Restaurant Research

IHOP 2024

IHOP 2024

IHOP is well positioned as the largest player in the $1B+ family chain segment whose brand awareness reflects its positioning around: an unexpected twist on “all things breakfast, any time of the day”; world famous pancakes; flavored syrups; and the never empty coffee pot. While IHOP’s strategy and execution provide a solid long-term positioning, the potential need to pivot further towards value given the current economic environment could be constrained by the system’s unit level EBITDAR margin which significantly underperforms its own 2015 best.

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BurgerFi International, Inc. 4Q23: Revenue -8.3% Y/Y, BurgerFi Comps -10%, Anthony’s Comps -3%

BurgerFi International, Inc. 4Q23: Revenue -8.3% Y/Y, BurgerFi Comps -10%, Anthony’s Comps -3%

Management expects both BurgerFi & Anthony’s will return to positive same-store sales and positive EBITDA growth by 2H24 driven by menu upgrades, an aggressive focus on food cost, and the benefits from an updated POS platform. That would be a welcome relief given the company’s -$14MM 2023 operating income loss and BFI’s -54% 1-year total return through 4/8/24 (leaving the company with a $14MM market cap).  

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4Q23 Chain Restaurant Same Store Sales Results

4Q23 Chain Restaurant Same Store Sales Results

The chain restaurants reported solid 4Q23 same store sales comp results which were mostly in-line with the last several quarters. While traffic continues to represent an industry challenge, the chains have been successful in passing through menu price increases while also driving a favorable product mix. Industry players have been mostly successful in offsetting sales weakness from the lower income demo with sales growth from the more affluent. Fortunately, the possibility of interest rate cuts later this year could help spur a rebound in lower income demo spending, providing a boost to the industry, but especially to those chains most oriented towards the less affluent. 

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Sonic 2024

Sonic 2024

Sonic Drive-In enjoys strong brand equity (particularly in core South & Central Plains markets) around its drive-in format with car stalls, friendly carhops and a plethora of specialty drinks & frozen treats. While Sonic is executing well around its strong & distinct brand equity while strategically increasing its value game, the opportunity remains for the chain to drive a higher check by increasing its food mix and to improve its new build economics.

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Jack in the Box 2024

Jack in the Box 2024

From burgers to tacos to egg rolls to flat sour dough carriers, Jack in the Box’s menu is known for variety and innovation. While Jack is doing an admirable job of executing around a solid strategic plan, the chain is challenged to hold the line on menu price increases during a turbulent macro environment that is badly aggravated by operating cost increases driven by California’s impudence.

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4Q23 Chain Restaurant Financial Performance Wrap-Up

4Q23 Chain Restaurant Financial Performance Wrap-Up

The chain restaurants proved their resiliency with mostly healthy 4Q23 enterprise financial performance, even as the economy continued to slow towards the end of last year. In general, we find that consumers continue to enjoy affordable dining experiences, even as they reduce spending on goods (like home improvement projects). While post-covid traffic continues to decline (for reasons that are not entirely clear to us), restaurant operators have been mostly successful in passing along menu price increases to the more affluent demos sufficient to drive profits.

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Chili’s 2024

Chili’s 2024

Chili’s (5th largest casual segment player) enjoys core brand equity as a sit-down Southwest (Tex-Mex) chain that specializes in Big Mouth burgers, sizzling fajitas, chicken crispers and margaritas. While Chili’s has been able to distinguish itself in a crowded FSR space with an attractive Tex-Mex menu, fun experience, leading value and digital strength, the chain has more work to do to bolster its store-level profitability at a time when stressed consumers are looking for more value, not less.

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Pizza Hut 2024

Pizza Hut 2024

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 and is currently repositioning towards a modern delivery concept. While Pizza Hut’s positioning is improving, the brand must still compete around value in a tough economic environment while it simultaneously completes its asset conversion sufficient to finish its evolution into a relevant competitor in the very challenging pizza segment.

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