August 20, 2023

Today's Topics

Happy Sunday! Today we're diving deep into the world of fast food, which, more than 100 years on from the first opening of a White Castle, shows no signs of slowing down. Over 200,000 different fast-food businesses exist in the US, where Americans reportedly spend~$200 billion every year — join us as we tuck into the whopper industry.

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Nobody does it better… or bigger

America (land of the free, home of the shakes) is the fast-food capital of the world. Of the 25 largest fast-food chains globally, 22 come from the United States, with every single one of the top 17 being American-owned.

Convenient, usually cheap, and always delicious, fast food is a familiar favorite for many — and it’s become even more familiar in the last year. Indeed, with groceries getting more expensive than ever before, sales at many of the largest chains have soared.

In the last 12 months, the net profits for 6 of the largest public fast-food chains in the country have totaled nearly $16bn, over 30% higher than the group achieved at the same point in 2019.

Faster food

So, which fast-food outlets are thriving? A new report from QSR ranking the top 50 chains in America reveals some of the fastest-growing chains in the country. In terms of raw restaurant unit count, it’s hard to beat the ever-omnipresent Starbucks — which, yes, according to QSR, is actually considered fast food — after the company added 429 stores in the last year, more than any other chain.

But, adjusting for its relative size, no chain has grown faster than Crumbl Cookies, which opened an astonishing 363 new units, adding a whopping 53% to its store count in a single year: not bad for a company founded in 2017 that relies on the humble cookie to pay its bills. Chicken lovers are also increasingly spoilt for choice, as chains like Wingstop, Popeyes and Chick-fil-A continue to expand — adding more than 500 units between the 3 of them in the last year. And if that still doesn’t whet your appetite, there’s also been room for both Taco Bell and Chipotle to keep expanding as well.

Slower food

Burger King, KFC and Panera Bread all reported modest net store closures — but it’s Subway that's slimming down most, shrinking its footlong footprint with some 571 store closures in the last year per QSR, as the company continues to explore a sale. Although this fresh upheaval saw 6x more closures than any other chain, it still leaves Subway with the largest store count in the country, with sandwich artists serving up subs at more than 20,000 locations nationwide.

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Pecking order

There remains, however, a clear stand out in the fast-food sales-per-store space: even as newer chains vie to carve out their own niche in the chicken game, Chick-fil-A continues to post some of the most mind-boggling numbers in the industry, with the average store selling $6.7m worth of food and drink every year. That’s more than any of the top 50, roughly 5x the ~$1.3m that a typical KFC franchise brings in, and nearly double what McDonald’s manages to sell per store — and Chick-fil-a rules the roost with only 6 days per week.

Even if McDonald’s doesn’t quite match the per-store sales of Chick-fil-A, the company’s enormous footprint still makes McD’s the industry heavyweight. Indeed, with ~13,500 US stores and each branch raking in over $3.6 million a year on average, the golden hue of the arches gleams on some 80+ years after the first restaurant opened. Indeed, QSR  put the burger giant’s US systemwide sales at a staggering $48.7 billion last year, highlighting its Accelerating the Arches overhaul as a key factor in the chain’s renaissance.

Advancin’ it

As its brainstormed-within-an-inch-of-its-life moniker suggests, Accelerating the Arches is all about moving McDonald’s forward. First unveiled in 2020, the plan aims to modernize the organization, while keeping core menu items at the heart of the business, and McDouble down on the 4 Ds — Delivery, Digital, Drive Thru, and (Restaurant) Development. So far, at least as far as those first 3 Ds are concerned, the overhaul might be working a little too well…

We’ll get that to-go

Indeed, the WSJ recently reported that dine-in customers now represent less than 10% of visitors to most McDonald’s franchises — and it’s not just Casa del Clown where customers are skipping eating in: data from Circana found that just 14% of fast-food orders were eaten on site in June 2023, compared with 22% in 2015.

In short, the vast majority of people who buy fast food today now want to grab it, (hopefully) keep it hot, and eat it somewhere else. We could blame COVID, call this newsletter done, and let you enjoy your Sunday, but the trend is more interesting than that. The rise of apps like Uber Eats, DoorDash, and Postmates have made convenience an even bigger priority — and it’s played into the hands of the chains that have invested in drive-thrus and pick-ups. Chick-fil-A is experimenting with 4-lane drive-thrus, overhead conveyor belts, and chutes that deliver the food straight to you, while Starbucks is teaming up with Target to roll out curbside food & drink pickup across the US.

Appy meals

However — although the predictability of this next sentence makes it almost painful to write — it’s McDonald’s that’s dominating the digital landscape and switch-to-app ordering that’s driving the off-site trend. As we charted only last month, the chain extended its already-huge lead in the fast-food app market, with 127 million global downloads in 2022, which is twice as many as Uber Eats, the second most downloaded food & drink app. It seems that, even as the arches go McDigital, we’re all still lovin’ it.

Like this deep dive? Be sure to share it with your friends, family, colleagues (and anyone else who you think it'll make hungry) — it really helps us out. Thank you!

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