Burger Segment No Longer Beefing Up

CHICAGO – It appears burger chains have finally reached maturity. According to Technomic Inc., the burger chains in its 2014 Top 500 Chain Restaurant Report generated U.S. sales of more than $72 billion in 2013, but recorded nominal growth of only 1.2 percent. Adjusting for price inflation, sales in the segment actually declined.

Burger chains aren’t growing their unit counts as much either. Overall units increased by only 1 percent last year, to 42,853 locations.

The weak performances of McDonald’s (whose sales increased only 0.7 percent to $35.9 billion), Wendy’s (up 1 percent to $8.8 billion), and Burger King (down 1 percent to $8.5 billion) led quick-service burger chains to post only a 0.9-percent increase in sales volume despite accounting for $69.7 billion in segment sales.

Some burger chains, however, did exhibit strong sales growth in the past year. That list includes Culver’s (up 8 percent in sales), In-N-Out Burger (up 6 percent) and Freddy’s Frozen Custard & Steakburgers (up 42 percent). Growth for Culver’s and Freddy’s has been supported by the consumer appeal of their frozen custard, according to Technomic, while In-N-Out Burger provides a simple menu, good quality and a strong value price point.

Fast-casual “better burger” chains also continue to generate strong sales growth. These chains boosted their sales last year by 10.4 percent to $2.4 billion, but they still represent only 3.3 percent of the Top 500-ranked burger chains.

In the fast-casual space, Five Guys Burgers and Fries continued to lead the segment with sales of $1.1 billion, but the chain’s growth slowed from 14 percent in 2012 to 5 percent in 2013. Meanwhile, Smashburger saw sales growth of 32 percent to $214.9 million, and established 54 new stores in 2013.

Smaller, regional burger chains like Habit Burger Grill (up 35 percent), Shake Shack (up 40 percent) and BurgerFi (up 178 percent) are also benefiting from consumers’ desire for a “better burger.” Technomic noted that “better burger” brands provide high-quality protein, toppings, sauces and buns combined with craveable French fries and strong beverage platforms including craft beer, wine and customizable soda.

“Consumer demand for health and wellness will drive success for [burger] brands that differentiate by quality, and innovation efforts will continue to drive impulse visits for trial,” said Darren Tristano, executive vice president of Technomic.  He also pointed out that while American consumers’ demand for burgers will not decline, “the biggest shift will occur in where they indulge themselves with a burger.”

The 2014 Technomic Top 500 Chain Restaurant Report provides Technomic’s exclusive sales forecast by menu category, an update on franchise and international activity, outlook for the future, market share by menu category, and much more. Thirty-six burger chains are included in the Top 500. 

Technomic is a research and consulting firm that focuses on food and related products and services. 

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