OC Business Journal

$24B in sales for top 25 locally based firms, led by Taco Bell, Chipotle

FOOD: Franchising, digital development

By KARI HAMANAKA

Orange County’s largest restaurant companies fought back against last year’s numerous headwinds with an unprecedented pace of innovative launches. Expect 2021 to be no different as unit growth and digital savvy dominate business strategies.

While last year saw companies speed up timelines on loyalty programs and digital ordering systems as operators clawed their way past operating restrictions, this year will be ruled by themes of franchise development, personalized guest experiences leveraging data and analytics, and new menu items to maintain the buzz.

The growth narratives come as restaurants close the books on a year unlike any in recent history.

The 25 largest restaurant operators based in OC generated revenue of $24 billion in 2020, which is down 2% from 2019, according to this week’s Business Journal list.

It’s the first decline in year-over-year sales for the list—which includes five of the country’s 40 largest fast-food chains, in addition to a bevy of other household names—in 10

years.

Four of the companies on this week’s list reported year-over-year gains, while 15 were down and six were estimated to be flat due to insufficient data. Data for the list was provided by Technomic Inc. and supplemented with information provided by the operators themselves.

Headcounts also contracted by 3% to 21,805.

Stand Outs

While the collective group declined, some operators notched all-time highs last year.

Irvine-based Juice It Up capped last year with record sales of $33 million, up nearly 6%, driven by mobile ordering, third-party delivery and the company’s loyalty program.

Juice It Up CEO and President Susan Taylor said the chain is focused on menu innovation and the on- and off-premise customer experiences, making the company “confident sales will continue to climb for our franchise owners through the rest of this year.”

The first quarter saw same-store sales up 25.8% for the chain, which said it has more than 100 locations either open or in development.

“As healthy fast casual continues to pick up steam, we are well poised to carve out a larger share of ownership in the booming segment and are steadily expanding Juice It Up’s presence throughout the Western U.S. and beyond,” Taylor said.

Expanding Footprints

Growth is coming for many as a flurry of franchise deals and new design concepts mark expansion this year.

OC’s largest restaurant chain, Taco Bell Corp. of Irvine, has nearly 7,000 restaurants in the U.S. with a longer-range goal of hitting 10,000 doors globally. Newport Beach-based Chipotle Mexican Grill Inc. (NYSE: CMG), ranked No. 2 locally, estimates roughly 200 new locations this year. It currently counts about 2,800 locations.

Franchise development deals will be leaned on heavily, with the new restaurant design concepts revealed by many companies last year helping play a part in growth.

No. 9 Irvine-based Wienerschnitzel with 328 restaurants, said last month it’s now looking for international franchise partners.

The roughly 600-unit Del Taco Restaurants Inc. (Nasdaq: TACO) of Lake Forest recently signed a franchise development agreement for 18 restaurants in the southeast, with plans to open a dozen restaurants this year.

John Cappasola, president and CEO of OC’s fifth largest chain, pointed out to analysts late last month that “while COVID is certainly not yet fully behind us, our core business acceleration and development strategy led by Fresh Flex has set us up to drive continued growth this year.”

The new Fresh Flex restaurant design the company announced last year will be applied to as many as 20 remodels this year with a systemwide rollout expected in 2022.

Customized Experiences

Digital was imperative last year for companies across industries to work around business restrictions.

Those who could make the investment or work off existing tech-savvy infrastructures thrived and intend to pace themselves ahead of the pack moving forward.

Del Taco’s Del App now has more than 1.4 million users, giving it a big audience as it readies to launch a refreshed customer retention management platform that includes a refreshed loyalty program and enhanced data capture to personalize customer experiences.

This month the company will add the ability for customers to order directly through Google search.

Chipotle also packed a powerful punch in its digital game last year with the growth continuing in the recently ended first quarter. Digital sales spiked 134% from a year earlier to $869.8 million and accounted for half the chain’s overall $1.7 billion in first-quarter revenue.

Chipotle’s loyalty program, currently totaling 21 million members, is helping with the company’s continued focus on using digital to bolster its customer service offerings.

“As our digital ecosystem has evolved from a commerce system to platform of engagement, we continue to look for ways to enhance convenience and access, including Chipotlanes, alternative store formats, digital-only menu offerings and Chipotle rewards,” CEO Brian Niccol said during the company’s quarterly earnings call last month. “We are regularly making enhancements to our app, website, delivering group offerings to support the current and expected future growth within this channel.”

On a related note, Niccol touched on Chipotle’s March investment in autonomous delivery company Nuro LLC, telling analysts it “has the potential to take the delivery experience to the next level.”

Taco Bell, like Chipotle, flexed its digital muscle last year, offering products such as the $5 Create Your Own Box promotion available exclusively through its app and online. It also announced a new, smaller footprint restaurant concept focused on the mobile and off-premise channel called Taco Bell Go Mobile.

Taco Bell notched an 11% global systemwide gain in the quarter with comparable sales up 9%.

David Gibbs, CEO of Taco Bell parent Yum Brands Inc. (NYSE: YUM) in Louisville, said “the future for Taco Bell is incredibly bright with accelerating development growth, a strengthening brand, a great leadership team [and] great franchise partners.”

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