Remember the “better burger” revolution? For a time, a generation of upstart, fast-casual chains were set to take over the restaurant industry. They would grab share from old and busted fast-food chains that lost their relevance with younger consumers demanding more of their fast food.
Yeah, about that.
The better burger revolution never quite materialized the way many felt that it would. While many of the fastest-growing burger chains are fast-casual concepts, for the most part much of their growth is coming from locations that look an awful lot like fast-food chains.
And any share they are taking is not coming from the one everybody thought would lose in this scenario: McDonald’s.
The Chicago-based burger giant gained market share among limited-service burger chains last year, according to data from the Technomic Top 500 Chain Restaurant Report.
Sales among the limited-service burger chains on the ranking grew 4.7%. McDonald’s system sales grew 6% last year. It generates almost half of the total sales for that sector, which is particularly impressive given that it’s by far the biggest sector in the restaurant industry.
The company also grew faster than all but three of the next nine largest limited-service burger chains on the Top 500 ranking.
Market share within an industry sector is more complex than people think. Restaurant decisions tend to be more complex than simply, “Should I get McDonald’s or Shake Shack,” and may be based on what’s available at that particular moment. As such, burger chains’ competitive set is broader than other chains within their sector.
And we’d be remiss if we ignored the fact that limited-service burger sales growth didn’t come close to matching the 8% pricing growth in 2022. Thus, on a customer-count basis, consumers shifted spending from burger brands to other options, like chicken (10.9% sales growth) or Asian (9.2%).
Still, the expected shift from quick-service burger restaurants to fast-casual chains hadn’t quite materialized in the 15-plus years after the fast-casual sector emerged.
Fast-casual burger chains did outpace growth among quick-service burger chains. Sales among the fast-casual set grew 9.6% last year, compared with just 4.4% for quick-service concepts. But the fast-casual burger sector has watched its growth slow in recent years, while consumers gravitated toward fast-casual chicken chains or Asian concepts.
In 2019, fast-casual burger chains accounted for 5.7% of the sales generated by limited-service chains.
In 2022, that increased to 6%.
To be sure, the pandemic likely shifted a lot of business to traditional burger chains as drive-thrus and mobile ordering proliferated. But the fast-food business was more normalized for much of 2022.
Perhaps this might be best illustrated by Five Guys. The country’s largest fast-casual burger chain had a decent year in 2022, with system sales up 5.3%. That was above its 1.4% unit growth last year, meaning the chain was able to generate organic growth inside its restaurants.
Yet that was still below the performance of the largest quick-service burger chain.
So, why did the better-burger boom die off? First: the market shifted more toward convenience, an area where traditional quick-service chains dominate. But many chains upped their quality games. McDonald’s, for instance, started selling fresh Quarter Pounders. Wendy’s added breakfast. Everyone did great chicken sandwiches. Many of the earlier better-burger concepts, notably chains like Smashburger, Mooyah and Burgerfi, have struggled.
And consumers appear to be gravitating toward higher-end quick-service burger restaurants that promise better burgers but in a fast-food format, and no I’m not going to use the stupid “QSR Plus” terminology. Whataburger, Culver’s, In-N-Out and Freddy’s are all strong ultra-regional performers that have won over consumers with their quality offerings.
Freddy’s is considered “fast casual” though the brand is much like those other three. Culver’s sales grew 13.7%. Freddy’s grew 12.5%. In-N-Out’s grew 10.5% and Whataburger’s 8.1%. Each of those appear to be gaining share from consumers gravitating toward their favorite regional fast-food burger brands.
And of course, when you visit a more traditional fast-casual burger chain like, say, Shake Shack, you are likely to find services that appear much like one of those quick-service brands: A drive-thru.