Long-Term Leadership
Renewed confidence tempered by pragmatism characterizes Top 400 Chains' performances.

By Scott Hume, Executive Managing Editor

Sales growth comes from marshaling every available revenue-generating strategy, from marketing to kids (as at Baskin-Robbins, top), honing server training programs (McAlister’s Deli, center) or enriching the customer experience with amenities such as Wi-Fi Internet access (McDonald’s, above).

If 2002 was a year of recovery for the chain-restaurant industry, its momentum derailed by terrorist attacks at the end of the previous year, then 2003 was when the industry showed what it had learned from adversity: controlled growth.

The largest chains tempered expansion ambitions, focusing instead on improving operational efficiency. They displayed remarkable agility in augmenting menus when low-carbohydrate diets blossomed, and in making nutrition information available when debate over obesity raged. New prototypes sprang from drawing boards and a few, such as Jack in the Box, began rethinking concepts top to bottom. Acquisitions (including Bob Evans’ recent purchase of Mimi’s Cafe) continued the consolidation trend (although McDonald’s sold Donatos Pizzeria back to that chain’s management).

In short, 2003 was a year when chain-restaurant management resolved to do whatever was needed to improve brand appeal, enhance customers’ experiences and increase revenues and profit margins. Chains’ made short-term fixes with an eye to improving long-term stability.

A year so eventful is difficult to capture in numbers, but this 40th annual edition of Restaurants & Institutions’ Top 400 chains provides a scorecard for 2003. Each of the concepts on this year’s list has a unique tale to tell about how to succeed in an often difficult economy, and when consumers’ change wildly and often. Simply that these brands were able to stay among or join the leaders indicates that hard work was done, tough decisions were made and solid plans were laid.

Key Metrics
Key trends in this year’s rankings:

• No. 1 once again, McDonald’s alone accounts for 20.1% of Top 400 sales, 12.4% of total units.
• Sales for the Top 400 in 2003 were approximately $218.1 billion, a 5% increase over last year’s total.
• That sales increase was hardly the result of rapid unit growth: The total number of worldwide units operated by the 400 largest brands rose a little more than 1% to 244,000.
• With a combined 116,266 units at the end of 2003, the 10 largest chains (McDonald’s, KFC, Burger King, Pizza Hut, Wendy’s, Subway, Taco Bell, Domino’s Pizza, Applebee’s Neighborhood Grill & Bar and Dunkin’ Donuts) represent 47.7% of the Top 400’s store count.
• The 100 largest chains account for 85.9% of total 400 sales, slightly more than last year’s 85%. The last quartile (chains ranked nos. 301 to 400) grew marginally stronger, accounting for 2.2% of the sales total, versus 2% a year ago.

View the Top 400 list.

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Rules of the Ranking

Restaurants & Institutions’ 40th annual Top 400 ranks systemwide (global, company-owned and franchised) food-and-beverage sales for the largest restaurant chains. It ranks sales strength of brands, not companies.

• Chains, as defined for this report, are foodservice concepts with five or more units operating under a single brand name, such as Chili’s Grill & Bar. Exceptions have been made where a concept operates under two brand names but both are controlled by a single management team (such as Ponderosa/Bonanza).
• The sales and unit figures listed encompass all food-and-beverage outlets, domestic and international, for each chain unless otherwise indicated.
• Multiconcept operators are excluded as single entries although individual chain concepts they operate may qualify for inclusion. For example, Seattle-based Restaurants Unlimited is not included, but its Palomino Euro Bistro and Kincaid’s Fish, Chop & Steak chains are eligible and are individually ranked as brands.
• Primary sources of information are the Top 400 chains themselves. Survey forms are sent to more than 700 companies in March and sales information for most chains comes from returned survey forms. Some companies, however, choose not to share financial information or are unwilling to provide systemwide totals that include sales by franchised as well as by company-run operations. In such cases, R&I uses all other available resources to estimate sales as accurately as possible.
• Sales numbers used in the Top 400 rankings are for calendar 2003 or for fiscal years ending between July 1, 2003, and April 1, 2004, unless otherwise indicated.
• When two or more chains have the same reported or estimated sales, chains with company-supplied numbers are given precedence in ranking over those with estimated sales. After that, ties are resolved alphabetically.
• The Top 400 does not include chains that are headquartered outside the United States. Exceptions can be made for chains owned by overseas companies (such as Hard Rock Cafe, owned by London-based Rank Group PLC) if the chain is headquartered in the United States. Canadian chains are eligible if owned by U.S.-based corporations (such as Tim Hortons, a unit of Wendy’s International).