Restaurant Industry

Recently, McDonald’s, Wendy’s, and Burger King (owned by Restaurant Brands International [QSR; Not Rated]) all reported their Q1 2022 U.S. same-store sales. In this report, we discuss how these same-store sales results — and potential results for full-year 2022 — relate to these three concepts’ average unit volumes (AUVs). We further discuss what this means for the companies, and their stocks.

Yesterday, we published a report examining 12 full-service restaurant stocks, in the context of their five-year highs and five-year lows. That report is available at:

We looked at 12 full-service restaurant stocks, and examined: (1) how far below they have fallen their five-year highs, and (2) how far they’d have to fall to equal their five-year lows. Our thinking is that the stocks that are most below the five-year highs, and simultaneously would have less to fall to get back to their five-year lows, might be best-positioned for meaningful outperformance should the general stock market recover.

Data out today from the U.S. Census shows that restaurants’ market share (with grocery stores making up the other component) was 54.9% in April 2022. This is a year-over-year improvement of +260 basis points from the April 2021 number of 52.3%. Even more impressively, as best as we can tell, this 54.9% market share figure for April 2022 is an all-time monthly high for the U.S. restaurant industry.

Earlier today (Wednesday, May 11th), we learned that the BlackBox Index of same-store sales for April 2022 — importantly, these data points are on a one-year basis — was up by +5.3%, with traffic off by -2.7%.

Data out today from the U.S. Census shows that restaurants’ market share (with grocery stores making up the other component) was 51.6% in March 2022. This was -10 basis points sequentially lower than February 2022’s 51.7% figure. But it was also modestly higher than restaurants’ full-year 2021 market share of 50.4%.

Earlier today (Wednesday, April 13th), we learned that the BlackBox Index of same-store sales for March 2022 — importantly, these data points are on a one-year basis — was up by +7.2%, with traffic off by -1.7%.

With this report, we update our data-driven Kalinowski Restaurant Industry Index for Q1 to +7.1%. On a three-year (pre-pandemic) basis, this is approximately +14.6%. The first quarter of 2022 had many dips and undulations in terms of same-store sales trends. January 2022 was hampered by labor availability issues that were widespread across the industry. February 2022 fared meaningfully better, as Covid (Omicron) cases rapidly declined in the U.S., and (in a related matter) as labor-availability challenges lessened. However, March 2022 saw trends weaken again, in part due to lapping the massive $500 billion stimulus from one year ago.

With this report, we update our data-driven Kalinowski Quick-Service Burger Index for Q1 to +2.1%. This is the one-year figure, lapping the +12.9% number from Q1 2021, and the -1.2% number from Q1 2020. On a three-year (pre-pandemic) basis, the Kalinowski Quick-Service Burger Index for Q1 is at +13.8%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during January, February, and March.

With this report, we update our data-driven Kalinowski Casual Dining Index for Q1 to +17.6%. This is the one-year figure, lapping the +9.1% number from Q1 2021 and the -13.1% figure from Q1 2020. On a three-year (pre-pandemic) basis, the Kalinowski Casual Dining Index for Q1 is at +11.5%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during January, February, and early-to-mid March. Keep in mind, individual performance can vary wildly on a concept-by-concept basis.

With this report, we update our data-driven Kalinowski Fine Dining Index for Q1 to +40.2%. This is the one-year figure, lapping the -0.8% number from Q1 2021, and the -13.3% figure from Q1 2020. On a three-year (pre-pandemic) basis, the Kalinowski Fine Dining Index for Q1 2022 is at +4.6%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during January, February, and early-to-mid March.

With this report, we update our data-driven Kalinowski Quick-Service Pizza Index for Q1 to -0.2%. This is the one-year figure, lapping the +16.6% number from Q1 2021, and the -0.9% figure from Q1 2020. On a three-year (pre-pandemic) basis, the Kalinowski Quick-Service Pizza Index for Q4 is at +15.3%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during January, February, and early-to-mid March.

One-year same-store sales trends have slowed down for U.S. chain restaurants. We believe that on an industry level, same-store sales turned negative in early-to-mid March 2022. What’s causing this? And when might trends get better?

With this report, we update our data-driven Kalinowski Quick-Service Other Index for Q1 to +1.7%. This is the one-year figure, lapping the +8.5% number from Q1 2021, and the +4.8% figure from Q1 2020. On a three-year (pre-pandemic) basis, the Kalinowski Quick-Service Other Index for Q4 is at +15.6%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during January, February, and early-to-mid March.

Restaurant Brands International (QSR; Not Rated) — parent company of Tim Hortons, Burger King, and Popeyes Louisiana Kitchen — announced its intention to acquire Firehouse Subs this past November 15th. That $1.0 billion acquisition’s close was announced one month later, on December 15th.

With this report, we update our data-driven Kalinowski Family Dining Index for Q1 to +20.6%. This is the one-year figure, lapping the -1.4% number from Q1 2021, and the -15.5% figure from Q1 2020. On a three-year (pre-pandemic) basis, the Kalinowski Family Dining Index for Q1 is at +1.3%. This is the lowest pre-pandemic figure in this respect for any of the major segments of the U.S. restaurant industry. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during January, February, and early-to-mid March.

Data out today from the U.S. Census shows that restaurants’ market share (with grocery stores making up the other component) was 51.5% in February 2022. This was +80 basis points sequentially better than January 2022’s 50.7% figure. It was also modestly higher than restaurants’ full-year 2021 market share of 50.4%.

With this report, we update our data-driven Kalinowski Fast-Casual Index for Q1 to +8.1%. This is the one-year figure, lapping the +15.3% number from Q1 2021 and the +1.5% figure from Q1 2020. On a three-year (pre-pandemic) basis, the Kalinowski Fast-Casual Index for Q1 is at +26.5%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during January, February, and early March.

Earlier today (Wednesday, March 9th), we learned that the BlackBox Index of same-store sales for February 2022 — importantly, these data points are on a two-year basis — was up by +2.7%, with two-year traffic off by -13.8%.

February 2022 was the 11th full month in the U.S. to lap a year-ago month that was affected by the pandemic and related issues. How is average check changing in the U.S. quick-service and fast-casual segments given these recent dynamics? Our bottom line: average check is holding in better than expected for fast-casual and quick-service (and particularly so for the quick-service burger segment). To the extent two-year & three-year trends in average check continue to hold in nicely over the course of 2022, this could be a positive for multiple companies, and potentially their investors as well.

Sometimes, relative bargains can be unearthed when looking at a group of stocks, and comparing their current prices with these stocks’ 52-week highs. We looked at 35 restaurant stocks’ closing prices as of this past Friday (February 18th). Some observations:

Data out today from the U.S. Census shows that restaurants’ market share (with grocery stores making up the other component) was 50.6% in January 2022. This was slightly higher than restaurants’ full-year 2021 market share of 50.4%, and +410 basis points higher than restaurants’ January 2021 market share of 46.5%. Nevertheless, the 50.6% number represents -50 basis points of sequential deceleration from December 2021’s 51.1% figure. In addition, the 50.6% number for January 2022 is the lowest monthly figure since April 2021’s 50.5%.

Earlier today (Wednesday, February 9th), we learned that the BlackBox Index of same-store sales for January 2022 — importantly, these data points are on a two-year basis — was down by -0.9%, with two-year traffic off by -15.6%.

January 2022 was the 10th full month in the U.S. to lap a year-ago month that was affected by the pandemic and related issues. How is average check changing in the U.S. quick-service and fast-casual segments given these recent dynamics? Our bottom line: average check is holding in better than expected for fast-casual and quick-service (and particularly so for the quick-service burger segment). To the extent two-year trends in average check continue to hold in nicely over the course of 2022, this could be a positive for multiple companies, and potentially their investors as well.

With this report, we update our data-driven Kalinowski Restaurant Industry Index for Q4 to +14.6%. On a two-year basis, this is approximately +11.6%. While this +11.6% number would mark the third-best quarter in several years for the industry’s two-year same-store sales performance, we believe that January 2022 has started off somewhat weak for the industry, particularly on a one-year basis. Investors should be aware of this as we head into the upcoming earnings reporting season.

With this report, we update our data-driven Kalinowski Quick-Service Other Index for Q4 to +5.3%. This is the one-year figure, lapping the +1.3% number from Q4 2020. On a two-year basis, the Kalinowski Quick-Service Other Index for Q4 is at +6.7%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December.

With this report, we update our data-driven Kalinowski Fine Dining Index for Q4 to +64.4%. This is the one-year figure, lapping the -36.4% number from Q4 2020. On a two-year basis, the Kalinowski Fine Dining Index for Q4 is at +4.6%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December.

For full-year 2021, U.S. Food Services and Drinking Places (primarily restaurants) generated $817.2 billion in sales. This was up by +31.1% year-over-year. On a two-year basis (to compare vs. pre-pandemic times), this was up by +5.6%. Restaurants lost about 800 basis points of market share to grocery stores in 2020, but gained back 580 basis points of share in 2021. We look for further market-share gains by restaurants at the expense of grocery stores in 2022.

With this report, we update our data-driven Kalinowski Quick-Service Pizza Index for Q4 to +3.9%. This is the one-year figure, lapping the +10.4% number from Q4 2020. On a two-year basis, the Kalinowski Quick-Service Pizza Index for Q4 is at +14.7%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December.

Earlier today (Wednesday, January 12th), we learned that the BlackBox Index of same-store sales for December 2021 — importantly, these data points are on a two-year basis — was up by +4.1%, with two-year traffic off by -8.4%.

With this report, we update our data-driven Kalinowski Casual Dining Index for Q4 to +35.1%. This is the one-year figure, lapping the -19.1% number from Q4 2020. On a two-year basis, the Kalinowski Casual Dining Index for Q4 is at +9.3%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December. Keep in mind, individual performance can vary wildly on a concept-by-concept basis.

December 2021 was the 9th full month in the U.S. to lap a year-ago month that was affected by the pandemic and related issues. How is average check changing in the U.S. quick-service and fast-casual segments given these recent dynamics? Our bottom line: average check is holding in better than expected for fast-casual and quick-service (and particularly so for the quick-service burger segment). To the extent two-year trends in average check continue to hold in nicely over the course of 2022, this could be a positive for multiple companies, and potentially their investors as well.

With this report, we update our data-driven Kalinowski Fast-Casual Index for Q4 to +13.6%. This is the one-year figure, lapping the +3.4% number from Q4 2020. On a two-year basis, the Kalinowski Fast-Casual Index for Q4 is at +17.5%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December.

With this report, we update our data-driven Kalinowski Family Dining Index for Q4 to +38.5%. This is the one-year figure, lapping the -28.4% number from Q4 2020. On a two-year basis, the Kalinowski Family Dining Index for Q4 is at -0.8%. (These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December.) At this point, we anticipate that the -0.8% figure will be the lowest two-year same-store sales number for any of our Kalinowski Same-Store Sales Indices as regards Q4 2021.

Looking back to the end of 2009, and through the end of 12/30/21, the value of $10,000 invested in the Kalinowski top picks would now be worth $126,241 (a CAGR of about +23.5%). The value of $10,000 invested in the S&P 500 over that time would now be worth $59,657 (a CAGR of about +16.0%).

With this report, we update our data-driven Kalinowski Quick-Service Burger Index for Q4 to +6.5%. This is the one-year figure, lapping the +4.5% number from Q4 2020. On a two-year basis, the Kalinowski Quick-Service Burger Index for Q4 is at +11.3%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and the first half of December.

We continue to look for the U.S. restaurant industry to win back additional market share over the next 12-18 months. Indeed, it’s looking increasingly likely that it’s just a matter of time that the market share for restaurants (versus grocery stores) will exceed the pre-pandemic market share it had of Americans’ food & beverage dollars.

Recently, Domino’s, Pizza Hut (owned by Yum Brands [YUM; Neutral, $132.14]), and Papa John’s all reported their Q3 2021 U.S. same-store sales. In this report, we discuss how these same-store sales results — and potential results for full-year 2021 — relate to these three concepts’ average unit volumes (AUVs). We further discuss what this means for the companies, and their stocks.

Earlier today (Thursday, December 9th), we learned that the BlackBox Index of same-store sales for November 2021 — importantly, these data points are on a two-year basis — was up by +8.3%, with two-year traffic off by -4.6%.

November 2021 was the 8th full month in the U.S. to lap a year-ago month that was affected by the pandemic and related issues. How is average check changing in the U.S. quick-service and fast-casual segments given these recent dynamics? Our bottom line: average check is holding in better than expected for fast-casual and quick-service (and particularly so for the quick-service burger segment). To the extent two-year trends in average check don’t deteriorate all that much over the remainder of 2021 or in early 2022, this could be a positive for multiple companies, and potentially their investors as well.

We have looked at several restaurant stocks’ historical valuations over 2015-19 (leaving out 2020 due to that year’s highly unusual nature), and examined what these valuations may imply about the future for these stocks. (We have never viewed valuation as the be-all and end-all of investing, but it is one of several tools in our analyst kit.)

Recently, McDonald’s, Wendy’s, and Burger King (owned by Restaurant Brands International [QSR; Not Rated]) all reported their Q3 2021 U.S. same-store sales. In this report, we discuss how these same-store sales results — and potential results for full-year 2021 — relate to these three concepts’ average unit volumes (AUVs). We further discuss what this means for the companies, and their stocks.

Sometimes, relative bargains can be unearthed when looking at a group of stocks, and comparing their current prices with these stocks’ 52-week highs. We looked at 34 restaurant stocks’ closing prices as of this past Friday (November 19th), and we believe that at some point there will be an inflection favoring full-service names.

We continue to look for the U.S. restaurant industry to win back additional market share over the next 12-18 months. Indeed, it’s looking much more likely that it’s just a matter of time that the market share for restaurants (versus grocery stores) will exceed the pre-pandemic market share it had of Americans’ food & beverage dollars.

Earlier today (Thursday, November 11th), we learned that the BlackBox Index of same-store sales for October 2021 — importantly, these data points are on a two-year basis — was up by +6.0%, with two-year traffic off by -6.4%. The +6.0% figure is very close to the September 2021 two-year figure of +6.1%.

October 2021 was the seventh full month in the U.S. to lap a year-ago month that was affected by the pandemic and related issues. How is average check changing in the U.S. quick-service and fast-casual segments given these recent dynamics? Our bottom line: average check is holding in better than expected for fast-casual and quick-service (and particularly so for the quick-service burger segment). To the extent two-year trends in average check don’t deteriorate all that much over the remainder of 2021 or in early 2022, this could be a positive for multiple companies, and potentially their investors as well.

We continue to look for the U.S. restaurant industry to win back additional market share over the next 12-18 months. Indeed, it’s looking much more likely that it’s just a matter of time that the market share for restaurants (versus grocery stores) will exceed the pre-pandemic market share it had of Americans’ food & beverage dollars.

Earlier today (Thursday, October 14th), we learned that the BlackBox Index of same-store sales for September 2021 — importantly, these data points are on a two-year basis — was up by +6.1%, with two-year traffic off by -5.3%. The +6.1% figure matches the August 2021 two-year figure of +6.1%.

With this report, we update our data-driven Kalinowski Restaurant Industry Index for Q2E to +16.0%. On a two-year basis, this is approximately +13.7%. The U.S. chain restaurant business is coming back strong sales-wise, although we’d caution that there is a broad range of performances on both a one-year and a two-year basis when looking at individual concepts. In addition, while the +13.7% two-year number is the second-best quarter for the Kalinowski Restaurant Industry Index in many years, it is still sequentially lower than the +20.6% two-year number achieved in Q2 2021.

With this report, we update our data-driven Kalinowski Quick-Service Burger Index for Q3E to +6.3%. This is the one-year figure, lapping the +4.1% number from Q3 2020. On a two-year basis, the Kalinowski Quick-Service Burger Index for Q3E is at +10.7%. These numbers are based on our latest proprietary checks/data as regards same-store sales performance for this segment during July, August, and September.