Sky rocketing COGs & labor costs are driving sharply lower new build ROI which, in turn, is driving a move towards smaller footprint stores optimized for digital & off-premise as well as increasing use of ghost kitchens.
Hardee’s brand attributes as a regional chain with a Southeast & Midwest orientation include: made-from-scratch breakfast biscuits; made-to-order charbroiled burgers (with over-sized patties & Black Angus options); hand-breaded chicken tenders; charbroiled chicken line; hand-scooped ice cream shakes; and table service. Hardee’s is unique in that its high-margin breakfast business generates a material sales mix and efforts to extend breakfast hours to 2PM should increase brand appeal.
New Unit Investment Report highlights: (1) the sales-to-investment ratio for $1B+ chains continues to trend down after peaking in 2013 as higher construction costs have outpaced the growth in new build AUVs; (2) new build ROI is also pressured by declining unit level margins; (3) declining trends are offset by appealing franchisor development incentives; (4) RR’s New Build vs. Buy Ratio rose for the 4rd consecutive year given a decline in store level acquisition multiples; (5) cost effective conversions seem to be the way to go post-lockdown; and (6) 4 chains introduced new building prototypes.
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