What Chain Restaurant Same Store Sales 'Pop'?

 |  Includes: APPB, BH, DIN, DPZ, EAT, MCD, WEN, YUM
by: John Gordon

What's happened recently with U.S. chain restaurant same store sales?

Same store sales is an important retail and restaurant metric. It is because of the operating leverage concept: That is, once an incremental sales gain occurs, somewhere from $.30 to $.70 falls through to the bottom line. Of course, we wish that same store sales was calculated on a compound average growth rate basis, as we have noted several times on Seeking Alpha such as on May 4, 2010, Chain Restaurant Disclosure and Analysis Can Improve.

We recently looked at same store sales (SSS) “pops”, where the sales metric trend moved by 10% (1000 basis points) or more, from quarter to quarter. And even in the last year or two, there have been a few instances, as seen below: (SSS %s)



Q1, 09

Q2, 09

Q3, 09

Q1, 09

Q1, 10

Q2, 10

Steak N Shake (NYSE:BH)








Domino’s (NYSE:DPZ)







Pizza Hut (US)














Click to enlarge

In addition, we believe Subway same store sales, while not publicly traded or disclosed, moved from -.1% in 2006 to 1.0% in 2007 and 12.5% in 2008. This was concurrent to the $5 footlong offer. Subway is pulling back on the offer a bit, recently.

What happened?

Concurrent with the pops were Steak N Shake (not promoting much heretofore) ran $.49 anniversary specials and $.89 specials. Dominos introduced its new pizza, Pizza Hut rolled out its $10/any/any campaign and KFC rolled its Grilled Chicken platform. The KFC pop was very short-lived, Steak 'N Shake is moderating, and the two pizza operators will compete head to head.

We wish we could see profitability. YUM (NYSE:YUM) doesn’t reveal brand profits, and the SNS/Biglari numbers are too highly summarized, and doesn’t do earnings calls. We should caution that sales gains do not necessarily equal profit gains, especially for franchisees.

No one in the casual dining space moved the trend of this magnitude, including Applebee’s (APPB) much copied 2 for $20 mantra and Chili’s new menu (still working its way in). In fact, you can’t see any pop in their numbers. Of course, we all know the casual dining results could have been worse without it.

So, it was a mix of price offers and new products that did it.

Disclosure: No stock positions