It is still too early to say how society will remember 2020. Given that we are well past the halfway point of 2021, and have yet to emerge from the clutches of COVID-19, one hesitates before designating 2020 as the “Year of the Pandemic.” Much must play out before we can place the events of 2020 in their full context. The same can be said about the restaurant industry and the QSR 50.
The pandemic contributed to a shuffling of the 50 names on QSR’s list, but COVID-19 was not the only factor that caused brands to rise or fall. Some brands entered 2020 with momentum that served them well when the virus hit the fan; they saw their fortunes rise. Others carried baggage into 2020 that made an already tough task more difficult. For the leaders of many of the brands that experienced declines, citing the pandemic as the primary source of their woes is a legitimate claim. For some, it is a convenient excuse.
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All 50 brands of America’s biggest fast-food chains, ranked by sales
The advantages held by the quick-service segment were monumental compared to the overall restaurant industry. This is best illustrated by the fact that in 2019, sixteen non-quick-service brands were among the top 50 highest sales volume restaurant brands in the U.S. At the end of 2020, that number was reduced to 11, and not one of the brands remaining in the top 50 avoided double-digit sales declines. All five of the slots left open were snatched up by quick-service restaurant brands.
Quickest to rebound among the quick-serve sectors was pizza, driven by the fact that most of the national players were already specialists in the world of delivery services. Quick-service restaurants with drive-thrus followed close behind in recovering, but as the results for 2020 later revealed, a drive-thru lane was no guarantee for growing sales during the pandemic. The highest profile example was Burger King (BK), which saw a decline of 5.4 percent, resulting in their expulsion from the elite club of brands with over $10 billion in domestic system sales. BK also suffered a blow to their heritage when a growing Wendy’s surpassed them in the rankings (Wendy’s now being ranked No. 6 and BK No. 7). But BK was not alone. Other burger brands registered negative sales as well. It can’t be emphasized enough that a drive-thru alone was not a panacea.
But a drive-thru sure helped. If you were a quick-service restaurant without one, you were likely reinventing what convenience meant for your brand. Some brands had more work to do than others. Those with a pre-pandemic disposition toward a dine-in experience were faced with great challenges. However, the silver lining in some cases—and this was certainly the case for Firehouse Subs—was that the consumer had the chance to discover different ways to engage with your brand. If this leads to being in the consumer’s consideration set for types of occasions for which a brand may have under-indexed prior to the pandemic, the long-term ramifications hold great positive potential.
The brands that perhaps faced the biggest hurdles were those with units disproportionately concentrated in sections of the country that suffered higher rates of infection or operated in the face of government-imposed restrictions on their ability to conduct business. Toughest of all challenges to overcome was a strong concentration in high density central business districts. Brands having to deal with such integral, systemic issues are still clawing their way back.
Will the shifts in the rankings be long-lasting? Will the consumer’s reenergized use of quick-serves persist in the post-pandemic world? Or will the fast-food hierarchy return to its pre-pandemic complexion, if not by the end of 2021, then another year at the most? Sonic is a brand to watch in this regard. Their service model was ideal for the pandemic. Their ability to hang on to the 21.2 percent growth they enjoyed in 2020 may provide evidence of just how ingrained the pandemic-induced behaviors have become.
I am compelled to return to the long-term relevance of drive-thrus. The burger category demonstrated that a drive-thru and pandemic-friendly cuisine did not guarantee a brand’s success. If a brand had baggage going into the pandemic, 2020 was not apt to play out favorably. It takes more than just a long drive-thru stack.
Outside of Arby’s, the sandwich brands in the QSR 50 do not enjoy a large penetration of drive-thrus (at Firehouse, they represent only about 6 percent of our units). Yet there are several examples of sandwich brands that performed well during the pandemic. Due to the relative lack of drive-thrus, the sales recovery time was longer, but once the consumer became familiar with how best to use the brands, several of them outperformed many of their drive-thru rivals from other segments. The same phenomena took place in other quick-service segments as well.
This leads back to how success in 2020 was driven as much or more by a brand’s performance leading up to the pandemic as it was by the impact of the pandemic itself. Subway’s woes have become the stuff of industry legend. The pandemic accelerated what was already a multi-year decline in unit count, average unit volume, and system sales. Their 18.5 percent sales decline in 2020 resulted in a drop from No. 6 to No. 8 and expelled them from the $10 billion club. It is hard to imagine that Subway’s multi-year decline would not have continued in 2020, regardless of the pandemic. Subway serves as the most salient example, but they were not alone in this regard.
Every brand will draw lessons from their pandemic experience. For some, it was their pre-pandemic culture that helped see them through the most difficult times. For others, the pandemic may have exposed weakness in their brand culture. If the latter is the case, value could be derived from the pandemic if leadership of the brand seized upon the opportunity to rally their teams, refocus their energy, and redefine their mission. An infectious, optimistic brand culture is something we all should aspire to test positive for.
