Move Over, McDonald's: The 5 Fastest-Growing, Publicly Traded Fast Food Restaurants

By Stephanie Taylor Christensen  AUG 21, 2013 11:45 AM

What brands are catching on with a time-crunched but hungry American public? The National Retail Federation's "Hot List" names some new favorites.

 


When its second-quarter 2013 profit and earnings growth failed to meet Wall Street’s expectations in July, McDonald’s (NYSE:MCD) said that it planned to open fewer new restaurants and carefully monitor its prices to account for weaker global demand. Does that mean that fast food as a whole is in trouble? Not at all.

Wendy’s (NASDAQ:WEN) Q2 2013 earnings announcement was a comeback story of sorts from the same time one year ago. The company announced an increase in margins and same-store sales growth, a 25% dividend increase, plans to shift more of its corporate-owned holdings to franchise operators, and a renewed strategic focus on its value-oriented menu.

Burger King (NASDAQ:BKN) reported a 30% rise in quarterly profits and higher-than-expected earnings. Despite posting weaker profits in Q2 2013 largely due to incidents in China, Yum Brands (NYSE:YUM), the parent company of Taco Bell, KFC, and Pizza Hut, also beat analyst expectations; its stock price hit a new 52-week high last week.

But the success of major fast food and quick-service restaurant players doesn’t mean that there aren’t opportunities for up-and-comers to capture their own lucrative stake in the billion dollar industry.

According to the National Retail Federation and Kantar Retail’s Hot 100 Retailers List, the top 10 fastest-growing fast food restaurants, measured by year-over-year sales growth, are: Jimmy John’s, Cheddar’s Casual Café, Buffalo Wild Wings (NASDAQ:BWLD), Chipotle Mexican Grill (NYSE:CMG), Panda Restaurant Group, Noodles & Company (NASDAQ:NDLS), Zaxby’s Franchising, Wingstop Restaurants, BJ’s Restaurants (NASDAQ:BJRI), and Chick-fil-A.

Here's a closer look at the top five publicly traded names on the list.
 
Buffalo Wild Wings. Frequently referred to as “B-Dubs” or “BW3” by its customers, Buffalo Wild Wings captured the No. 3 spot on Kantar Retail’s list with 21% year-over-year sales growth. In its Q2 2013 earnings call, the company announced a total revenue increase of 27%, and a 41% increase in earnings per diluted share. Popular among sports fans for its open layout and multitude of large screen TVs and trivia facilities that create a “watch and dine” environment, the part corporate-owned, part franchised model plans to expand with four international locations. Though it gets a boost from sports associations with the NCAA football series and other key sports seasons and events, the brand is also in the midst of executing an improved guest experience initiative, slated to be in place in all of its 930 locations by next year.

Chipotle Mexican Grill.  With more than $3 billion in annual sales and about 1,500 locations, it’s sometimes hard to believe that Chipotle has been part of the quick service restaurant landscape for fewer than 20 years. The company is ranked No. 4 on Kantar’s list with 20% year-over-year sales growth, and Chipotle has managed to reshape traditional perceptions of fast food by offering a simple menu focused on delivering only “food with integrity” through its selection of burritos, burrito bowls, tacos, chips, and salads, which are made using natural, quality, sustainable ingredients, including some that are locally sourced. Chipotle’s formula managed to boost revenue and beat analyst earnings projections for Q2 2013.

Noodles & Company. noodles and company Though founded in Colorado in 1995, Noodles & Company just went public this summer, and it is another brand founded on quality ingredients, which are used to make noodle and pasta dishes (like the Japanese noodle dish pictured) that can be served quickly in a pleasant atmosphere. Ranked No. 5 on the list, it had 16% year-over-year sales growth, with fewer than 400 locations. The company beat Q2 2013 analyst earnings expectations and earned $89.2 million in total revenue. It also announced plans to put a strong emphasis on “stay and dine” initiatives, with appetizers, desserts, and wine menu additions, and will expand into new markets, including Orlando, San Francisco, and Houston, in the near future. 

BJ’s Restaurants. With different concepts, including BJ’s Restaurant & Brewery (a brewery within the restaurant), BJ’s Restaurant & Brewhouse (which receives the beer it sells from one of its breweries or a third-party craft brewer), and BJ’s Pizza & Grill, this brand family includes 137 locations across the United States. Although it competes against larger outfits like California Pizza Kitchen, which recently announced an exclusivity partnership with Coca-Cola (NYSE:KO) to include several cross-promotional initiatives, BJ’s is ranked No. 9 on  Kantar’s list for 14% year-over-year sales growth. Though Greg Trojan, president and CEO of BJ’s, acknowledges that brand awareness could be better, he told the National Retail Federation’s Stores magazine that “retention and adoption rates are very, very high.” BJ’s plans to add 17 new locations this year.

Panera Bread Company. With more than 1,200 Panera Bread (NASDAQ:PNRA) company-owned and franchise-operated bakery-cafes in the United States and Canada (some operate as Saint Louis Bread Co. in parts of the Midwest), the brand specializes in freshly baked breads, soups, salads, and café beverages delivered in a family-friendly yet upscale store environment. Although it didn't make the top 10 of Kantar's list -- it came in at No. 11  -- it did see 14% year-over-year sales growth, having earned $589 million in Q2 2013 revenue (an 11% increase compared to the same quarter last year). Panera recently missed analysts’ earnings expectations and its own comparable same-store growth target for Q2 2013. However, the brand plans to stay on course with its plans to open as many as 125 new locations this year.
 
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