Chain Restaurant Same Store Sales Pop, What Happened?

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 zero to $.70 falls through to the bottom line.

Of course, depending on the offer ($1 items may not have a positive contribution) and whether company owned or franchisee owned (zees have lower P&L margins because of royalties paid, and often higher capital costs).. 

We listened to YUM's earnings release yesterday, KFC was down 7% same store sales, lapping the grilled rollout a year ago--not much addition to the sales base.

We recently looked at same store sales (SSS) “pops”, where the sales metric trend moved by 10% (1000 bpts) 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)

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 heretofor) 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, SNS is moderating, and the two pizza operators will compete head to head.

We wish we could see profitability. 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 spacemoved the trend this magnitude, including Applebee’s 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.