Independent restaurants outperform the chains

Was this the year of the indie? The short answer is yes...if we’re going by the numbers. They’re nimble and able to seize upon trends like a hungry diner on avocado toast. Plus, independent restaurants have the built-in advantage of simply not being linked with chains, a segment that’s seeing pointed ambivalence, particularly from younger consumers.

“There are two restaurant industries: These big public companies aren’t really in the restaurant business anymore. They’re retailers or manufacturers or whatever, but food and service aren’t at the heart of what they do,” Dan Simons, co-owner of Farmers Restaurant Group, which operates top-grossing independent Founding Farmers, recently told Restaurant Business. “Smart independents look at them and say, ‘Those guys are having a hard time and are dying, but I’m not.’”

Proof is in the statistics

The numbers tell the clearest story of indies’ ascendance. The 100 largest full-service chains saw sales grow just 0.8%, while small chains and independent FSRs had 3.3% growth, according to the most recent figures from Technomic. The top 100 limited-service chains reported sales growth of 4.2%, while indies grew 5.8%, according to the researcher.
Those same 100 full-service chains generated $51.6 billion in sales volume. During the same period, indie and small chain FSRs did $172.9 billion in sales, Technomic finds. Top 100 limited-service chain restaurants fared far better, however, logging $195.2 billion in sales volume to $48 billion for small chains and indie LSRs.

Chains hang in there

But don’t hold a funeral for chains just yet. Big restaurant groups typically have something the independents don’t: a steady reservoir of cash that allows them to follow trends and potential innovations.

“Chains are pretty smart,” says Joe Pawlak, managing principal with Technomic. “[But] they have to start being different. The biggest issue with chains today is they all, in the consumers’ minds, are the same.”

That’s part of the reason chains spent much of the year trying not to look like chains. Expanding 15-unit Southern-focused concept Tupelo Honey Cafe launched a cocktail menu specific to its new Denver location (its first restaurant outside of the South) while also rolling out a philanthropic program designed to engage local charities with the restaurant. “We’re not the Tupelo Honey in Denver,” says Tyler Alford, the chain’s VP of operations. “We’re Denver’s Tupelo Honey.”

To steal some of the dining dollars from independents, successful chains are getting back to basics, Pawlak says. But the real savior comes in off-premise—something chains likely have more financial and human resources than indies to implement, he says. Takeout and delivery will likely be how chains regain their footing among the independents, he says. “Fast casual and takeout have done very well,” Pawlak says. “These guys have a big opportunity.”

Check out the full State of the Industry report.