Restaurant Chains Are In A Battle For Market Share And Growth

by Paul Schlossberg
Posted On: 4/10/2019

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  Paul Schlossberg
We’ve mentioned same-store sales growth before. Let’s define it as sales at (the same) stores open for the same time period. We’ll say last year versus this year. It excludes new stores opened during the past 12 months. That allows you to see how well your current business is doing without any impact from new accounts added or those accounts no longer being served.

Sometimes it’s difficult for restaurant chains to tell if a new store is cannibalizing (‘stealing’) sales from established locations. In a city, town or even a neighborhood, one fast food restaurant, maybe it’s a McDonald’s, might ‘steal’ sales other nearby fast food locations. Maybe it will be a competitor – Wendy’s, Burger King, etc. Or maybe it will be another nearby McDonald’s.

Our industry has an advantage when we open at a new location (or store), we do not typically cannibalize sales from our other stores. But, our sales can be cannibalized, relatively easily, by conveniently located fast food restaurants, convenience stores, delivery and many other food sellers. That is especially so when a new fast food restaurant opens and it’s located even closer to a key client site than other competitive restaurants.

No matter what the competitive situation, the restaurant owner, whether company-owned or franchisee, expects to see year-over-year growth. Since you are the ‘store owner’ in your company, you need pay attention to same-store sales growth at every location you serve. A March 18, 2019 article in Ad Age – Restaurant Wars – is worth your time to read. Fast food restaurants are forecast to grow by 3.4 percent in 2019 versus 3.1 percent in 2018.

Looking at 2018 data, we see that McDonald’s had 2.5 percent same-store sales growth and topped the hamburger menu companies. In the “Mega Mexican” sector Taco Bell and Chipotle both achieved 4 percent same-store sales growth. Among the top three pizza chains, Domino’s recorded 6.6 percent same-store sales growth. In the coffee category, Starbucks generated 2 percent same-store sales growth.

The sit-down chains are not always a direct competitor for our transactions. But there are probably some occasions we lose transactions and sales dollars to them. The leaders in 2018 in same-store sales growth are Texas Roadhouse +5.6 percent and Applebee’s +5.0 percent.    

You should keep track of same-store sales growth, especially for your most important customer locations. Your objective should be to have those most significant accounts growing faster than your business as a whole. Set up a tracking system to monitor same-store sales growth by account. Do it for each calendar quarter versus the (immediate) prior quarter and for the same quarter last year.  

In the restaurant industry “comps” or same store sales comparisons are one of the most important measures. For publicly traded companies, stock market analysts might upgrade or downgrade a company’s stock based on comp trends. Company managers understand from the data if they have a problem to correct or if their menu, in-store service and marketing and promotion are working (or not).

It is critical that you are aware when sales are not trending up at key accounts. That will allow you to find out what is going on so that corrective action can be taken.  

When was the last time you checked your comps? Were you satisfied or dissatisfied with numbers you reviewed? If you haven’t been focused on same store sales growth in the last six months, shame on you. If you don’t know the growth trend for your most important accounts, shame you again.

Make same store sales growth an important part of the data you track in your business. It will keep you highly targeted in making decisions and taking actions to sell more stuff.



» Paul Schlossberg is president of D/FW Consulting, working with clients to merchandise and market products in impulse-intense selling environments, such as vending, onsite foodservice and convenience stores. Based in the Austin, TX, area, he can be reached at Paul@DFWConsulting.net or (972) 877-2972 or www.DFWConsulting.net.