By Nicholas Upton; Research by Matt Haskin and Max Wolf
The Restaurant 200 reflects many of the major trends in the restaurant industry, one being the big continue to grow. But the industry is facing real change and difficulty even at the top. These year-end 2019 numbers serve as one final benchmark for the industry before the COVID-19 pandemic changed everything.
Flynn Restaurant Group maintains its No. 1 position for the ninth year in a row. But it was a down year for the California-based restaurant giant. The company shed seven Applebee’s and sales dipped by $5 million. Flynn added one Arby’s, five Taco Bell units and a single Panera.
NPC International retains the No. 2 spot even as it struggled with finance issues in 2019. The company grew to $1.6 billion in sales, a $67 million increase in the self-reported numbers. But even that wasn’t enough to stave off liquidity issues. The company faced a credit rating downgrade from Moody’s and filed for bankruptcy protection midway through 2020.
Carrols Restaurant Group continued to expand, and the company was the top sales grower in the rankings. The massive Burger King operator added $273 million in sales. For some context, that level of sales alone would put an operator solidly at No. 39 on the ranking.
The Dhanani Group in Sugar Land, Texas comes in at No. 4 with an estimated $1.1 billion in sales, and Sun Holdings jumps to No. 5 from the No. 9 position last year. The company added $206 million in sales (the second most aggressive sales growth) through 2019 as it acquired 51 McAlister’s Delis.
While there were shifts and disruptions among the top operators, the largest franchisee groups continued rapid growth. The top 10 companies now account for $11 billion in sales with an additional $158 million added in 2019. There was also plenty of growth beyond the top 10. In fact, the next 190 restaurant operators grew even faster.
The percentage of sales in the top 10 accounted for 27 percent of the overall sales in the group of $42 billion, down slightly from 28 percent last year. That marks a switch in a five-year sales trend that heavily favored the largest operators.
The average operator on the Restaurant 200 has $210 million in revenue and oversees 151 locations. That’s up from $202 million and 143 units last year.
All together now
Mergers and acquisitions shifted hundreds of restaurants around on the Restaurant 200 list. In all, 10 of the top 200 companies sold the entirety of their operations. The largest was QK Holdings, which reported $154 million in sales in 2018 and ranked No. 76 on last year’s listing. The Denny’s and Del Taco operator sold all of its 94 Denny’s locations to WKS Restaurant Group (No. 17). The next largest, Diversified Restaurant Holdings (No. 78), was taken private when private equity firm ICV Partners took over the company’s 64 Buffalo Wild Wings locations.
Four Foods Group, the No. 95 operator last year, unloaded all of its franchise locations and became a private equity fund itself. The Salt Lake City-based operator behind the expansion of Kneaders and also a major Little Caesars franchisee now invests in fledgling restaurant and food-retail concepts with an aim to scale under the name Savory.
Others on the list of sellouts or near sellouts were McEssy Investment Co., which sold many of its 23 McDonald’s locations. No. 165 Ocedon sold most of the Burger King locations it operated, and No. 195 Lunan Corp. sold most of its Arby’s stores.
The common theme among that group was great prices for active consolidation companies. Despite ongoing industry hardships, including rising labor costs and lagging traffic, prices for the right brands remained high. The decision between investing in remodels and updates or cashing out has been top of mind for operators in the last few years.
In all, 24 companies on the Restaurant 200 opted to sell all or the vast majority of their operations in the last two years. Large franchisees, meanwhile, continue to buy more scale.
Carrols, the largest Burger King operator and No. 3 on the ranking, added 187 BK restaurants and 65 Popeyes, contributing to its sales growth.
Sun Holdings’ acquisition of 51 McAlister’s locations represented another trend as the largest operators diversify with new brands within their markets. The Dallas-based company run by Guillermo Perales already has 290 Burger Kings, so taking on a new concept, complex or not, starts to make sense.
WKS Restaurant Group added $169 million in sales, much of that from its Denny’s acquisition, along with six Krispy Kremes and five El Pollo Loco restaurants. The operator grew sales by nearly 60 percent, making it the strongest percentage sales growth leader within the top 200.