● Average menu size contracted -5.2% for QSR through 1H:21 given a post-lockdown focus on minimizing operational complexity and maximizing drive-thru speeds.
● Conversely, FSR menu size rebounded +6.8% (although still -21% below the 2014 peak) after declining -17.6% last year as the chains pivoted to an off-premise model.
• Applebee’s benefits from key brand positioning elements which include: a comfortable grill with great tasting food & a prominent bar area; abundant value; decorating cues tied to individual neighborhoods; and appeal as a place to connect with family & friends.
• A strong 2021 rebound reflects the retention of off-premise sales even as dine-in returns to normal.
• While Applebee’s has worked hard to balance the pursuit of value for its core Middle American customers and increased relevancy to attract a younger guest, more time may be needed to address the disparate needs of these demos especially as the system seeks to recover from a post-lockdown world.
• Papa John’s quality positioning currently facilitates higher price point promotions, supporting check.
• The brand’s ongoing turnaround (including the addition of Shaq as a spokesperson) has succeeded at broadening its reach with new & lapsed customers.
• If there is one chink in the armor, it maybe that Papa John’s pivot away from value could have medium to long-term implications depending on consumer strength in the new, post-lockdown world.
• The level of company store ownership has increased for the 2nd consecutive year as the corporate development rate continues to exceed the franchise development rate and more franchised stores are acquired than sold.
• The 2020 franchise transfer rate exceeded the development rate for the 9th year in a row, which reflects: a continued move towards franchisee consolidation (in search of scale-based cost efficiencies) and high construction costs.
• Despite the most difficult operating environment in the industry’s history, gross development increased +2.1%.
• Projected 2021 gross new unit development of +2.7% is slightly above 2019’s +2.6% growth rate.
• 2020 closure rates for the $1B+ chains were much more manageable (-3.7%) than expected.
• Notably, the $1B+ QSR Chains were able to recoup ~10 years of market share losses in 2020.
Domino’s is very well situated as the largest US pizza chain (36% delivery share & 15% carryout share) with a 40% domestic share among the top 4 players. Brand positioning emphasizes: leading-edge, digital ordering convenience/speed and seamless payments; a 100% contactless delivery model; and its long running $5.99 and $7.99 price point deals which are centric to their everyday value positioning. The chain’s impressive 75% digital sale mix drives higher group checks including more high margin add-on sales enabled by its broad menu (specialty chicken, wings, stuffed cheesy bread, salads & desserts).
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Little Caesars enjoys simple, effective brand positioning around HOT-N-READY speed & convenience, the lowest price points in the pizza segment and quality (as the only chain to make dough in-house). It’s HOT-N-READY access model means no waiting for an in-store pick-up of $5+ large cheese or pepperoni pizzas kept in inventory. Online orders for other products (Reserve-N-Ready) are available for pick-up from the store’s unique Pizza Portal. Access further benefits from a new DoorDash delivery service started at the beginning of 2020.
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Wendy’s “Quality is our Recipe” brand positioning stresses a commitment to fresh, never frozen, North American beef in the form of square, cooked-to-order burgers that are juicier, hotter and made with more melted cheese. The brand’s freshness positioning is also reinforced by the: use of smaller birds which make its chicken fillets more tender & juicy; daily produce prep; mayo on its burgers; and greenhouse grown tomatoes. Further, it’s premium positioning benefits from: high-end toppings (applewood smoked bacon, asiago cheese & high-end salad toppings); spicy flavor profiles; and bakery styled buns that “hold the whole thing”.
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