Struggling restaurants are witnessing significantly lower foot traffic compared to pre-2019 figures
In the aftermath of the global pandemic, the chain restaurant industry has shown signs of a resurgence, albeit with some notable shifts in the market. According to data from the Technomic Top 1500, U.S. Census, and U.S. Bureau of Labor Statistics, the industry has made a significant recovery, although not without its challenges.
Sales per restaurant in the Top 1500 have experienced a significant boost, with an increase of 24.2% in 2021. The average restaurant now generates approximately $1.79 million in sales, up from $1.44 million in 2019. However, industry profitability remains down, on average, since the pandemic, with franchisee profitability also taking a hit.
One area where the industry has yet to fully recover is customer visits. Despite sales and location count recovery, the chain restaurant industry continues to struggle with decreased foot traffic. The bulk of the growth has come among fast-casual chains, which have grown location count by 19% over the past five years. In contrast, the count of casual-dining restaurants has decreased by 4%, and family-dining restaurants are down nearly 7%.
The industry has seen growth from existing brands and high-growth concepts like drive-thru beverage or fast-casual chicken chains. Notably, several full-service chains have rebounded strongly despite a challenging environment for restaurant sales.
Companies that have expanded significantly in the fast-food sector since 2020 include Chipotle Mexican Grill, which plans to open 315–345 new restaurants by 2025 and aims for 7,000 locations in the US and Canada long-term. Another interesting player is the Berlin-based startup Milano Vice, which launched in 2022 and has developed a virtual pizza restaurant network leveraging underused kitchens and focusing on delivery-centric digital operations.
The number of locations in the Top 1500 has risen by 3.9% since 2019, which is lower than the 4.6% growth in the U.S. population over the same period. This indicates a slower expansion rate compared to population growth.
To attract more visits, restaurant operators are lowering prices, offering discounts, increasing limited-time offers, and partnering with companies like Netflix, Nickelodeon, and Minecraft. Despite these efforts, consumers are spending more at restaurants but visiting less often, leading to increased pushback on social media over prices.
The Top 1500 accounts for the majority of the chain restaurant industry, and there are more limited-service restaurants today than there were last year, and certainly five years ago. As consumers cut back, they're taking the brunt of the impact. Many restaurant chains have closed locations during and after the pandemic, with burger chain franchises, buffet brands, and casual-dining locations being among those affected.
The industry's constant push for unit growth is putting a growing amount of pressure on individual locations. Menu prices have increased by 31% over the same period, further intensifying the pressure. The makeup of the chain industry has changed, with a lot more limited-service and a lot more fast-casual, and a lot less full-service.
In conclusion, the chain restaurant industry is on the rebound, albeit with a shift towards fast-casual and limited-service concepts. The industry is grappling with challenges such as decreased foot traffic, increased prices, and the pressure to expand, but innovative strategies and partnerships are helping to drive growth.
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