborhood grill & bar positioning with an emphasis on abundant value (plate coverage) and buzzworthy beverage & culinary innovation (leveraging mainstream American recipes/flavors) that is designed to get diners off the couch and over to America's Kitchen Table. Applebee's everyday value positioning includes its signature 2 for $20 - $22/$25+ platform and monthly $1 - $2 craft cocktail offers (mirroring low priced QSR coffee/espresso offers) which work well for the brand's core middle-income customer base. Resultantly, the chain enjoys an all-time high value for the money rating (surpassing its primary competitors) which is consistent with a check that is substantially lower than the segment average. Also, promotions like the Dollarita and all-you-can-eat riblets attracts a younger crowd of Millennials which come in groups and skew toward female, Hispanic and African American. TV ads are well done, featuring compelling food photography set to famous pop songs (creating emotional connections) and punctuated with its "Eating good in the neighborhood" tag line. Operations benefit from a reduction in store performance variability and back of the house simplifications, helping to drive all-time high guest satisfaction scores. Recent comp sale trends are outperforming and benefit from corporate contributions to the ad fund to go with the 2H17 initiative to redefine the Applebee's brand identity & culture. Results are attributed to: nurturing a winning leadership team that is very well seasoned & collaborative; re-establishing franchisee trust; increased investments in research & consumer insight; enhanced guest & team member engagement through consumer-facing technology & CRM; guest satisfaction improvements; a focus on traffic-generating menu innovation & abundant value; and accelerated growth in its off-premise businesses (To-go/car-side & delivery is ramping-up as the system also develops a new family catering channel). However, despite +5% comp growth during 2018, the system's AUV remains significantly below the segment average with an EBITDAR margin that is finally rebounding from a 2017 system low. In conclusion, Applebee's return to its roots as a strong value player which is now quite adept at keeping things interesting and relevant is an essential first step towards the brand's important task of catching-up with the segment average AUV which will be required to fund remodels and development necessary to maintain its claim as king of the casual mountain.



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Popeyes - RR Executive Summary

Popeyes' Louisiana bold/spicy menu profile emphasizes its slow cooking techniques which are unique to QSR. Its core bone-in chicken is infused with a Louisiana-inspired seasoning dry rub that is applied to fresh chicken which marinates for 12 – 72 hours and is then hand-breaded. Its Louisiana heritage provides the brand permission to extend its menu beyond bone-in chicken to boneless chicken products as well as seafood (particularly shrimp). The brand's growth strategy for bone-in: expand its unique flavor profile (adopting boneless flavors); enhance its price-point promotions; and better leverage media. Its growth strategy for boneless: build awareness; drive hand-held innovation; and gain traction for its new chicken sandwich which is doing very well in test markets. The brand's value equation is driven by a steady layer of $5 meal promotions (protein, biscuit & side) along with periodic deals at the $3.99, $10 & $20 price points. Its value equation is also supported by boxes of bone-in family home meal replacement dinner options and deals promoted in store windows. Fortunately, its new product news has started to rebound during 1H19 after sharply declining in 2018 (which is notable given that innovation has historically represented a key brand equity). In any case, the system's 2-year stacked comp of -1.3% through 2018 reflected ineffective marketing/promotions, KFC's strengthening position and heightened QSR discounting. Resultantly, corporate recognizes its need to better balance its calendar with more impactful LTOs consisting of stronger single guest (particularly around boneless) and family bundle offerings as the brand seeks to compete around value without diminishing its premium positioning. In any case, its last remodel program was completed in 2016 (with an updated system providing another point of distinction in the QSR chicken space) and the system benefits from store-level dollar profits which outperform and a strong development outlook. In conclusion, Popeyes challenge has to do with finding a way to leverage its distinctly unique Louisiana flavor positioning to re-establish comp out-performance in a market marked by heightened competition and a resurgent KFC.



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Think'in It Through...


Plant Protein that Tastes Like Meat?


How about Healthy Plant Sweeteners

in Place of Sugar?


Maybe a Delicious Way to Jump Start High Margin Fountain Sales!



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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