Where are they all going to fit?

Conor Cunneen © 2003

The answer is over 800,000 units. The question is, “How many foodservice / restaurant units are there in the United States?” To put this number in perspective, this is about one foodservice outlet for every 360 people in the country. And you wonder why over 60% of the US population is technically overweight?

In a market where 50 cents of every food dollar is spent out of home, a percentage that continues to grow (see chart), most of these restaurants survive and of course many of them thrive.

The question though does arise as to just how many more restaurants can fit within this landscape. Most of the large restaurant chains in the US are publicly quoted companies whose stock price is driven purely by growth. This growth can only be achieved in one of two ways, a consistent increase in same store sales which in the current environment can realistically be pegged at 2-3% for even the best performing organizations. The other factor that can drive growth is increasing the number of restaurant units, something that virtually every restaurant CEO is currently promising will happen. But you have to wonder if there is room for everyone.

One of the most ambitious growth plans comes from Applebee’s Restaurant Inc. This Kansas based group is the brand leader in the casual dining sector in terms of restaurant units with a current count of 1500 and sales in excess of $3 billion. Just 10 years ago, Applebee’s had but 250 units! This is quite a growth rate and one which they have no intention of easing up on. Chairman and CEO Lloyd Hill believes he can grow the chain to 2,500 restaurants ultimately. Their stated strategic objective is to be twice as large as their nearest competitor in each of their defined markets. Financing of this growth may not be a problem for Applebee’s as its momentum is heavily influenced by franchisees who today own about 1,100 restaurant units.

The issue for this chain and others is that every one else has the same idea! One of Applebee’s competitors, The Darden Restaurant Group has significant expansion plans for each of its concepts. With overall sales at $4.4 billion, Darden is the largest player in the casual dining sector due to the strength of its many brands – Olive Garden, Red Lobster, Bahama Breeze, and Smokey Bones.

Olive Garden is slated to add up to 100 new units in coming years to bring this concept to around 600 units. Growth for their Red Lobster concept will be based partly on 10-12 new units each year. The 22 unit Bahama Breeze averages $5 million annually per restaurant and expects to build a further 100 units in coming years. But it is their Smokey Bones BBQ and Sports Bar brand that is likely to show the largest growth. Smokey Bones BBQ and Sports Bar is a casual dining restaurant “that combines great tasting barbecue with an energetic sports bar” according to Darden. Currently Smokey Bones has less than 30 units, but is proving highly successful for the Darden group. So successful in fact that they believe they can bring it up to 500-600 units over the next decade! Add to this a new Darden concept -Seasons 52 – a sophisticated casual dining concept utilizing freshest ingredients that has just gone into test in Florida and you wonder ‘Where are they all going to fit?’

The 62 unit Cheesecake Factory does not plan to be left out of this race for growth. This amazingly successful group averages $10.9 million per restaurant. It’s most successful Cheesecake Factory restaurant is in Chicago which grossed $17million in 2002. This group built 12 new units last year, has plans for 14 openings in 2003 and according to Chairman and CEO David Overton has the potential to grow to 200 units. The Cheesecake group has developed another classy concept called Grand Lux Café, currently in Las Vegas, Chicago and Los Angeles which it is planning to roll out. And with good reason. The Las Vegas unit – based in the Venetian Hotel - grossed over $19 million in 2002.

Wendy’s opened 300 hamburger units last year and expects to do something similar this year and they believe that their recently acquired Baja Fresh concept can grow from a current 200 unit chain to 700 by 2007.

Yum! Brands, parent of KFC, Pizza Hut and Taco Bell has aggressive expansion plans as has the 152 unit California Pizza Kitchen which believes it can grow from to 350 units.

Conor Cunneen is President of GROW Foodservice Profit, a Chicago based foodservice consultancy. He can be contacted at cc@growfoodserviceprofit.com

***********************************************************************

Bio 2005

Conor Cunneen is an internationally acclaimed speaker on strategy, marketing, leadership and strategy. He speaks on foodservice strategy, food service growth, profitable foodservice, foodservice trends in addition to other industries. The author is an award winning humorist and has won the coveted Chicago Toastmasters Humorous Speaker of the Year title. He is author of Why Ireland Never Invaded America – An Insightful Unique Look at Corporate Strategy

 More Articles>>