Executives of major restaurant chains are hungry for location expansion as some get enough long-awaited relief from soaring food and supply costs to make up for still-elevated construction expenses. Sales for many chains rose amid resilient consumer spending in recent months, with the escalating prominence of digital sales boosting restaurant development and design plans. Those are among the themes discussed during calls with analysts run by executives at chains including KFC, Taco Bell, Applebee’s, IHOP, Denny’s, Cheesecake Factory and Outback Steakhouse. Yum Brands, which operates more than 55,000 global franchised locations of KFC, Taco Bell and Pizza Hut, reported opening 1,025 new restaurants in its second quarter and a total of 1,800 in the first half. Company officials said one U.S. franchisee, Flynn Restaurant Group, is on track for “another record-setting year” with 63 Taco Bell openings expected for full-year 2023, including 27 outside the United States. “Just in the last two and a half years, we’ve added 10,000 new gross units to the Yum system,” CEO David Gibbs told analysts during the Louisville, Kentucky-based company’s earnings call. “That’s nearly 20% of our stores built in the last two and a half years.”
At Dine Brands Global, which operates more than 3,600 Applebee’s and IHOP restaurants, executives said that company like others is seeing some relief from food and other commodity inflation, though construction costs remain elevated due in part to lingering supply chain disruptions for key materials and equipment. That’s one reason why expansion at Pasadena, California-based Dine Brands will focus primarily on remodeling buildings rather than ground-up construction. The company plans to have 45 to 60 new restaurants opened by year’s end, primarily for IHOP, as it continues a years-long program of closing underperforming locations of Applebee’s.
‘Ghost Kitchen’ Expansion
Catering to digital sales, Dine Brands is expanding its network of “ghost kitchens” geared solely to preparation of food for sale through its website and mobile apps, and also items sold through third-party delivery companies. “We expect to open approximately 30 new distribution points by end of year, bringing our global ghost kitchen total to over 80,” Dine Brands CEO John Peyton told analysts during his company’s earnings call. “And we’ve recently signed agreements to bring our brands to new markets including Spain, Colombia, and Japan, which we expect all to be active by year-end.” Dine Brands is also testing a dual-branded Applebee’s-IHOP concept, where the brands share dining space under same roof, after opening its first dual-brand site earlier this year in Dubai. Executives said the model “is proving to be a success in first few months of operation,” with three more Middle East locations in the works and plans to have up to eight opened globally by year’s end. Tampa, Florida-based Bloomin’ Brands, operator of more than 1,400 restaurants including Outback Steakhouse, Fleming’s Prime Steakhouse and Carrabba’s Italian Grill, is also eyeing domestic and international expansion. CEO David Deno told analysts the company plans “to have a meaningful increase in new restaurant development in 2024.” The company is aiming for systemwide location expansion that would include increasing its Brazil locations of Outback Steakhouse from its current 148 to nearly 300 by 2028. U.S. restaurant sales totaled $88.9 billion in June, up 8.4% from a year earlier, according to the latest Commerce Department data. “While the overall trajectory of restaurant sales was positive in recent months, the primary catalyst was higher menu prices,” the National Restaurant Association trade group reported.
Source: CoStar News