As we put the finishing touches on 2015, a look back reveals a year full of major stories and trends throughout the limited-service restaurant industry.
Although it is often difficult to pare a year’s worth of developments in culinary, financial, and operational categories, these 10 rise to the top, in no particular order.
Labor comes front and center
From states and cities setting higher minimum wages to federal agencies implementing new regulations, labor issues made a huge impact on the restaurant industry this year.
Several cities are boosting minimum wages to $15 an hour, while New York state plans to hike wages for quick-service restaurant chains to that level over the next six years—a move the National Restaurant Association calls “arbitrary, capricious, and contrary to law.”
Meanwhile, fast-food workers in dozens of cities once again took to the streets in October to rally for a $15 wage.
And this summer, the National Labor Relations Board voted 3–2 to make it easier for unions to bargain on behalf of workers at franchises of large companies, which would affect many quick-service restaurants.
Shake Shack rocks the market
This was a big year for limited-service restaurants going public, led by the wild reception of Shake Shack, the fast-casual burger chain created by Danny Meyer’s Union Square Hospitality Group. The burger brand’s January initial public offering raised $112.3 million. At one point this spring, the stock had gained over 300 percent, but has since dropped to about half its peak price; at press it stood around $44.
Nearly overshadowed this year were stock offerings by Bojangles’, which raised $147.3 million, and Wingstop, the first Roark Capital Partners–backed restaurant company to go public; it raised $110 million.
Meanwhile, a number of acquisitions made news. An affiliate of Chicago restaurateur Larry Levy purchased Del Taco for about $500 million, while Jolibee Foods paid $100 million for a 40 percent stake in Smashburger.
Consumers are used to buying products online and having them delivered, so it’s no surprise that more restaurants, including big guys McDonald’s, Taco Bell, Chipotle, and Starbucks, began launching or testing delivery service.
Unlike pizza and sub shops that use their own drivers, many limited-service players are teaming with delivery services such as Postmates and DoorDash to get burgers and burritos to your door.
“It’s all about people wanting more and more convenience,” says foodservice strategist Dennis Lombardi.
But operators still want to have control. California’s In-N-Out Burger sued DoorDash to stop using the chain’s logo in its marketing, questioning the service’s ability to preserve the food’s quality.
McDonald’s finally finds footing
After two years of slumping same-store sales, McDonald’s in October reported a quarterly increase, news that was received well by investors who pushed the company’s stock to a record high.
The results came in the wake of numerous changes, including launching all-day breakfast, streamlining the menu, changing the organizational structure, and naming Steve Easterbrook as the new chief executive.
The positive sales results “marked an important step in the company’s global turnaround,” the CEO said in an October statement accompanying the third-quarter report.
Subway’s year began on a sour note, as 2014 systemwide sales slumped $800 million despite adding 778 stores. This allowed Starbucks to surge past the sandwich chain as the new No. 2 brand in the annual QSR 50.
The franchisor then endured a public-relations nightmare, as its long-time pitchman, Jared Fogle, was arrested—and later sentenced to more than 15 years in prison—on a range of sex charges involving children.
And in September, founder Fred DeLuca, who started the company a half century ago, died at age 67 from complications with leukemia. His sister, Suzanne Greco, was named president in June to run day-to-day operations.
The menu clean-up begins
Operators across the limited-service restaurant industry decided clean foods are in. From phasing out additives to using cage-free eggs, restaurants are moving toward real, healthier, and more humane ingredients.
Panera Bread, Papa John’s, Pizza Hut, Taco Bell, and others are removing dozens of “artificial” ingredients and additives from their menus. Others, including giants McDonald’s and Subway, are phasing out antibiotics in many meats.
For Noodles & Co., the decision to move to antibiotic-free meat options and removing artificial colors, flavors, preservatives, and sweeteners “underscores our commitment to food quality and transparency,” chairman and CEO Kevin Reddy said in a statement.
Supply chain hits multiple snags
Weather, disease, and climate issues left a huge impact on the supply chain and food costs in 2015. While drought conditions eased in cattle-ranching areas like the Plains states, California suffered a shortage of rain for the fourth straight year, drastically affecting the nation’s produce supply.
Food shortages also resulted from disease, including pork affected by a virus in pigs and eggs and poultry by avian flu.
Supply issues hit Chipotle hard this year. First it had to sell its carnitas on a rotating regional basis due to a shortage after the chain suspended a supplier for violating its standards. Later, more than 40 customers fell ill with E. coli poisoning at its restaurants in six states. The company still has not discovered the cause of the E. coli, but has indicated it will pull back on local sourcing in an attempt to strengthen its food safety standards.
Fast-casual pizza reaches tipping point
Fast-casual pizza is still a small piece of the limited-service restaurant universe, but it’s reached a tipping point. Just look at NBA star LeBron James: He became a Blaze Pizza investor and ended his endorsement deal with McDonald’s.
As more fast-casual pizza parlors spring up and others expand, many traditional pizza operators have moved to adjust their strategies, taking steps like removing artificial ingredients and offering more premium ingredients.
Sbarro, for instance, has not only boosted its quality and launched its own fast-casual brand, Cucinova, but it also opened its first standalone unit this year, a Columbus, Ohio, locatioin with seating for about 20.
EMV tightens security
While smartphones, kiosks, and other consumer-centric technology tools have received plenty of attention in the restaurant business, a back-office security standard was perhaps the most important tech action in the industry this year.
The new standard, EMV—an acronym for credit card companies Europay, MasterCard, and Visa—became effective in October. The companies created the security directive for cards, which are embedded with computer chips that replace magnetic strips.
While restaurants are not obligated to meet the standard, EMV’s effective date marked a shift in liability from the card issuer to the operator if the eatery does not have a system in place to accept EMV payment.
Sysco/US Foods deal falls through
One of the biggest events in 2015 was something that didn’t happen: the planned merger of Sysco and US Foods.
The proposed $3.5 billion deal was dropped after the Federal Trade Commission (FTC) announced its opposition to the combination, arguing it would result in higher prices and less service at restaurants, schools, and other foodservice entities.
“This proposed merger would eliminate significant competition in the marketplace and create a dominant national broadline food service distributor,” Debbie Feinstein, director of the FTC’s bureau of competition, said in a statement.