Branch closures and the rise of fast-casuals are putting pressure on full-service sales

Evidence of the pandemic’s continued impact on the restaurant sector is perhaps most evident in the underperformance of the casual and mid-priced restaurant segments.

While many limited-service operators thrived during the pandemic and continued to grow and optimize their operations, full-service operators have struggled to recover from the unit closures and traffic losses they suffered in 2020.

Top 500 data shows that full-service operators in the Top 500 grew revenue by just 5% through 2023, lagging the industry’s menu price inflation of 7.1%. According to Technomic, revenue among these full-service operators has grown an average of just 2.4% annually since 2019.

These operators, especially in the mid-market and casual segments, have experienced extensive branch closures in 2020 and 2021 and have yet to regain their pre-pandemic market presence. For example, data from the Top 500 report shows that last year’s unit count at mid-market operators was about 4% below 2019 levels, and unit counts at informal chains were still 2.5% below 2019 levels.

These numbers compare with the 2.5% unit growth among the Top 500 chains overall from 2019 to 2023, as limited service operators more than made up for the relatively minimal declines they suffered in 2020. Fast-casual operators in particular appear to be supplanting a role historically filled with mid-range and casual restaurants, which offer a somewhat elevated level of food and experience, with the added value of convenience.

The fast-casual operators in the Top 500 achieved 11.2% revenue growth in 2023, while expanding their market presence, with unit numbers growing 4.4% to 35,517 locations, or 14.7% more than in 2019. Five of the six largest fast-casual chains posted double-digit sales increases in 2023, led by Wingstop, Jersey Mike’s Subs and Raising Cane’s, which each rose more than 20%.

“I think the full-service segment is still recovering from the pandemic,” said Andy Barish, an analyst at Jefferies. “There were a lot of closures in 2020 and 2021, and it was just a tougher environment, especially for the smaller chains. Whatever growth takes place in full-service will be offset by closures of the smaller or less relevant players.”

Although fine-dining chains accounted for just 5% of full-service sales in the Top 500, the segment was a bright spot for the industry, in part as consumers continued to splurge for special occasions and continued demand.

According to data from OpenTable, the number of special occasion dinners will grow significantly by 2023. For example, restaurant activity on Valentine’s Day and Mother’s Day grew 9% and 6% year-over-year, respectively, while diner spending on those days grew 15% compared to non-holiday spending.

“We’re happy to spend money in exchange for greater price commitment, as long as we get service and taste,” says Robert Byrne, director of consumer and industry insights at Technomic, which recently identified Ruth’s Chris Steak House. the largest operator in the fine-dining segment, ranked #1 operator in its America’s Favorite Chain report.


All data comes from Technomic Ignite Company data. Looking for more data? Click here to access the full Technomic Top 500.