Based on the non-cash transactions of millions of shoppers across the U.S., 1010data used its Merchant Insights to figure out which quick-service brands are winning customers and which still have ground to make up. The platform showcases online versus brick-and-mortar performance and deciphers the customer behavior driving it, resulting in competitive dynamics and a breakdown of the customer lifecycle. It’s worth noting that cash is still alive and well for many brands, and this data doesn’t take into account those transactions. For example, sandwich chain Jersey Mike’s estimates that 35 percent of its business is done the old-fashioned way, although it’s definitely trending the other direction. Just five years ago, it was around 50 percent.
1010data’s study looked at McDonald’s, Burger King, Wendy’s, Starbucks, Dunkin’ Donuts, Pizza Hut, Domino’s, Papa John’s, Chick-fil-A, Subway, and Panera Bread. Here’s what it found:
Market share: According to the data, Pizza Hut’s market share declined six share points in the past four years. Domino’s, meanwhile, gained eight share points. In early 2016, Papa John’s moved ahead of Pizza Hut in market share, according to the data. Domino’s has, undoubtedly, gained momentum in the past few years, especially when it comes to digital, which would buoy these numbers thanks to online ordering and the customer base it’s courting.
Customer spend: Pizza Hut customers spend an average of $4 less than Domino’s or Papa John’s. While prices don’t vary much ($13–$14 for a large hand-tossed pizza), Pizza Hut’s customers have slightly smaller order sizes and go to the restaurant less frequently.
Lost customers: The data showed that 38 percent of Pizza Hut customers who dined from November 2015 to October 2016 did not return the following year. Instead, from that same time period, 56 percent dined at Domino’s or Papa John’s. This showed that Pizza Hut lost 21 percent of its customers to the two chains.
Domino’s comparable same-store sales grew 8.4 percent in the third quarter, and the brand has reported 26 consecutive quarters of positive sales momentum in its domestic business. Some technological rollouts lately have included the expansion of Domino’s rewards program, where the chain became the first national pizza delivery company, it said, to offer loyalty points via online, phone, and in-store orders.
Pizza Hut is also on the upswing. The Yum! Brands chain experienced same-store sales growth of 1 percent at stores open at least a year in the third quarter, breaking a slump of five consecutive quarters of declining sales. Added advertising and promotions, as well as the move to make its $7.99 large, two-topping pizzas available for online ordering, are paying dividends. Pizza Hut recently revealed a new “oven hot delivery system” that contains a pouch made with 3M Thinsulate Insulation thermal technology and a pizza box with crisp sheet inserts to deliver pizza 15 degrees hotter to guests. The chain also improved its mobile presence. In August, Pizza Hut launched Hut Rewards, the nation’s only pizza loyalty program that rewards customers with unlimited points for every dollar spent online.
Papa John’s is undergoing changes of its own as well. Notably a leadership shift as founder John Schnatter stepped down from his CEO role in December. He will now serve as chairman and Steve Ritchie, a longtime employee of the brand and former chief operating officer, will take over.
Customer loyalty: The data showed that Dunkin’ and Starbucks retained 69 and 63 percent, respectively, of customers who shopped there in the prior year. The percent of customers each lost to the other was 28. That means the remaining 72 percent of lost customers either went to local shops, brewed at home, or just stopped drinking coffee. As 1010data points out, coffee is one of the industry’s most loyalty-inspiring categories, which could account for the nearly even split in market share.
Trip frequency: The average number of trips to Starbucks and Dunkin’ hasn’t budged much, either, hovering between 2.6 and 3.2 trips per month. Dunkin’ held a slight edge but Starbucks was driving a check average $2 higher.
As for recent financial performance, Starbucks experienced a somewhat up-and-down performance in 2017, although it’s all relative to past success. The brand is still doing just fine sales wise but is grappling with declining U.S. traffic. Starbucks announced in November it was selling its Tazo Brand to Unilever for $384 million. This would allow Starbucks to focus on its Teavana in-store business. The company previously announced its decision to shutter all retail stores, although that’s hit some roadblocks. Starbucks’ same-store U.S. sales increased 3 percent in the fourth quarter. Transactions were up 1 percent and average ticket 2 percent. Mobile order and pay reached 10 percent of all transactions in the U.S., and membership in Starbucks Rewards increased 11 percent, year-over-year, to 13.3 million active members, with member spend accounting for 36 percent of U.S. company-operated sales.
Dunkin’ posted U.S. same-store sales growth of 0.6 percent and a revenue increase of 8.3 percent during the third quarter. Dunkin’ has started to test a new drive-thru store design while simplifying menus across system restaurants, removing items such as afternoon sandwich selections and bakery items like danish and cookies, in an effort to reduce operational complexities.
Customer loyalty: According to the data, McDonald’s retains the most customers in the burger category, year-over-year. A whopping 88 percent of customers who dine at McDonald’s will return the following year. This makes sense. How many people try McDonald’s for the first time? The mere saturation of the brand and its status makes it a repeat destination for most Americans. Burger King and Wendy’s returned figures of 73 and 78 percent, respectively. Also, 80 percent of customers who dine at Burger King and Wendy’s in a given year also dine at McDonald’s.
Customer spend: 1010data credited the market share to the average amount customers spend in a given month. On average, McDonald’s customers fork up $26 per month, whereas Burger King and Wendy’s customers spend $17 and $18 per month, respectively. McDonald’s average order size is slightly lower, but the average trip frequency in a month is 3.1 compared to 1.7 at Burger King and 1.8 at Wendy’s, leading to higher spend per month.
In 2016, there were some 14,000 McDonald’s in the U.S. generating systemwide sales north of $36 billion. When the data is collected for 2017, it’s likely to be even more impressive given that McDonald’s just enjoyed a watershed year. Customer traffic dropped in each of the last three fiscal years before they started to climb in 2017. The chain welcomed 0.6 percent more customers in the first quarter. That improved to 1.8 percent in the second quarter—a period that saw same-store sales grow 6.6 percent—the brand’s best comps growth in five years. In the third quarter, guest counts rose 2.1 percent. Same-store sales are up 5.6 percent through the first nine months of the year.
Burger King reported same-store sales growth of 3.6 percent in the third quarter. Systemwide sales rose 11.2 percent and net restaurant growth came in at 6.6 percent. Delivery is also apparently in the works.
Wendy’s announced in December it’s taking delivery national through DoorDash. The chain’s same-store sales in North America increased 2 percent in the third quarter.
Market share: 1010data is slotting Chick-fil-A into the sandwich category with Subway and Panera bread, and, not surprising, Chick-fil-A is thriving. The brand’s market share grew 13 share points over the past four years, while Subway’s share declined 15 points. Chick-fil-A, in this grouping, surpassed Subway mid-2015. Panera’s share grew by 1 share point.
Customer retention: Chick-fil-A is also losing the fewest number of customers each year. From November 2016 to October 2017, Subway and Panera lost 23 and 30 percent, respectively, of customers who dined in the prior 12 months. Chick-fil-A, on the other hand, retained 81 percent of all its customers in the same time period. Chick-fil-A’s retention rate increased year-over-year, while Subway and Panera’s declined.
Thanks to JAB Holdings recent purchase of Panera for $7.5 billion, all three of these companies are now privately held. But Panera’s recent reports show a bustling online operation. Panera says digital sales represented 26 percent of total company sales at the end of the first quarter. Broken down, that’s around 1.2 million digital orders per week. Panera said digital sales, including mobile, web, and kiosk, surpassed $1 billion on an annualized basis in 2017. The company expects that to double in 2019.
Subway has faced some challenges lately, with reports surfacing that it closed more than 900 stores in 2017. Bloomberg said Subway’s sales fell 1.7 percent in 2016 from $11.5 billion in 2015 to $11.3 billion, and The New York Post, citing an internal memo it obtained, said traffic declined 25 percent in the past five years.
In 2016, Chick-fil-A led all restaurants with average-unit volumes of $4.4 million (and that's being closed on Sundays). Systemwide sales were nearly $8 billion with 2,102 total units.