But some of the biggest brands among them, namely Subway and McDonald’s, lost ground to focused-menu competitors and emerging fast-casual chains and reported overall sales decreases for the year.
According to data released by Technomic Inc., the nation’s 500 biggest chains improved their sales growth from a 3.4% increase in 2013, when they collectively reported $264.4 billion in sales. The Top 500 Chain Restaurant Report also found that the industry’s 500 biggest brands grew their overall unit count 2.2% in 2014, to more than 220,000 locations.
However, four of the five largest brands in overall sales—McDonald’s, Subway, Burger King, and Wendy’s—struggled in 2014, including estimated declines of 3.3% for Subway and 1.1% for McDonald’s. Taken together with Starbucks, which leveraged an 8.2% increase in sales to $12.7 billion and leapt over Subway into the No. 2 ranking behind McDonald’s, the top five brands eked out just a 0.3% increase in annual sales.
“Brands focused on being the best, not the biggest, were the real winners in this year’s Top 500,” said Darren Tristano, executive vice president of Technomic. “In many cases throughout fast casual and specialized segments within quick service and casual dining, narrowly focused menus and straightforward models for service and pricing have let brands put forward a value proposition and an image of high quality that definitely appeal to consumers. They are seizing market share, and big names like McDonald’s and Subway will continue to lose share if their loss of focus continues to erode brand standards.”
Subway’s sales decline reflected a 3.1% decrease in its estimated average unit volume offsetting an estimated 2.9% unit count gain to 27,205 U.S. locations. Even as the chain continues to add franchise locations, it is losing share within the limited-service sandwich segment, which grew 1.9% in 2014. Jimmy John’s Gourmet Sandwiches and Firehouse Subs appear to be benefiting most within the sector, with unit growth rates in the high teens and annual sales growth of 17.9% for Jimmy John’s and 24.7% for Firehouse.
The limited-service burger segment achieved 2014 sales growth of 1.3% among Top 500 brands, despite McDonald’s struggles, a slight 0.4% sales decrease for Wendy’s, and sales growth of 1.6% for Burger King, which retook its place in 2014 as the second-largest burger brand from Wendy’s. Those brands have tried to fight stagnation in the past year by promoting non-burger items, especially chicken nuggets, while competition intensified from outside the segment with Taco Bell, Dunkin’ Donuts, and Starbucks making gains in the breakfast and snack dayparts. Fast-casual burger brands with smaller menus showed consistent unit and sales growth, including sales gains of more than 20% for chains like Wayback Burgers, Smashburger, and Shake Shack.
Limited service overall registered a 4.2% gain in sales in 2014, and fast casual dominated that expansion with a 12.8% sales surge. Within fast casual, brands with a customizable menu that allows guests to build their own entrées grew even faster than chains with standard made-to-order menu items.
