Article

Report: How does your restaurant compare to your competition?

Expect to see a continued focus on controlling costs through strategic inventory and labor management, as well as leveraging technology in new and innovative ways.

April 27, 2016

By Dustin Minton, BDO

Once per year,BDO USA’s Restaurant Practice looks closely at publicly traded restaurant companies’ operating results to provide insightful benchmarking information for the fiscal year. Read on to see how your restaurant stacked up to the competition in 2015.

Restaurant sales were solid throughout 2015, largely due to improvement in overall economic fundamentals like decreased unemployment and increased discretionary income, which boosted consumer confidence and spending. Same-store sales improved across all segments last year, with the pizza and fast casual segments seeing the strongest growth, experiencing a 6.4 percent and 4.9 percent increase, respectively.

Domino’s sat atop the pizza pack throughout the year, enjoying a 12.2 percent increase in same-store sales in 2015. Behind this growth is Domino’s focus on convenience, food delivery and online ordering.

Though the fast casual segment has historically been dominated by Chipotle, FY 15 had a new winner in Shake Shack. The chain experienced a same-store sales growth of 13.3 percent, driven largely by its strategic menu mix and focus on unique limited-time offers. In the quick service segment, all day breakfast proved to be a great strategy for McDonald’s, showing a strong increase in Q4. Overall, the QSR segment had a modest increase of 3.8 percent.

In another positive sign for the industry, cost of sales decreased across all segments in FY 2015, partially a result of declining commodity prices. After spiking in 2014, pork and cheese prices fell significantly in 2015 – by 23.4 and 13.5 percent, respectively. And even beef prices decreased substantially in the second half of the year.  

When it comes to labor prices, the additional costs associated with the Affordable Care Act and pressures to attract and retain key employees led to marginal increases throughout 2015. With the anticipated rise of minimum wage regulations across the country—following recent laws in California and New York—costs of labor will likely continue to be an even bigger item on restaurants’ budgets. 

Overall, 2015 was a year of modest growth for all segments. As restaurants seek to carry forward these positive trends and drive higher profit margins through the remainder of 2016, expect to see a continued focus on controlling costs through strategic inventory and labor management, as well as leveraging technology in new and innovative ways.

If you are wondering how to benchmark a private company against this report, BDO has found that on average, when compared to public companies, medium-sized private companies’ prime costs were one to two percent higher. However, the best performing private company participants—those in the highest quartile—had prime costs three percent lower than the average public company.