RR StockSense – January 2021

QSR names continue to benefit from an asset-light model which insulate these companies from store-level margin compression. This segment also benefits from healthy post-lockdown performance as strong drive-thru and digital access solutions translate into solid valuation multiples with many stocks trading close to their 52-week highs.

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TRAFFICAST: FORWARD LOOKING CONSUMER SURVEY

• RR’s Intent to Eat Out Index (our survey of 1,500 consumers’ plans to eat-out over the next month) increased +3.9% y/y (from pre-lockdown level).
• This represents an inflection point after the Index declined sharply over the last 2 months, hopefully suggesting a bottom in consumer sentiment.

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KFC

KFC is a leader in traditional hand-breaded, bone-in Southern fried chicken with considerable brand equity around its Original Recipe seasoning (top selling menu option) and Extra Crispy option. This iconic brand is distinguished by red & white striped buckets (featuring the Colonel’s portrait) which represent an indulgent, pampered home meal replacement option that works particularly well post-lockdown during a time when families have returned to the practice of eating together at home.

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Pizza Hut

Pizza Hut enjoys substantial scale and strong brand equity as the 2nd largest national player in the $1B+ chain pizza segment by domestic system sales. The brand has historically been distinguished by its Pan Pizzas, Stuffed Crust products and fun innovation. Its ongoing repositioning towards a modern delivery concept includes a conversion of dine-in assets to smaller stores optimized for delivery to go with brand upgrades that include: product quality enhancements; stronger value offerings (including national price points); increased national ad spend to support value and its sports sponsorships; delivery speed improvements; and progress with Hut Rewards.

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Dashboard: Dec 2020

Olive Garden was First to Report for the 4Q20 Season; More Value is Necessary…; 4Q Rebound Still in Progress with a Government Backstop; Commodity & Labor Continue to Ramp-Up; Progress on Unit-Level Valuation Rebound; RR Index Ends Year in the Black; Cap Rates Tick Higher with Rates

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Carl’s Jr.

Carl’s Jr. is a regional chain with a West Coast orientation and a large burger mix. Key brand attributes include: affordable burgers with double patties; premium Thickburger Angus platform; charbroiling for burgers & certain chicken sandwiches; bold flavor options (addressing its large exposure to the Hispanic demo); hand-breaded chicken tenders; made-from-scratch biscuits; and milkshakes made with hand-scooped ice cream.

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Insights Journal: December 2020

We were curious what multi-unit operators thought about the use of lockdowns to manage COVID so we conducted a survey with the following questions:
1. Lockdown effectiveness?
2. Is there a better way than lockdowns?
3. What solutions would be better?

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Dunkin’

Dunkin’s DNA is built around speed & convenience as a beverage led (traditional drip coffee) to-go brand with a mid-level positioning above c-store & QSR but below Starbucks. Dunkin’s famous coffee, donuts & munchkins are legendary in core Northeast markets and the brand’s coffee authority supports its expansion into espresso (2018 upgrade), cold brew & frozen coffee.

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