Consumer Trends Evolving
in the Chain Restaurant Space

The lingering effects of COVID-19, inflationary pressures, and a desire among consumers for new types of cuisines will impact the chain restaurant space for years to come.

That's according to The NPD Group's Stephanie Epperson, a panelist on a recent webinar co-hosted by The Food Institute and DMA entitled "Evolving Buying Patterns of Chain Restaurant Patrons."

Evolving Consumer Buying Trends

Epperson highlighted that although the restaurant recovery was ongoing, behavior below the surface continued to evolve.

She shared that the average customer made 89 total chain restaurant purchases in the 12 months ending in September 2021, representing an 11% drop compared to the same period in 2019. However, the spend per purchase was up 14% for the time frame to $14.46 per occasion.

With these two data points together, Epperson showed that total spend per buyer is flat, with the average consumer spending $1,279 on chain restaurant purchases in the 2021 period, compared to $1,271 in 2019.

Epperson also noted a generational difference. Consumers under the age of 45 cut out eight restaurant purchases in the 2021 period when compared to 2019. For consumers over the age of 45, 15 restaurant purchases were cut out.

Are Consumers More Loyal?

Epperson posited an interesting question for the audience: Are consumers more loyal to restaurant brands in the wake of the pandemic? She highlighted research showing the average consumers visited 20 unique chains in the 2019 reference period, while in 2021, the average consumer only visited 17 unique concepts.

However, she noted restaurant chains shouldn't see their customers are exclusively their own. Instead, they share customers with other brands, and buyer churn was constant.

She cited Popeyes as an example. Despite the popularity of its chicken sandwiches, 38% of customers who purchased a meal from Popeyes in 2020 did not return in 2021.

Considerations: LTOs, New Launches

Epperson offered some advice for those looking to boost brand loyalty among consumers, starting with limited-time offers (LTOs). She shared research showing that LTOs appealed to chain's existing buyers, and that LTO buyers visit a chain at a rate 2.4 times higher than non-LTO buyers.

Additionally, LTO purchases drive check prices. She showed that LTO main dishes offered a $3.60 party check lift when compared to the period before the launch of an LTO. Desserts provided a $2.89 average party check lift.

She also said new product launches could also successfully drive customer purchases, citing Burger King as an example. She said 21% of Impossible Whopper buyers in October 2019 had not visited a Burger King location in the year prior to that eating occasion. Food Institute Focus


Lunchtime Rush Coming Back for Restaurants

Online and physical restaurant visits during lunch rose 4% in the year ending September 2021 compared to a year ago when visits were down 11%, based on The NPD Group's U.S. foodservice industry tracking.

"Consumers are on-the-go now, and the lunch rush is coming back," said NPD Group food and beverage industry analyst Darren Seifer in a press release.

Though lunch traffic hasn't fully recovered to pre-pandemic levels, down 8% from September 2019, the increase is a significant improvement over the double-digit declines seen in 2020. Against this backdrop, restaurant lunch visits are now forecast to grow by double-digits through 2024, according to NPD's Future of Lunch study.

With workplaces starting to reopen, consumers have also returned to convenient ways to prepare or source lunch. Easily transported categories, like packaged lunch and snack kits, are positioned to do well through 2024, while consumers will also look to retail for ready-to-eat foods for convenient lunches.

QSR Boost

Quick service restaurants (QSR), which represented 79% of lunch restaurant orders in the year ending September, are benefiting from the lunchtime rebound.

Lunch orders increased 4% in the period compared to same period year ago when visits were down 9%. However, QSR lunch visits haven't fully recovered to pre-pandemic levels and in the year ending September 2021 are still down 12% from the same period in 2019.

"In order to attract during lunchtime with much of the population still working from home, restaurants need to offer convenience to consumers, and at lunch, it's about saving time," Kim McLynn, executive director, The NPD Group, told The Food Institute. "The more a restaurant can offer convenience, speed, and quality food during lunch, the more they will attract customers."

Breakfast Rebound

Morning meal is also recovering.

NPD found that online and physical visits to restaurants during the breakfast and AM snack period increased by 7% in the year ending September 2021 compared to a year ago when visits declined by 13%, but the daypart is still 7% below the pre-pandemic period of year ending September 2019. Food Institute Focus

Restaurant Acquisitions Remain Red Hot

The sandwich market's potential appears to be underscored by recent quick-service restaurant acquisitions.

In the span of two weeks, a pair of QSR parent companies expanded their culinary offerings via acquisitions of established brands. Restaurant Brands International (RBI) made headlines Nov. 15 after it said it would acquire Firehouse Subs for $1 billion, which followed the Nov. 2 news that FAT Brands would acquire Fazoli's for $130 million.

Consolidation among QSR parent companies, a category that also includes Yum Brands and Inspire Brands, is likely to continue as capital is easy to get right now and these companies look to protect their share of franchisees, according to Dan Rowe, the CEO of Fransmart.

Rowe told The Food Institute these companies were "leveraging existing franchisees to develop other in-house brands as non-competitive expansion vehicles, instead of their franchisees expanding outside the network...It's both defense and offense for these strategic buyers."

Targeting Sandwich Shops

The sandwich sector has a fair number of operators, ranging from QSRs like Subway to fast-casual concepts like Panera Bread to delivery-driven operators like Jimmy John's, which was acquired by Inspire Brands in 2019.

Rowe noted Subway was by far the largest operator in the space, estimating its footprint at about 40,000 locations. In comparison, he said Jimmy John's, Jersey Mike's, and Firehouse Subs each had less than 10% of Subway's footprint, but the ubiquitous demand for sandwiches and falling prospects for Subway cleared a lane for the smaller operators to grow.

"All that market share is still wide open," he said. "The good news for all the other sandwich guys is that Subway is falling apart."

Potential for Ghost Kitchens

A potential reason for acquiring established brands in different cuisine categories could be their use of ghost kitchen concepts, much like Inspire Brands deployed in the Atlanta market, reported CNBC (Nov. 11). Full Story

Alliance Kitchen, billed as the first ghost kitchen launched, owned, and operated by a multi-brand restaurant company, will offer products from its signature brands, which also include Arby's, Buffalo Wild Wings, Rusty Taco, Dunkin', and Sonic.

Under such a model, RBI would be able to provide cuisine from four different brands, and FAT Brands would be able to leverage 15 unique banners when offering products via a ghost kitchen.

RBI, FAT Brands Continue to Grow

RBI was formed by the merger of Burger King and Tim Hortons in 2014, but it did not take long for the company to expand from burgers and breakfast to a different cuisine: It acquired Popeyes Louisiana Kitchen for $1.8 billion, giving it a competing banner for Yum Brands' KFC unit.

The acquisition has largely been seen as a boon for the company, and its performance during the chicken sandwich wars would back that up. However, it also expanded the company's culinary footprint, adding a pure play into the fried chicken arena.

The Fazoli's acquisition by FAT Brands followed two other purchases it made in 2021. In June, the company acquired Global Franchise Group from Serruya Private Equity Inc. and Lion Capital LLP for $442.5 million.

The purchase gave it access to a variety of restaurant concepts, including Round Table Pizza, Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery and Pretzelmaker. Additionally, in September, the company announced it would acquire the Twin Peaks sports lodge concept from Garnett Stations Partners for $300 million. Food Institute Focus

Store News:

  • McDonald's plans to offer $250 million in low-interest loans over the next five years to increase diversity among franchisees. McDonald's said Hispanics, Asians, and Blacks made up 29.6% of all U.S. franchisees at the end of 2020, while women made up 28.9% of domestic owners, reported The Wall Street Journal (Dec. 8). Full Story
  • Starbucks is opening a pick-up cafe in midtown Manhattan with Amazon that uses the retail giant's cashierless technology to attract busy consumers who want to buy coffee or snack quickly. The partnership with Amazon is the latest step in Starbucks' plan to adapt its locations to consumers' new habits, reported CNBC (Nov. 18). Full Story
  • IHOP opened its first virtual location in Toronto in partnership with Ghost Kitchens Brands. Full Story
  • Jif, Goldfish, and Pizza Hut have been named to TikTok's first-ever Culture Drivers list, which highlights 14 brands doing the best, most engaging, and entertaining work on the platform. Full Story
  • Burger King will cut some of its menu items to help workers process drive-thru orders more quickly, according to Restaurant Brands International CEO Jose Cil. He also said new technology for preparing sandwiches and digital menu boards are helping make drive-thrus more efficient, reported USA Today (Dec. 1). Full Story
  • Meanwhile, Burger King has re-introduced the Italian Original Chicken sandwich for a limited time. Full Story
  • Jimmy John's will waive all or most initial franchise fees and discount royalty rates in an effort to incentivize development starting in 2022 and beyond. Full Story
  • FAT Brands agreed to buy Arizona-based Native Grill & Wings for $20 million. The purchase gives FAT Brands three separate chicken wing concepts, reported Yahoo! (Nov. 22). Full Story
  • MOD Pizza joined the growing parade of restaurant companies to announce plans to go public. The Seattle-based chain announced it has confidentially submitted a draft registration to the Securities and Exchange Commission for a proposed initial public offering, reported Nation's Restaurant News (Nov. 22). Full Story
  • Logan's Roadhouse launched its first loyalty program and mobile app. Full Story
  • Papa John's International is entering Sub-Saharan Africa with plans to open 60 locations in Kenya and Uganda. Full Story
  • MOOYAH Burgers, Fries & Shakes is seeking to close out key markets in Texas by adding 54 new locations across Austin, Waco, San Antonio, and Houston. Full Story
  • Twin Peaks will open 10 locations in Philadelphia. Full Story

Executives on the Move:

  • Cal-Maine Foods named Matt Glover VP of accounting, Jia Scott VP of treasury, and Rhonda Whiteman VP of operational accounting. Full Story
  • Krystal Restaurants appointed Dan James VP of real estate and construction. Full Story
  • Hungry Howie's Pizza named Steve Clough director of franchise development. Full Story
  • McLane Company appointed Chris Smith president of McLane Grocery. Full Story
  • MOOYAH Burgers, Fries & Shakes named Doug Willmarth president. Full Story
  • Domino's Pizza is promoting Kate Trumbull, Christopher Thomas-Moore and Juan Joachin to senior vice president roles. Full Story


Labor Shortage Update: Restaurants Limit Delivery, Online Sales to Focus on Dine-In

The labor shortage continues to take a toll on restaurants across the U.S., just as the holiday season gets underway.

For example, a California Boston Market shut on Thanksgiving after staff did not show up, leaving customers unable to collect pre-ordered meals. "No employees showing up today... We are unable to fulfill the orders," a sign at the restaurant read, as reported by Business Insider (Nov. 26). Full Story

Here's a closer look at the implications of the labor shortage for restaurants as well as signs of hope in recent employment data.

Restaurants Limit Delivery Amid Labor Shortage

Some restaurant companies are shutting down delivery and online sales for periods to focus on dine-in customers, reported The Wall Street Journal (Nov. 28). Full Story

Darden Restaurants, Cheesecake Factory, Dine Brands Global, and First Watch Restaurant Group are among the operations juggling delivery and online orders as locations struggle with staffing.

Darden, for example, is reducing business at its restaurants on weekends, when brands can only take about four to-go orders every 15 minutes, CEO Gene Lee told investors. There are a lot more orders than that," Lee said. "We know we have excess demand."

The slowdowns aren't going unnoticed by customers. Fifteen percent of diners said delivery wasn't available from full-service restaurants at peak times in recent months, according to a recent poll by consumer-research firm Lisa W. Miller & Associates LLC.

New Jobs Added in November, More Teenagers Employed by Restaurants

On the bright side, U.S. employers added 534,000 new jobs in November, with franchise employment up 35,300, according to ADP. Among franchises, restaurants added 21,700 jobs while food retailers shed 900 jobs.

Black Box Intelligence also found that more teenagers were hired by restaurants in 2021. Teenagers have commonly made up a sizeable portion of limited-service restaurant employment. In 2019, 17% of all hourly, non-management employees were 18 years old or younger. By the end of Q3 2021, the percentage grew to 24%.

A similar shift was observed in the full-service segment. The percentage of hourly, non-management employees 18 years old or younger was 4.6% in 2019. In Q3 of 2021 the percentage increased to 7.2%.

Meanwhile, the 25- to 34-year-old age group had the biggest reduction in its share of both limited-service and full-service employees. Food Institute Focus


November Sales Growth Best for Industry in Over a Decade

Same-store restaurant sales were up 8.27% in November when compared to November 2019, representing the best sales growth for the industry in over a decade, according to Black Box Intelligence. Comparable traffic was down 4.65% for the month, indicating many of the sales gains were due to increased prices and larger tickets for to-go and delivery orders. Full Story



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