Smaller Operators have Outsized Hopes for Growth
Small to mid-sized restaurant operators are a bullish bunch, with 69 percent of respondents to a new survey expecting top-line growth next year and a mere 4 percent worrying about a decline.
The average expected increase is a giddy 22 percent among those predicting growth. “That’s truly optimistic,” said John Nicolopoulus, who leads the restaurant practice for accounting firm RSM in Boston, which administered the survey.
The breakdown is more sober but still robust. The median projected growth rate for all restaurant segments is a healthy 9.7 percent. Quick-service operators forecast 9 percent growth next year, while fast-casual operators expect 5.9 percent.
Casual dining operators project “a surprising 12 percent” boost in revenue in 2016, said Nicolopoulus. “That casual dining column includes bars and taverns. We all know bars and taverns are really hot right now,” he said, to explain robust optimism in a category with slim year-over-year revenue gains of late.
RSM, formerly called McGladrey, surveyed 150 restaurant operators, half of whom hold the title of CEO or COO. Some 75 percent of respondents own five to 30 units, meaning the survey shines a spotlight on the smaller, nimble operators, many in emerging brands, that are attracting an outsized share of capital and attention today.
Doug Pak, who operates more than 50 Hardee’s and 70 Papa John’s stores, runs a technology business and also owns an Asian chain called Stir Crazy, believes the good feelings among smaller operators are justified. “There are a lot of cool concepts out there, five- or 10-unit chains that are growing very fast. It’s very, very exciting,” he said, speaking on a panel Nov. 10 at the Restaurant Finance & Development Conference to reveal the survey results.
He notes a dichotomy, with a handful of large “tier one” brands that have scale and buying power continuing to do well, and he cited Papa John’s 8 percent growth rate in 2015 as an example. So the biggest brands have scale, the smallest players are hip. “And everybody in the middle—and we have some investments in that—it’s hard,” he said, to gain attention from consumers and investors alike.