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Retail Trends

The Taste of Success

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This year’s 15 hottest restaurants are almost a replay of last year, with the top four in the same order and 11 repeaters from 2011. Part of the reason is methodology, which favors younger concepts building on a small base for year-over-year comparisons.

Of this year’s four newcomers, Noodles & Company alone fits the young-concept, small-base model; Dunkin Brands became a public company in July 2011, Culver Franchising, known for frozen custard, expanded beyond its traditional territory, and Darden Restaurants grew corporate revenues 6.6 percent in its fiscal year ended in May.

Noodles & Company began as a single restaurant 17 years ago in Denver with the idea of serving international noodle and pasta dishes under one roof. The business has grown to nearly 300 locations in 23 states, with a combination of company- and franchisee-owned and -operated stores.

Dunkin Brands consists of two distinct chains: Dunkin’ Donuts, with about 10,000 retail outlets; and Baskin-Robbins, with some 6,700 outlets.

In the last fiscal year, Dunkin Donuts’ systemwide sales grew 9.4 percent, boosted by comparable store growth of 5.1 percent “driven by both increased average ticket and transaction counts, net restaurant development of 243 locations and approximately 190 basis points of growth attributable to a 53rd week in the fiscal year,” the company told shareholders.

The story was a little different at Baskin-Robbins, where more franchisees operate fewer locations than Dunkin Donuts. Systemwide in the United States, Baskin-Robbins sales growth was only 0.4 percent even with an increase of 0.5 percent in comparable store sales.

Culver’s may be the largest frozen custard chain in the country, but it is not formulaic. Some units are drive-through, some are drive-in and some have eating areas inside; all are independently owned and operated. Franchising began well after Craig and Lea Culver opened their first store in Sauk City, Wis., and today the network stretches to Texas, South Carolina and Arizona.

Darden is the largest operator on the list, with revenues boosted by combined same-restaurant sales growth of 1.8 percent for Olive Garden, Red Lobster and Longhorn Steakhouse, and a same-store gain of 4.6 percent in the company’s specialty restaurant group that includes Capital Grille and Seasons. The overall sales growth of 4.7 percent for the year was bolstered by the net addition of 89 new restaurants and the acquisition of 11 Eddie V’s locations.

Darden is anticipating sales growth of between 6 and 7 percent this year — in part on the strength of 110-120 new restaurants, net of closings. “With this level of sales growth, much more moderate food cost inflation and continued progress in the transformational cost reduction initiatives we’ve previously outlined, we expect diluted net earnings per share growth for fiscal 2012 to be between 8 percent and 12 percent,” says Darden CFO Brad Richmond.

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