Within the past year, the top quick-service chains experienced a mix of challenges and opportunities as they navigated the ever-changing landscape of foodservice. These brands, known for fast and convenient dining experiences, had to adapt to shifting consumer preferences, technological advancements, and global events that impacted operations.
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One thing is for certain—automation is coming sooner rather than later. A host of companies are tinkering with robotics in the back of house, on the phone, and at the drive-thru. Not for the sake of replacing human bodies, but for the benefit of relieving an already stressful job that suffered greatly from recruiting and retention issues during the pandemic.
The restaurant industry is often labeled as a sector slow to adopt technology. But COVID remapped the minds of operators nationwide. Ideas that were once seen as innovative and cutting edge are quickly becoming table stakes. Onlookers should buckle up—the pandemic appears to be in the rearview, and the quick-service segment is preparing for another transformation unlike anything it’s seen before.
The world’s largest burger chain is experiencing a renaissance of sorts thanks to its overall transformation plan, Accelerating the Arches, which calls for modernization, emphasis on core menu items, and the three Ds—digital, delivery, and drive-thru. At the start of 2023, McDonald’s systemwide sales had grown by nearly $20 billion since the onset of COVID, despite losing nearly 850 stores in Russia. The brand’s U.S. comps increased roughly 25 percent on a three-year basis in 2022. And now, McDonald’s is using those bigger sales to enhance its development outlook. The company finished last year with 13,444 restaurants after gaining a net of six locations. It marked the first time McDonald’s grew its domestic footprint in eight years. All of it was company-owned growth, with the footprint moving from 663 to 693, while the franchise base dipped 24 units to 12,751. The chain is drawing in customers with constant product news, like the announcement of its improved Big Mac, McDouble, cheeseburger, and hamburger, which will come with softer buns, gooier cheese, and more onions. At the same time, McDonald’s isn’t shying away from new ventures. The chain reportedly tested the meatless McPlant sandwich and the chicken Big Mac in the U.S. and began piloting Krispy Kreme doughnuts in about 160 Louisville-based restaurants. However, McDonald’s didn’t entirely escape macroeconomic pressures. In April, multiple media outlets said the brand planned to lay off hundreds of employees as part of an organizational restructuring. CEO Chris Kempczinski hinted at the move in January, saying “This will help us move faster as an organization, while reducing our global costs and freeing up resources to invest in our growth.”
The pandemic uncovered a few realities for Starbucks. Perhaps none louder, however, then the fact digital released the floodgates—maybe too much so at times. This past September, the java chain shared a comprehensive “Reinvention Plan” at its biennial Investor Day. Headlining was an incremental $450 million investment in new equipment designed to boost efficiency and reduce complexity. In conjunction, Starbucks revealed its Siren System built to aid customization of hot and cold drinks, as well as warm food. This included the brand’s Clover Vertica system, which can serve a cup of coffee on demand in less than 30 seconds.
Yet this was, at its center, a story rooted in an enviable problem. Fueled by digital growth, the chain suddenly faced unprecedented demand. The tidal of transactions stressed productivity and inspired Starbucks to spend $1 billion in employee investments during the spring.
It’s a tale that stretches back further. In the fall of 2020, Starbucks announced it could close 800 units as part of “portfolio repositioning.” The goal was to meet a changing guest head-on. It was mainly geared toward devoting 90 percent of new store expansion to units with drive-thrus (mobile order and pay, drive-thru, and delivery accounted for 74 percent of Q2 company-owned revenue). And as it turned out, the pace back was exactly how Starbucks billed it—a pause before a boom. Starbucks across 2022 opened more locations than any restaurant in America, with a net of 429. So the brand dotting the country today is simply not the same as 2019. It’s a far gamer model ready to take advantage of trends ignited by COVID. New CEO Laxman Narasimhan, who arrived in March, recently explained Starbucks’ ambitions through this multi-year lens. Due to digital-erupted demand, the chain witnessed elevated turnover on the crew level, supply instability, and cracks in operations that left a lot on the table. Hence, it was in need of a “Reinvention.” Narasimhan said to expect a solution where Starbucks becomes a company with “theaters at the front, with a factory in the back.” Or “theaters” where employees focus on making coffee and delivering experience, and “factories” in the back that aid productivity and streamline processes to free up workers to do just that.
There is a bevy of rolling initiatives to support that, like Starbucks’ new Cold Pressed Technology, a patented method that extracts coffee with low-pressure immersion, without heating water. But regardless of the logistics, there’s undeniable opportunity. To start the year, Starbucks’ ticket in December was the highest on record. Average weekly sales in U.S. corporate units reached a high, and eight of the 10 best sales days in Starbucks’ history came during a three-month stretch. In Q2, consolidated revenues climbed to $8.7 billion and Starbucks reported 12 percent same-store sales growth in the U.S. Store traffic surpassed pre-pandemic levels in the brand’s busiest dayparts. Starbucks’ 90-day active rewards membership tacked on 400,000-plus members and hit 30.8 million users. Members accounted for 57 percent of company-operated revenue in Q2—a record figure, and 3 percent higher on an annual basis.
There’s reason to believe Starbucks’ efforts are paying off already, with barista turnover down more than 9 percent last quarter from a high in March 2022. “Starbucks delivers connection no matter how you visit us, in stores, drive-thrus, or digitally—we are there to provide this connection, any place, any time,” Narasimhan said.
Anecdotally, anybody in a car who’s passed a Chick-fil-A in recent years might have an inkling the brand is doing OK. But the actual scope is unrivaled. In 2022, Chick-fil-A generated $18.814 billion in U.S. systemwide sales. That figure was $16.674 billion, $13.7 billion, and $12.2 billion, in 2021, 2020, and 2019, respectively. Over that run, it’s seen total revenue and income climb from $4,321,122,548 to $5,764,153,899 to $6,373,786,108. The number worth circling, though, goes back to the drive-thru point. Chick-fil-A’s freestanding and drive-thru locations (non-mall environments), of which about 1,925 locations counted and were opened at least a full calendar year in 2022, produced median annual sales volumes of $8.51 million and average annual sales volumes of $8.676 million, with 919 of the 1,925 locations, or 48 percent, hitting that mark or higher. One operator pulled in $16.985 million. Notably, 33 percent of operators in this field recorded annual sales volumes north of $9.5 million. In 2021, the AUV figure was $8.142 million, which was nearly 15 percent higher than Chick-fil-A’s 2020 result of $7.096 million.
To put it plainly, no restaurant brand in the QSR 50 has come this far, this quickly, and punches that high above its store count. And there are reports, too, Chick-fil-A will soon begin testing international waters. At the end of 2022, there were 10 franchised stores outside of the U.S. (seven in Canada and three in Puerto Rico). The brand plans to invest $1 billion as it looks to open restaurants in Europe and Asia by 2025, with stores in five international markets come 2030.
To illustrate the potential just domestically, there were nine brands in this year’s QSR 50 at $10 billion or above in U.S. total sales. After Chick-fil-A, the next smallest, footprint-wise, was Wendy’s, at 5,994 U.S. stores. Chick-fil-A had 2,837. Even closed on Sundays, the brand trails only McDonald’s and Starbucks in systemwide results despite the fact there are 13,036 more Starbucks and 10,607 more McDonald’s in America. It’s yet one more staggering statistic for a brand that’s bar continues to get reset every year.
Taco Bell’s digital business was up 40 percent year-over-year in 2022. It grew another 60 percent in the first three months of 2023, leading to an eight-point improvement in digital mix for Q1. Executives at parent company Yum! Brands credited the growth in digital to the addition of delivery as a service through the brand’s mobile app. The chain also has become a leader in asset innovation with a first-of-its-kind Defy restaurant, which features a two-story design with a proprietary lift to transport food directly from the kitchen to customers.
U.S. system sales grew 11 percent to $13.85 billion last year, driven by 8 percent same-store sales growth and 5 percent unit expansion. The fast-food giant bucked the trend on margins, holding company-operated margins steady from 2021 in the face of industry-wide cost pressure.
Yum! Brands opened 4,560 gross new units in 2022, which translated into nearly 3,100 net new units, beating the previous record it set in 2021, when it opened 4,180 gross new units. Taco Bell ended the year with 8,218 total units, up from 7,791 at the end of 2021. The brand opened 496 new restaurants in 24 countries, pushing its international business past the 1,000-unit mark for the first time. It accomplished that milestone quickly, having built around 40 percent of its international estate within the last two years.
Stateside, Taco Bell opened 196 new stores last year, its second-highest annual amount to date. It ended 2022 with 7,198 domestic stores, 464 of which are company-owned and 6,734 of which are franchised.
Wendy’s near-term development goals are to achieve 2-3 percent net unit growth in 2023 and 2024 and 3-4 percent in 2025, and there is a specific strategy in place to achieve these marks. In August 2022, the chain unveiled its digital-forward Global Next Gen prototype, which features a delivery pick-up window, parking and in-restaurant shelving for mobile orders, a new galley-style kitchen, efficient lighting and HVAC systems, and updated technology. In the future, these restaurants may include drive-thru AI technology. This past spring, Wendy’s announced that it was using Google Cloud’s innovation to test automated voice ordering at one restaurant in Columbus, Ohio. The intention is to not replace workers, but to ease their burden, while also improving speed of service for customers. In terms of ramping up development, Wendy’s in March announced a new “Pacesetter” development program in the U.S. and Canada that doubles the incentive offered in the previous Groundbreaker program. It’s estimated the new incentive will cut payback for a new build to just over two years. The first store under the Pacesetter agreement should come in 2025, and a meaningful impact should begin in 2026. A leadership restructure took place amid these initiatives. To create a unified operating model, CEO Todd Penegor said the brand will start thinking globally instead of running the U.S. and international businesses separately. As part of the redesign, Kurt Kane, U.S. president and chief commercial officer, was let go and his positions were eliminated. Penegor said the move will put himself “a lot closer to the business.”
In 2020, Dunkin’ worked (not unlike Starbucks) on getting its footprint primed for a fresh generation. That included the closure of 450 Speedway stores—a group that accounted for less than 0.5 percent of its domestic sales. Dunkin’ would ultimately trim by a net of 547 locations. Yet also in Starbucks’ vein, the chain filled those gaps quickly with builds designed to capture the omnichannel whitespace at hand. Inspire Brands spent $11.3 billion to acquire the chain, along with Baskin-Robbins, at the end of 2020. It’s since grown by 161 and 126 locations in 2021 and 2022, respectively. And done so with NextGen stores that focus on streamlined orders and digital integration.
Dunkin’s AUV climbed from $1.127 million to $1.2 million year-over-year and the brand has paced in the double-digits for same-store sales over recent calendars. Dunkin’ also committed to 100 percent Responsibly Sourced Coffee by 2025. In 2020, its U.S. restaurants replaced their polystyrene cups with a new double-walled paper cup made with paperboard certified to the Sustainable Forestry Initiative Standard. The same year, it began testing an industrial compostable straw in select markets throughout the U.S. The straws are made with PHA, a material created by the fermentation of canola oil. Dunkin’ is shifting from plastic to wooden stir-sticks across all U.S. venues as well.
It was another eventful year for the country’s most ubiquitous restaurant. Subway finished 2022 with 20,576 U.S. stores after closing a net of 576 units. While a large chunk, it was the brand’s lowest rate of closures since 2016. Subway shed a net of 1,043 units in 2021 and 1,600 or so in 2020. Even at its lowest total count since 2005, Subway remains the largest chain in America by some distance—Starbucks is next at 15,873.
As it pares back, Subway remains in transformation mode. Last year, the chain shifted its development strategy to focus on multi-unit operators and remodeled stores. The company said it was partnering with franchisees and using data to ensure units aligned with market needs, were in the right location, and using the best format. Meanwhile, Subway is inviting multi-unit restaurateurs to buy out existing operators who want to retire or sell. More recently, the brand inked five multi-unit deals in Texas, Florida, Arizona, and the Mid-Atlantic. The agreements involved the consolidation and transfer of more than 230 existing stores as well as the remodeling and opening of new ones. Subway expects to increase North America openings by 35 percent in 2023 year-over-year, it said. Also, 3,600 stores will be remodeled, bringing the total to more than 10,000. Systemwide, Subway opened nearly 750 new restaurants in 2022 and 145 stores in Q1.
Additionally, in April, Subway reported its ninth straight quarter of positive same-store sales. It credited positive traffic and double-digit sales growth to menu innovation, modernized restaurants, and digital improvements. First-quarter same-store sales increased 12.1 percent year-over-year, and digital sales hiked 11.4 percent. Global digital sales have more than quadrupled since the start of 2019. And to start April, Subway accomplished its highest weekly U.S. AUV since 2010.
Speaking of menu innovation, the brand in May announced the first update to its “Subway Series” since the curated lineup arrived last July. This included double cheese, two new sandwiches, and new twists on four fan favorites.
Burger King is rethinking its brand image arguably more so than anyone else near the top of the quick-service industry. After a long stretch of disappointing sales, the chain announced last fall its $400 million Reclaim the Flame turnaround strategy, which covers modernized branding, simplified operations, premium menus, advertising, and building refreshes/remodels. Of that financial figure, $150 million is for advertising and digital investments and $250 million is for technology, kitchen equipment, building enhancements, and remodels/relocations. The company kicked things off by switching its classic tagline “Have it Your Way” to “You Rule.” The change was featured in commercials that put a hip-hop spin on the classic “Have it Your Way” jingle from the 1970s. Early into the journey, sales improved, but some operators succumbed to COVID pressures. Franchisees TOMS King and Meridian Restaurants Unlimited declared bankruptcy, and EYM King shut down 26 restaurants. This is all happening under a series of leadership changes. In November 2022, Burger King revealed that former Domino’s CEO Patrick Doyle would become the new executive chairman of Restaurant Brands International, the parent of Burger King, Popeyes, Tim Hortons, and Firehouse Subs. As part of the move, Doyle agreed to buy $30 million in shares and hold the investment for five years. Then, in February, RBI announced that CEO Jose Cil—who had been at the helm since 2019—stepped down and was replaced by COO Josh Kobza. The consensus among these new executives is a lower tolerance for unengaged franchisees. As a result, Burger King U.S. plans to shut down 300-400 stores in 2023.
Domino’s COVID journey has been maligned by delivery struggles, magnified by consumers returning to pre-pandemic habits like sit-down occasions, inflationary prices, and struggles to find workers. At the start of 2022, Domino’s reduced stores and restricted online orders because of labor challenges. The number of combined lost operating hours equated to the entire U.S. system being closed for six days. The situation improved throughout the year, but struggles remained. To end 2022, delivery same-store sales dropped 6.6 percent year-over-year. Also, domestic comps decreased 0.8 percent last year, which was Domino’s first negative result on an annual basis since 2008. Because of delivery woes, the brand updated its two-to-three-year outlook from 6–10 percent global retail sales growth to 4–8 percent and global net unit growth from 6–8 percent to 5–7 percent. Domino’s entered 2023 with an action plan, including its first “Summer of Service” training program—one of the largest system training efforts in Domino’s history. The expectation is that best practices are shared and franchisees create a specific strategy to impact their restaurants. Ideas will vary depending on market and operator, but overall, Domino’s wants its system to focus on innovation. And by that, CEO Russell Weiner means menu (Loaded Tots), delivery (electric vehicles), and ordering (enhanced loyalty program and online ordering system and Apple CarPlay). As for the possibility of third-party delivery, Weiner hasn’t confirmed whether that will happen in the U.S. He said in late April that he wants to ensure “we’re our best Domino’s” before anything happens.
Chipotle’s identity as a digital brand gained significant traction during COVID. In 2022, the channel earned more than $3 billion in revenue and mixed 37.4 percent in Q4 and 39.3 percent in Q1. Last year, loyalty membership lifted 20 percent year-over-year to 31.6 million. The brand is supporting its digital push with Hyphen, a platform that automates the digital makeline process, and Chippy, a robotic arm that fries chips. Additionally, earlier this year Chipotle rolled out virtual brand Farmesa in partnership with Kitchen United. The menu, featuring bowls, was designed by James Beard Award-winning chef Nate Appleman, who is also serving as director of culinary innovation for Farmesa and led menu ideas for Chipotle in the mid-to-late 2000s. On a bigger level, the fast casual is dedicated to growing Chipotlanes, which feature a drive-thru pickup window for mobile orders. In 2022, Chipotle opened 236 restaurants, and 202 of those were Chipotlanes—about 85 percent. The brand opened its 500th Chipotlane during Q4. It’s no coincidence that as the proportion of Chipotlanes in the system increases, so does efficiency. Since 2018, when the prototype was launched, restaurant productivity has improved by roughly 1,000 basis points. New stores produce on average around 85 percent of what the existing comp base is doing. Three to four years ago, that figure was in the high 70 percent range. Chipotle hopes to grow 8-10 percent per year for the foreseeable future, with at least 80 percent being Chipotlanes. Chipotle expects between 255–285 new restaurants this year.
Panera spent 2022 diving further into customer convenience. In June, the sandwich chain announced the opening of its first digital-only restaurant in Chicago. The 2,500-square-foot prototype—meant for densely populated urban centers—features a smaller front of house and pickup shelves for to-go customers and third-party delivery drivers. A few months later, Panera revealed that it was testing drive-thru AI voice ordering at two restaurants in the Rochester, New York, market. The fast casual partnered with OpenCity’s proprietary AI assistant, named “Tori,” which takes customers’ orders while employees are on standby to troubleshoot if necessary. Panera also recognized that convenience isn’t restricted to off-premises customers. Last year the chain implemented Contactless Dine-In, which allows guests to find a table inside the restaurant and order using the app—bypassing lines and kiosks. Then in 2023, Panera released that it was piloting Amazon One inside two stores in St. Louis. The innovation uses computer vision technology to create a unique palm print for each user, which is matched with a credit card and customer account. Panera wants to use it to create a faster and more personalized experience for rewards members. The fast casual said it planned to expand the technology to up to 20 additional restaurants across St. Louis and Seattle. It was believed that Panera would continue these initiatives as a public company in partnership with Danny Meyer’s special purpose acquisition company, USHG Acquisition Corp. However, the deal was called off last summer because of “deteriorating capital market conditions.” The IPO strategy gained steam once again in May when Panera reconfirmed its plans and announced former Einstein Bros. Bagels leader José Alberto Dueñas as its new CEO.
Pizza Hut is embracing technology on both sides of the counter. The company adopted third-party delivery this past year, integrating white-label delivery into its point-of-sale system and expanding access to the brand via aggregator’s online marketplaces. After entering into its first partnership with delivery providers in early 2022, it launched multiple marketing campaigns on Uber Eats and DoorDash in Q4. As a result, aggregator transactions were up 30 percent heading into 2023.
Pizza Hut President David Graves told QSR that aggregators are bringing incremental customers into the business and allowing team members to process delivery orders with new levels of ease.
The pizza chain also is ramping up utilization of the Dragontail AI platform, which automates kitchen flow and driver dispatch processes. It expanded the tool to more than 2,500 restaurants across nearly 30 countries last year.
Pizza Hut opened 1,584 gross new restaurants in 73 countries in 2022, the vast majority of which were in international markets. Stateside, the company netted 13 new restaurants last year, pushing its domestic footprint to 6,561 total units, including 21 company-owned stores and 6,540 franchised stores. U.S. system sales were $5.5 billion in 2022, with AUVs increasing from $1.022 million to $1.033 million.
The classic drive-up heads into 2024 with new leadership. Jim Taylor, who worked at sister brand Arby’s for nearly nine years, stepped into Sonic’s brand president role in April following the resignation of longtime executive Claudia San Pedro, who temporarily stepped away to focus on family medical matters. San Pedro had served as president since January 2018, guiding Sonic to a 30-plus percent increase in AUV.
Taylor led robust growth of his own at Arby’s, where he started as head of product development before moving to CMO and eventually brand president. During his tenure, Arby’s reported nine consecutive years of positive comps and its highest AUV on record. He was also behind multiple award-winning brand activations, such as the Wagyu Burger, Diablo Dare, and the introduction of Arby’s venison.
Sonic retracted by six units this past year after growing by 26 the prior calendar. The brand’s setup fit the country’s “car picnic” movement to a tee, helping bump two-year same-store sales 25.8 percent. Of late, the brand marched forward its well-known cadence of outsized menu innovation, from merchandise for dogs to Pickle Juice slushes. Sonic also made its Hawai’i debut in February with an opening in Kahului, Maui.
Panda Express is a believer in the plant-based movement, according to the meals its tried in recent years. To start 2022, the fast casual introduced Mapo Tofu and String Beans with Beyond Beef. In September 2022, the brand announced the return of Beyond The Original Orange Chicken, which was first introduced in California and New York City in 2021. But Panda Express found room to roll out traditional menu innovation as well. In March, the chain revealed it was testing The Original Orange Chicken Sandwich and also launched Sizzling Shrimp. Additionally, the fast casual brought forth Spicy Wagyu Beef Dumplings, wok-tossed in an exclusive sauce made with Fly by Jing. Looking at the bigger picture, Panda Express has plans to welcome customers with a new store design honoring its American Chinese heritage. The company debuted “Panda Home” in Dripping Springs, Texas, in early May. The building features a moon gate-inspired entrance, neon signs, a mural celebrating Chinese culture, and a drive-thru that is lined with pictograms that tell an American Chinese story. There were also terrazzo tables symbolizing Chinese New Year confetti, traditional fretwork tiling, and red lanterns. The prototype was brought to life by ChangeUp, a retail brand agency.
KFC is targeting new audiences and category use occasions. The chicken chain has doubled down on value and product innovation with the introduction of boneless offerings, including a 2 for $5 chicken wrap deal and $5 chicken pot pies, both of which contributed to positive same-store sales in the first half of 2023
More recently, it brought back the fan-favorite Double Down Chicken Sandwich and introduced a new Bacon and Cheese Chicken Sandwich. In May, KFC claimed to have sold more than 100 million chicken nuggets, after launching the boneless offering in March. Those launches followed the successful rollout of $5 Mac and Cheese Bowls and a $6 Drum and Thigh Combo last year, both of which helped the brand retain low-income and value-conscious consumers.
KFC’s U.S. system sales were $5.1 billion in fiscal 2022. The brand closed 35 stores and ended the year with a total of 3,9018 domestic stores, including 46 company-owned units and 3,872 franchised units. Globally, KFC expanded its footprint to over 27,000 restaurants by opening nearly 2,500 new units around the world. Development outside of the U.S. was widespread, with new units opening in over 100 markets, including significant openings in India, Thailand, Turkey, and China.
KFC completed its 1,100-unit exit from Russia this spring. Parent company Yum! Brands sold the stores to two local operators. The former franchisees took over all Russian KFC restaurants, operating systems, master franchise rights, and the trademark to Rostik’s, the name of a former Russia-based chicken chain.
Popeyes Louisiana Kitchen
Popeyes’ story continues to be around unit growth. In 2022, the chicken chain opened more than 200 North America stores, featuring the highest number of new franchisees and the highest percentage of freestanding single or double drive-thru locations in five years. Globally, the brand finished last year with nearly 4,100 units—about 2,700 more than it had when RBI acquired it in 2017. Much of the momentum is coming internationally. In 2022, Popeyes opened 180-plus units outside of North America, a nearly 7x increase above 2017. Also, in March, the master franchisee responsible for rapidly growing Tim Hortons in China announced that it would lead expansion for Popeyes as well. A total of $90 million is being used to accelerate investment. Meanwhile in the U.S., the restaurant is directing attention toward profitability. This past spring Popeyes unveiled “Easy to Love,” a multi-year strategy to increase average four-wall profitability to $300,000 by the end of 2025. The plan starts with simplifying operations, especially in the kitchen. Other components include leaning into core menu items and innovation and building modern and convenient restaurants. There are already examples of the brand putting these tenets into action, like the digital-only restaurant in Miami with no registers and the introduction of Ghost Pepper Wings. As part of the “Easy to Love” strategy, the Popeyes team visited several international markets and learned best practices to bring back to the U.S. It’s a new emphasis by RBI and executive chairman Patrick Doyle to increase transparency around franchisee profitability.
The legacy treat chain recently enjoyed a major marketing win. Dairy Queen began selling its famed Blizzard for 85 cents in honor of the product’s 1985 debut. Guests using the DQ mobile app were able to tap in from April 10–23. The result, according to Apptopia data, was staggering. Initially, there was a surge in downloads in late March when the promotion was announced. Two weeks later, thanks to push notifications and another round of publicity, Dairy Queen welcomed 3.3 million new installs in April. The only quick-serve in America to have more that month was McDonald’s (3.4 million). From February to March, DQ’s app grew downloads 193 percent. Then, from March to April, it erupted 974 percent. It placed Dairy Queen in the top 10 for the first time in Apptopia’s records.
The brand made a big executive move in 2022, appointing Nicolas Boudet as chief operating officer, international. He arrived from Wingstop, where he served as SVP of global development and president of international. Previously, he clocked roles at Focus Brands and Yum!
Like Sonic, Arby’s has some new faces at the controls. When Taylor moved over, then-CMO Rita Patel ascended to brand president. Patel joined Inspire in August 2020 as the marketing chief of Buffalo Wild Wings. There, she established integrated ways of working between marketing, supply chain, and franchisees, the company said. She also spearheaded menu innovations such as the Wild Burger, Boneless Bar Pizza, Bird Dawgs, and Saucy Chicken. Ellen Rose, a 10-year company vet most recently serving as VP of strategy growth initiatives, was named CMO. About a week later, Inspire announced Stephanie Sentell as SVP of Arby’s company operations. Previously, she guided Inspire’s drive toward restaurant innovations and led the journey to transform the company’s approach to efficient team member and guest experiences. Sentell joined Arby’s in 2012, leading field marketing, and eventually brand strategy and culinary innovation and restaurant excellence.
Arby’s expanded by net six stores domestically in 2022 and recently opened its first restaurant in Saudi Arabia’s capital city of Riyadh. Operator Shahia Foods Limited Company is the master franchisee for Dunkin’ in Saudi Arabia and Bahrain and operates more than 700 Dunkin’ locations across Saudi Arabia, Bahrain, and Germany. International growth will remain a key lever going forward—Arby’s now operates 180 locations across eight countries outside the U.S., with plans for further development in the Kingdom of Saudi Arabia and Southeast Mexico.
Jack in the Box
Jack in the Box has hovered around the 2,220-unit threshold for nearly a decade, but CEO Darin Harris believes the brand has enough whitespace to surpass 6,000 stores in the U.S. His goal is to reach 4 percent annual unit growth by 2025.
Since launching its development program in mid-2021, the burger chain has signed 76 agreements for a total of 335 restaurants. Highlights include bringing in the first new franchisee in over a decade and the addition of new markets, including Florida and Arkansas.
Profitability initiatives and a focus on maximizing store-level profitability are encouraging more franchisees to build and open new restaurants, Harris said during the company’s Q3 earnings call in May. AI-enabled pricing tools are one area of focus, along with equipment updates, process improvements, and automated frying and drink-making technology.
A slimmer, 1,350-square-foot prototype designed that caters to off-premises orders also is generating interest from new and existing franchisees. Jack in the Box’s drive-thru-only model launched in Oklahoma late last year. It has continued to outperform expectations by generating average weekly sales of around $43,000. Harris said 20 percent of those sales are coming through digital channels, and the new prototype costs approximately 20 percent less to build than legacy locations.
Jack in the Box is on track to reach positive unit growth in 2023 for the first time since 2019, with 25-30 new restaurants slated to open by the end of the year. In fiscal 2022 the company shuttered 33 stores. It ended the year with 2,181 units in the U.S.
There’s a simple way to frame Papa Johns’ success in 2020, a year that proved as challenging to the pizza chain as any segment in the business: It was the only of the “Big 3” public brands to report positive same-store sales across the calendar. What drove that momentum is a playbook that dates back to the early days of CEO Rob Lynch’s arrival a few months before COVID. Lynch, a former Arby’s president, turned Papa Johns’ attention back to what helped it separate from the pack in the first place—premium menu innovation. That commitment insulated Papa Johns from some of 2022’s inflationary hurdles as consumers didn’t feel the sticker shock quite as they did elsewhere. Additionally, Papa Johns jumped ahead on a few tech initiatives, like third-par ty delivery and AI at its call centers. The former, in particular, proved fortuitous as pizza brands of all sizes struggled to find drivers amid a labor shortage.
In more recent months, Papa Johns worked to strike a value balance, with options like Papa Pairings lowering the entry point, while also sticking to its innovation laurels. It’s a formula that’s paid dividends. Papa Johns opened 2023 with flat comps, but the results measured against an Omicron-saddled period where pizza sizzled when diners stayed home. It also lapped a Q1 2022 where Papa Johns set its highest sales volume in history. And that measured against a quarter that marked the top result since the company’s 1984 inception.
To put it simply, Papa Johns continues to hold and elevate its record-setting shift. AUVs have bumped from $900,000 to $1.2 million since 2019. Lynch believes the brand could catapult higher if some of the sector’s cost structure challenges (namely commodity instability) level out. In all, it’s painting a future view where Papa Johns expects 2–4 percent top-line growth this year and an even riper growth chart. The brand is on track to achieve 270 to 310 net new units in 2023 and recently reaffirmed a long-term development target of 1,400 to 1,800 between 2022 and 2025. One area to circle is international: Papa Johns still boasts about half as many restaurants as its two largest competitors domestically, and roughly a third internationally. It exited Q1 with 2,349 international stores, up 19 from at the end of 2022.
Staffing shortages, a difficult delivery environment, and macroeconomic headwinds made 2022 a challenging year for the quick-service pizza category. Little Caesars wasn’t immune from those pressures, but a streamlined business model and vertically integrated supply chain have helped it weather the storm.
The company has worked with third-party delivery aggregators since 2020, so it didn’t feel the pinch from the delivery driver shortages that plagued competitors like Pizza Hut and Domino’s last year. Still, the privately-held pizza chain ramped up investments in technology, emphasizing automation, digital menu boards, and other proprietary technology aimed at reducing friction for in-store employees. It also increased wages across the board and introduced more flexible scheduling for team members.
Labor efficiency and a strong value proposition are two key ingredients that could help the brand reach new heights. It recently planted flags in the U.K. and Portugal, expanding its global footprint to 27 countries. It also is growing in the core Latin America market, including Mexico, where it plans to open around 100 stores this year.
The company is seeking multi-unit deals with both new and existing franchisees to energize its domestic system. Earlier this year it inked a 10-store agreement in the Bronx and Manhattan, kicking off a plan to open hundreds of new restaurants in New York City over the next few years. Chief development officer Jeremy Vitaro told QSR the company’s streamlined model and small store layout work well in urban areas, where delivery and digital options have had the biggest impact on bringing in new customers.
Whataburger continued its expansion throughout the country with the addition of 52 new stores last year. That represented a 9.6 percent increase from 2021, when it opened a total of 14 units. Heading into 2023, the burger chain’s footprint stood at 925 units, including 785 company-owned stores and 140 franchised stores. Sales jumped 23.8 percent to $3.34 billion in 2022 from $2.698 billion in 2021, with AUVs increasing 16.5 percent to $3.725 million.
The chicken finger brand has been on a tear. From 2019 to 2022, it added a net of 246 locations and saw AUVs soar from $3.6 million to $5.4 million. Total systemwide sales have climbed from $1.466 billion to $3.11 billion. This kind of eye-popping growth is nothing novel for Raising Cane’s. In early 2016, the brand wrapped up the year at $500 million in sales, 290 locations, and a shade over $2 million in AUVs. It then set a goal to triple in size over the next 60 months. The brand “stoutly” did so, as co-CEO AJ Kumaran told QSR earlier in the year. It finished 2021 at $1.711 billion. However, the COVID pause, and eventual eruption, allowed Raising Cane’s to rethink its future. Management came up with a guidepost called “Timeless Horizon.” Unlike past projections, which showed in five-year blocks, Raising Cane’s decided to think bigger, and broader. Kumaran now believes Raising Cane’s is on track to triple the current figure, which could take seven years or so. And when the brand does, he believes it will boast $8 million per store averages, or numbers on par with what Chick-fil-A reports at its drive-thrus these days.
And pulled back, Raising Cane’s would tout a footprint of 1,500 locations and $10 billion in systemwide sales, making it (most likely) one of the top 10 chains in America. As it gets there, a people-first focus that has long defined the brand will continue to anchor its growth. Raising Cane’s has spent hundreds of millions on wage increases and other employee efforts in recent years, including a Restaurant Partner Program designed to turn GMs into millionaires. It’s even offering $10,000 toward closing costs for restaurant leaders who purchase their first-time home, among a host of other industry-leading benefits.
Lastly, Raising Cane’s will keep giving back as it scales, too. In the last 26 years, it’s donated some $100 million to communities. It plans to match that number, but in just six or seven years.
Culver’s is well on its way to becoming a $3 billion brand with a four-figure footprint. The burger chain’s U.S. sales surpassed $2.8 billion last year, up 13.7 percent from $2.489 billion in 2021, marking the latest in an ongoing streak of double-digit annual sales gains. AUVs grew nearly 6 percent year-over-year to $3.28 million from just over $3 million.
Highlights from 2022 include the return of the CurderBurger topped with cheese curds. Culver’s originally teased the item a few years back on April Fool’s Day. Countless demands from guests and even a Change.org petition prompted the company to make the burger available for one day in 2021. The promotion saw 20 percent of restaurants systemwide break their single-day sales record. Following the record sales from the initial debut, it brought the fan-favorite item back for an extended time late last year.
Culver’s also embarked on a “Welcome to Delicious” marketing campaign headlined by a 17-city tour featuring its first food truck. Both the campaign and the buzzworthy CurderBurger LTO were spearheaded by former marketing VP Julie Fussner, who earlier this year became the first person to hold the CMO title in Culver’s 38-year history. She joined the executive team alongside chief operating officer Jim Esposito, who came on board last summer.
The addition of a new COO and first-ever CMO comes as Culver’s steadily increases the pace of new store openings. It netted 56 new restaurants in 2022 after adding 55 units in 2021. It ended the year with 892 total stores, including six company-operated locations and 886 franchised locations.
In 2021, Jersey Mike’s CEO Peter Cancro told QSR the brand was closing on a growth cadence of 300 units per year, with 3,000 in sight. The 1975-founded sandwich chain was just about there in 2022, expanding by a net of 297 stores. Jersey Mike’s trailed only Starbucks and Crumbl Cookies in total net growth last year, which is hardly a stunner. It ballooned by 246 restaurants the previous year. The three leading up to that: 189, 173, and 150, respectively. So it’s a pace that’s only gaining. Jersey Mike’s closed 2022 with 2,397 restaurants and AUVs above $1.2 million. If you go back to 2019, stores averaged $824,000.
No matter how big Jersey Mike’s gets, philanthropy will always key into its business—a culture that’s as old as Cancro’s tenure. He turned 18 a few months after acquiring Mike’s Subs (its original name) and hosted a local Special Olympics event for kids from a neighboring town. That came full circle in 2022 when the national event rolled into Orlando, Florida, and Cancro got on the mic to introduce the Games on national TV. The brand raised a record-breaking $21 million to help more than 200 local charities during its 13th Annual Month of Giving in March. As always, Jersey Mike’s Day of Giving featured every unit donating 100 percent of sales. One reason it’s surged so much and will continue to do so—there are now far more locations than 13 years ago.
Volatile wing prices proved to be a significant headwind for Wingstop during COVID, but once the fast casual pushed past that obstacle, it was completely in the driver’s seat. The chain noted to investors that while many competitors had to raise prices due to record inflation in 2022, it felt significant deflation. Last year, spot market prices for bone-in wings lowered 44 percent, and in Q4, the brand’s cost of sales decreased 900 basis points year-over-year. Because of these lowered expenses, same-store sales increased 8.7 percent in the fourth quarter, fueled solely by transaction growth. That happened in the first quarter too, except comps rose even higher at 20.1 percent. And Wingstop has a multi-layered plan to ensure these financial figures continue, like building awareness through a revamped national ad fund, leaning into its chicken sandwich that’s mixing in the mid-single digits, launching more menu innovation, such as the Hot Honey Rub, and reaching additional customers through new platforms, with Uber Eats being the latest example. In turn, this energy is driving franchise interest. Last year Wingstop opened more than 200 net new stores globally for the first time ever. In 2023, the goal is to reach 240 net new openings. The coming years appear just as fruitful since Wingstop is sitting on a pipeline of nearly 1,200 restaurants, also a record. With an initial investment of $450,000 and AUVs closing in on $1.7 million, operators experience a payback of less than two years. The long-term goal is to surpass 7,000 units worldwide, including 4,000 in the U.S.
Zaxby’s made waves last fall when it introduced a new loyalty program called Zax Rewardz. The new app allows members to earn rewards online or in person by converting dollars into “Rewardz” points. Every $1 leads to 10 points, which can be put toward free menu items and discounted offers. In October, when the fast casual made the announcement, the chain’s app downloads increased 204 percent month-over-month, according to Apptopia, a leader in real-time app data. In November, the downloads increased 196 percent. Zaxby’s incentivized customers to go digital by offering a free Big Zak Snack Meal with every download or update of the existing app. The rewards program launch was directed by Patrick Schwing, who joined Zaxby’s as CMO in 2022. He entered the company after working for Inspire Brands, where he served as Arby’s CMO and president of the Franchise Association for more than two years. Zaxby’s consumer-facing marketing efforts are a big part of the chain’s overall growth story. In 2014, the brand had 662 locations, earned $1.24 billion in U.S. systemwide sales, and reached AUVs of $2.03 million. In 2022, each of those increased to 922 restaurants, $2.38 billion, and $2.59 million. Fueling that growth has been leadership. In addition to Schwing coming on board last year, Zaxby’s hired former Dairy Queen and Domino’s executive Mike Mettler as chief development officer, brought in Papa Johns veteran Sharlene Smith as COO, moved interim chief digital and technology officer Mike Nettles into the position long-term, and appointed Michelle Morgan as the company’s first chief people officer.
Inspire’s sandwich chain kicked off 2022 by introducing its first drive-thru-only restaurant in February. The Bartow, Florida, store included dual lanes and windows, with a side dedicated to mobile orders. This followed the rollout of a fresh virtual identity the prior year, powered by design agency ChangeUp. Jimmy John’s retracted by 26 stores across 2022 but did see its AUVs inch upward from $866,000 to $900,000. On the menu side, the brand permanently added a Fudge Chocolate Brownie to the menu at $1.99 in May.
The burger brand expanded its footprint by 19 stores last year as it reached $2.2 billion in systemwide sales. That number was $2.092 billion at the end of 2021 and $1.71 billion after COVID-riddled 2020. Going back to pre-pandemic days, Five Guys boasted 1,368 locations, sales of $1.6 billion, and AUVs of $1.359 million. The brand is up 41 units net since and has lifted its per-store sales nearly $400,000 to $1.7 million.
Hardee’s parent company CKE Restaurants made a change at the top in March when it named former Papa Johns executive Max Wetzel its new CEO. Wetzel was COO at the pizza brand in May 2022, a role he ascended to from chief commercial and marketing officer. Wetzel succeeded Ned Lyerly, who spent more than 30 years with the company, and was CEO since April 2019 when he replaced Jason Marker.
Hardee’s, as well as Carl’s Jr., is in the heart of broad transformation. Last year, CKE revealed a $500 million reimaging program that called for physical and digital transformations in the next four to six years. Some examples include new signage, brand statement elements, freshly installed interior and exterior digital menu boards, and upgraded lighting, bathrooms, and subway tiling. The company also used 2022 to launch its first loyalty program, which is part of a larger technology overhaul at Hardee’s and Carl’s Jr.
Going bolder, CKE connected with three partners—Presto, OpenCity, and Valyant AI—to expand automated voice ordering throughout its drive-thru footprint. In early pilots, the company announced in May, it experienced faster service, improved order accuracy, upselling, cost savings, and better data collection.
CKE’s drive-thru efforts have been coming on. The brand was one of the better performers in this past year’s QSR magazine Drive-Thru Report. Carl’s Jr. and Hardee’s both clocked in above 85 percent in order accuracy, according to Intouch Insight’s data. And they were No. 2 and No. 3 behind Chick-fil-A in the friendly metric at 82.8 and 76.4 percent, respectively.
The cult favorite is in expansion mode. This spring, it unveiled a “strategy to become a national powerhouse brand,” the company said. This included a streamlined menu, fresh building design, and a reworked staffing model—all aimed at simplifying operations and bumping guest experience. In response to growing demand, the chain unveiled a boneless chicken platform in new markets, which was created to reduce complexity in the kitchen and help crew members execute at a higher level. It features the new, hand-breaded Bo’s Chicken Biscuit for breakfast and Bo’s Chicken Sandwich and Bo’s Chicken Tenders for lunch and dinner, with no bone-in chicken. In markets, Bojangles also introduced new items such as premium salads, lemonade, brewed iced coffee, and milkshakes.
On the prototype side, Bojangles’ Genesis build is a modern, ergonomic design with new kitchen layouts and equipment that centers on prepping, cooking, and holding innovation. Additionally, there are digital menu boards, dual drive-thru lanes, and a “Biscuit Theater” to showcase the chain’s iconic preparation (37 percent of sales flow through the breakfast daypart at company venues). Alongside these changes, Bojangles restructured its restaurant teams to handle higher volumes and improve guest experience. This includes enhanced customer service training, outside order takers, and food runners a fast drive-thru experience. It created a new, more elevated position in company-operated stores called an “Operating Partner,” who oversees the restaurant with an ownership mentality. Bojangles’ refreshed approach launched in six locations—Sanford, Florida; Memphis, Tennessee; Clarksville, Arkansas; Monroe, Louisiana; and Ruston, Louisiana; with plans to open in Ohio and Texas later this year.
Growth is coming on the heels of boosted sales. AUVs hit a record $2.1 million for full-sized franchised units at the end of 2022.
Much of Carl’s Jr.’s trajectory mirrors sister brand Hardee’s. The brand ended 2022 with AUVs of $1.463 million and essentially flat year-over-year unit growth.
Dutch Bros is one of the fastest-growing beverage chains in the U.S., opening a record 133 shops in 2022. There aren’t any signs of slowdown either. The brand ended last year with 671 locations systemwide, and in 2023, there are plans for at least 150 openings. If accomplished, that would put Dutch Bros well over 800 stores, which is the goal it set back in 2018 when TSG Consumer Partners decided to invest. The company expects to earn $1 billion in revenue on a trailing 12-month basis by late 2023 or early 2024 and to surpass 1,000 shops by 2025. The longer-term objective is to surpass 4,000 units nationwide within the next 10-15 years. Dutch Bros implements a “smiley face” growth strategy in which it focuses expansion along the mouth of the smile. That means from the Pacific Northwest to California, the Southwest, and Texas, up to the Southeast and Mid-Atlantic. In the near-term, 60 percent of development will be in California and Texas. Once the brand enters a market, it uses a fortressing strategy to build market share and reduce drive-thru wait times. All future growth is centered around company-owned operations. Starting in 2008, Dutch Bros only awarded franchises to existing operators, and 11 years later, it decided to stop franchising completely and recruit from an internal pipeline. The pivot has worked well as locations open since 2017 have 35 percent higher AUVs, and the classes of 2020 and 2021 both exceed $2 million in AUV.
Firehouse Subs in 2022 finished its first full year under new owner Restaurant Brands International, which announced it was buying the chain in 2021. Last year, the fast casual had an AUV of almost $925,000 on a trailing 12-month basis, good for a 20 percent increase against 2020. U.S. comps lifted slightly at 1.1 percent, rolling over 21 percent growth in 2021. The company spent the year transitioning from an area representative model to a more traditional corporate and franchisee-led development model, like sister chains Burger King, Popeyes, and Tim Hortons. Another big change came earlier this year. Don Fox, CEO for 13 years, stepped down from his role. COO Mike Hancock was promoted to brand president, while Fox is remaining with the team as chairman. Under Fox’s leadership, the brand grew to more than 1,200 restaurants across 45 states, Puerto Rico, Canada, and non-traditional locations. It had about 400 stores when he took over as CEO.
Whenever In-N-Out teases expansion, it’s headline-grabbing. And that moment arrived in January when the burger chain said it would enter the Southeast for the first time. In-N-Out plans to invest $125.5 million to build a 100,000-square-foot corporate office in Franklin, Tennessee, with construction slated to begin late 2024 and end by 2026. It will house functions from ops management to HR and IT. In turn, In-N-Out projects to start opening locations in the Nashville market by 2026. At the time of the announcement, it had stores in California, Nevada, Arizona, Utah, Texas, Oregon, and Colorado. All corporate-owned. Nashville would mark In-N-Out’s first restaurants east of Texas.
Naturally, In-N-Out’s decision wasn’t just social media fodder. The brand, per location analytics platformer Placer.ai, led the industry in terms of average visits per store last year. It averaged nearly 700,000, or more than four times the industry mark. Another area In-N-Out shined last year was on the labor line. Sharon Zackfia, head of William Blair’s equity research consumer group, released her yearly longitudinal analysis of restaurant employee satisfaction last August. Zackfia pulled more than 350,000 Glassdoor reviews across 90-plus restaurant concepts, and In-N-Out shined. The chain topped the net promoter score section (the percentage of employees who would recommend their job to a friend) at 87 percent for the seventh straight year. It’s the only brand to maintain a top 10 ranking every calendar since 2016.
Tropical Smoothie Cafe
Tropical Smoothie Cafe has been on a decades-long upswing that isn’t showing any signs of slowing down. With more than 100 store openings and more than 250 executed franchise agreements, the fast-casual cafe concept was able to achieve its 11th consecutive year of positive same-store sales growth in 2022. It ended the year with 1,198 restaurants across the U.S. Systemwide sales increased 13.4 percent to $1.075 billion.
Franchisees opened 158 locations last year, marking the highest number of new cafe openings for the brand in a single year. Existing franchisees were a driving force behind the growth, accounting for more than three-quarters of the 2022 openings. Similarly, the brand signed 258 franchise agreements, many of which will expand it into key territories throughout the Midwest, Northwest, and South.
The company opened its first airport location inside the Will Rogers World Airport in Oklahoma City. The store is equipped with an efficient design to handle increased foot traffic from on-the-go travelers. Another first came last spring when it opened its first double-drive-thru prototype. Located in Oklahoma City, the new model includes one standard drive-thru lane and one lane dedicated to digital orders.
Tropical Smoothie Cafe expects to continue benefiting from upgraded app technology and enhanced mobile ordering capabilities that further elevate the digital and dine-in experience. Last year it debuted a redesigned app that helped grow its loyalty program membership by 69 percent.
El Pollo Loco
Efforts to streamline back-of-house operations are helping El Pollo Loco reduce complexity and improve product quality. The operational improvements, along with successful LTO promotions and strong demand for value items, delivered a 4.7 percent increase in same-store sales. U.S. system sales at the fire-grilled chicken restaurant chain grew 6.8 percent last year to $1.039 billion.
On the heels of a successful 2022, El Pollo Loco is expanding its operational improvement initiatives to include bench building and training. Another area of focus is better managing labor and food costs by minimizing overtime and reducing food waste.
Crumbl Cookies finds itself on the QSR 50 for the first time after experiencing skyrocketing growth since its founding in 2017. For perspective, the chain had 65 locations at the end of 2019. It finished 2022 with 688 shops nationwide, making it the largest cookie concept in the U.S. in terms of footprint. The company has gained social media fame, particularly on TikTok, where it had 6.8 million followers as of late May. The chain rotates cookie flavors each week and builds anticipation by doing a special reveal each Sunday evening. In September 2022, Crumbl boosted its leadership team by naming former Chick-fil-A executive Graciela Chadwick as COO.
QDOBA sees itself as a sleeping giant. The Mexican fast-casual restaurant chain’s footprint stood at 728 units heading into 2023, but chief development officer Jim Sullivan thinks that number could reach 2,000 in the not-so-distant future.
Around 40 percent of QDOBA locations are owned and operated by the company. Realizing that potential Sullivan sees will require growing with franchisees. To that end, the company has been working to roll out a range of prototypes that will allow partners to thrive in a wide range of traditional and non-traditional settings. It currently has around 80 restaurants in non-traditional environments, and it plans to “exponentially” grow in additional airports, military bases, stadiums, and college campuses in 2023.
The company opened 34 new restaurants last year. That included a mix of freestanding and in-line prototypes as well as non-traditional locations. It also signed agreements in Cleveland and Alabama and inked its largest franchise deal to date in the South Florida market.
One strategy QDOBA is using to break into new markets centers around ghost kitchens. The company is using its digital presence to grow awareness and gain traction in new territories before rolling out physical stores. It also is touting robust off-premises channels generated through its new mobile app to attract franchisees.
One of the biggest points Shake Shack learned from the pandemic is that drive-thru matters, and its development schedule confirms as much. There are only a handful in the system, but these prototypes are earning more than $4 million and operating profit margin is just as strong, if not more, than company averages. The plan is to open 10-15 drive-thru restaurants in 2023. The biggest obstacle is that drive-thru stores are more expensive to build—somewhere between $2.4 million and $3 million. But Shake Shack has a plan to mitigate those costs. CEO Randy Garutti said that with the first 20 openings, the fast casual is “doing kind of a little bit of everything so that we can learn what we like best.” Building and construction teams are value engineering and determining whether steel or wood is used, how windows are positioned, how many drive-thru lanes to use, and how tech will be incorporated. When it comes to capacity, Shake Shack wants to keep a decently sized dining room. The brand has discovered that in-restaurant sales still mix 50 percent at drive-thru locations. Meaning, the fast casual values its stores as community-gathering places. A drive-thru-only design may come in the future, but not in the ne ar-term. Meanwhile, Shake Shack is still heavily focusing on its typical core format, which can be built for around $2 million. There’s also smaller format stores under 3,000 square feet that can fit into urban environments, higher traffic suburban areas, airports, travel centers, and resorts.
In recent years, Krispy Kreme has transformed operations to focus on a hub-and-spoke model in which dozens of production centers send fresh doughnuts daily to thousands of points of access, which can include retail shops, convenience and grocery stores, and more. The U.S. strategy is working quite well, with 6,615 points of access in Q1 equating to 13.5 percent growth in net revenue and an 18.9 percent increase in adjusted EBITDA. Going forward, one of the biggest plans is for Krispy Kreme to use quick-service restaurants as points of access. The first major test came with McDonald’s last fall. The company began delivering fresh doughnuts daily to nine Louisville-based McDonald’s. In February, it was announced the deal would expand to roughly 160 locations. As of May, Krispy Kreme CEO Michael Tattersfield said the test was going well and that other shops in the market have not seen any cannibalization. The doughnut chain added delivery trucks and doubled production in three hubs to support the McDonald’s venture. Also important to note, McDonald’s controls demand planning, meaning it determines how much product it wants each day as opposed to Krispy Kreme forecasting the number. The burger brand is part of Krispy Kreme’s overall goal to reach 75,000 global points of access, including 15,000 in the U.S. In addition to exploring restaurants, the brand is making a point to enter pharmacies and club stores, like Walgreens and Costco.
Marco’s Pizza achieved several milestones last year. The company opened its 1,100th store and surpassed $1 billion in annual systemwide sales while growing comps and securing its position as one of the country’s top five pizza brands by sales.
Marco’s recently committed to investing millions of dollars in technology innovations over the next several years. Key areas of focus include migrating to a 100 percent cloud-based tech platform dubbed Marco’s Order Management System (moms), exploring voice-to-text ordering, continued adoption of th ird-party delivery, and utilizing AI and machine learning to predict the amount of time it will take to complete an order.
President and co-CEO Tony Libardi told QSR that MOMS will take center stage this year as the company prioritizes technologies that create a better frictionless customer experience with a focus on improving store-level profitability. The platform includes a host of features like conversational ordering, labor scheduling, inventory management, and real-time reporting dashboards.
“The system enables all kinds of applications both now and in the future, allowing us to keep up with rapid digital change,” Libardi said. “We can pivot and plug in additional technology features for customers as they become available, such as ordering from virtual assistants … using remote kiosks, delivering items using GPS, and utilizing social media for instant delivery.”
Franchise expansion continues to surge with more than 200 stores in various stages of development and more than 350 agreements signed. Last year, Marco’s opened 65 new units in the U.S. Libardi said the company has identified more than 4,000 potential U.S. locations, with the development team working to identify cost-saving opportunities that will keep the up-front investment affordable for franchisees.
Following its $585 million purchase of Del Taco last spring, Jack in the Box set out to sell at least 250 company-owned Del Taco restaurants—roughly half of the system’s footprint—to new and existing franchisees. CEO Darin Harris said the company is seeing “robust interest” from outside operators as well as from existing Del Taco and Jack in the Box franchisees.
The company expects to refranchise 65-85 restaurants by the end of 2023, all of which will contain at least a 1:1 ratio of restaurants purchased to developed restaurants. As part of the initiative, Jack in the Box has announced new development agreements for both brands to enter Montana and Wyoming for the first time. The refranchising initiative also has resulted in an agreement to build 16 new stores in California.
Del Taco’s latest Fresh Flex prototype is providing another catalyst for growth. The model debuted in late 2021 and features future-focused additions like third-party pickup stations, digital menus, updated kitchen equipment, and a dedicated drive-thru lane for mobile orders. The first drive-thru-only version of the new model opened in New Mexico in June.
Del Taco also is gearing up for a larger national rollout of AI voice-ordering technology, following a successful pilot program that launched in 2022 through a partnership with Presto. The system greets guests, accepts orders, and consistently upsells. More than 95 percent of orders are completed without human assistance and sent directly to the POS and KDS stations.
The pandemic did little to stop McAlister’s momentum. Between the end of 2019 and 2022, the fast casual gained a net of 56 restaurants. Among the Focus Brands’ portfolio, McAlister’s is believed to have the highest ceiling. Joe Guith, who previously served as the company’s restaurant category president, told QSR in April 2022 that for McAlister’s, it’s a matter of “how fast we can go.” At that point, the pipeline was enough to open once a week for the next five years. He added that the fast casual could go faster, but the chain didn’t want to rush to big metro areas like Los Angeles or New York City. Focus is instead concentrating on the Mid-Atlantic and Midwest for better operations and supply chain relationships. Two years ago, McAlister’s announced that it would reach $1 billion in systemwide sales by 2024. The brand is on its way toward that goal, with $956 million in 2022. In terms of innovation, piloted CLTV, or customer lifetime value. It’s about using artificial intelligence to send tailored offers to individuals as opposed to sending generic messages to several customers. If a consumer hasn’t been in the store within a week, Focus wants to send a unique note that will bring them in. Once the customer returns, the company wants to send messages that will keep them coming. McAlister’s saw an incremental $2.5 million from the original test.
Checkers & Rally’s
Checkers & Rally’s experienced momentum in the first half of 2022, with 32 signed franchise multi-unit development agreements comprising 53 restaurants. These deals involve new and existing groups that will expand in priority markets, like Phoenix, California, and the tri-state area, and new markets such as Knoxville, Tennessee; Providence, Rhode Island; and Montgomery, Alabama. Additionally, CEO Frances Allen was awarded the Silver Plate Award by the International Facility Management Association in the “Chain Limited Service” category. At the store level, Checkers worked through the launch of its drive-thru AI. The voice assistant has proven to be highly precise—clocking in at 98 percent accuracy rate overall and nearly 100 percent at some locations. The tech involves minimal cost for franchises that updated their overall timer and headset systems over the past five years. By mid-2022, the innovation had reached more than 170 company restaurants.
Freddy’s Frozen Custard & Steakburgers
Freddy’s is getting closer to its goal of reaching 800 units by 2026, thanks in large part to Thompson Street Capital Partners, which purchased the frozen custard and steakburger chain in mid-2021.
The company has zeroed in on accelerating franchise development under its new owner. In 2021, it added 32 new stores and signed 17 multi-unit deals to add 102 locations. The momentum continued into 2022, when it opened 36 new restaurants, including its first stores in North and South Dakota, and added over 140 new restaurant commitments to its pipeline. It also signed a deal for its first stores in Canada with plans to expand across nine of the country’s provinces in the near future.
The 456-unit chain entered 2023 with plans to open at least 60 new stores in more than a dozen states by the end of the year. The growth will be split between new and existing franchises in both new and existing markets, with a mix of traditional and non-traditional formats. After opening its first drive-thru-only location two years ago, the company has been working on two new designs that would offer an even more seamless experience for on-the-go guests. Last year it opened its second casino location and its first airport location, and it’s eyeing opportunities to expand with more non-traditional formats at sports stadiums and college campuses.
Freddy’s notched a 6.5 percent increase in systemwide sales last year. That followed a stellar run in 2021, when sales surged 17.8 percent. AUVs clocked in at $1.84 million, roughly the same as 2021.
Church’s Texas Chicken is entering its next phase of growth with a fresh slate of leaders. Former Focus Brands executive Joe Guith took over as CEO last summer. The move came one year after Church’s was acquired by High Bluff Capital Partners, the parent company of Quiznos and Taco Del Mar.
The chicken chain earned $765 million in U.S. systemwide sales in 2022, down slightly from $776 million in 2021. It shuttered a net of 91 restaurants and ended the year with 812 total units, around 80 percent of which are company-owned.
The company has shifted its sights toward global expansion via its international counterpart, Texas Chicken. It opened a record 75 new restaurants internationally in 2022. Guith will work with a slew of new leaders across the business to prioritize entering new markets. Another area of focus is boosting efficiency and improving the customer experience with smaller and more streamlined concepts, like Texas Chicken Express, which was introduced in Thailand last fall. The store features a reduced menu centered around brand staples and localized offerings.
The company last year promoted Claudia Lezcano to senior vice president of U.S. marketing, hired Bill Mitchell as vice president of company restaurant operations, added Frank Costello as vice president of U.S. franchise development, and brought on Ignacio Barbadillo as director of international new business development. It has continued to invest in expanding its leadership team, tapping Natalia Franco as CMO, Danton Nolan as CFO, and Roland Gonzalez as COO. Other recent additions include new VPs of growth and strategy, purchasing, and international business.
Lagging sales and elevated costs for franchisees weighed on Papa Murphy’s last year. Eric Lefebvre, CEO of parent company MTY Food Group, told analysts during the company’s year-end review that sales at existing locations declined in the low-single digits on the heels of softer demand for take-and-bake pizzas.
Combined with surging costs for labor and food, the waning sales sparked a slow but steady trickle of restaurant closures throughout the year. Franchisees shuttered 72 units in 2022. AUVs were $632,000, down 11 percent year-over-year but still up 14 percent on a two-year stack. U.S. systemwide sales fell 7 percent to $753 million in 2022 from $809 million in 2021.
Lefebvre said strong value propositions for quick-service pizza chains offer a partial explanation for the results.
“A lot of our competitors have gone into some really significant discounting… so it was a little bit harder for us to compete, as we don’t want to go too deep into the value offering,” he said during the company’s Q3 earnings call last fall.
By 2023, executives at MTY were optimistic that the worst of the troubles is in the past. Same-store sales and systemwide sales have trended upwards in the first half of the year, a sign that the 1,168-unit chain is regaining momentum following a soft landing in Q4. The company has launched new online ordering capabilities and a series of new menu items, including calzones, extra large New York-style pizzas, and a Meatball Marinara appetizer.
Moe’s was part of a record year for Focus Brands, which earned $3.9 billion in sales last year. Roughly 650 new franchise agreements were signed, more than 400 stores opened, and 4.1 million loyalty members joined across the seven chains. For Moe’s specifically, it began 2022 with new leadership. Tory Bartlett was named chief brand officer after previously serving in the same position for Schlotzsky’s. During his time at the sandwich chain, the industry veteran introduced two new prototypes and overhauled the menu to streamline operations and maximize kitchen efficiency. A few months later, Moe’s announced Mike Smith as the new vice president of operations. Before coming to the fast casual, he worked as COO of Taziki’s for two years. However, unit growth has been challenging in the past few years. From 2020-2022, Moe’s shuttered a net of 85 restaurants.
U.S. system sales at Baskin-Robbins were $685 million last year, compared to $686 million in 2021. AUVs were $300,000, up 1.4 percent from $296,000. The classic ice cream chain closed a net of 54 restaurants in the U.S. and ended the year with 2,253 domestic units, all of which are franchised.