In this Placer Bytes, we take a look at the offline performance of two restaurant leaders, McDonald’s and Chipotle, to see how they’ve fared in Q2 2022.
McDonald’s Outpaces QSR Category Average
McDonald’s has long been an industry leader, with over $23 billion in sales in 2021. The fast food giant has the most locations of any restaurant in the country after Starbucks and Subway, even though it has been shrinking its store fleet in recent years. But despite its smaller physical footprint, the QSR leader has seen its year-over-year (YoY) and year-over-three-year (Yo3Y) visit numbers grow in recent months while outpacing foot traffic trends to the wider QSR category. In June 2022, QSR visits were up only 5.9% relative to June 2021 and down 2.6% relative to the same month pre-pandemic, while McDonald’s visits were up 16.7% and 0.6% YoY and Yo3Y, respectively – a particularly notable feat given the wider contraction in restaurant spending.
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Chipotle Outperforming Fast Casual Category Average
Chipotle has been posting even more impressive gains in YoY and Yo3Y foot traffic gains, helped by the brand’s expanding store fleet. Yo3Y visits to the fast casual leader were up 15.6% and 16.7% in May and June 2022, respectively, while YoY visits were up 23.3% and 14.6% for those same months. Meanwhile, nationwide visits to fast-casual restaurants in June 2022 were down 0.1% and 7.4%, respectively, on a YoY and Yo3Y basis – likely due to consumers cutting back on dining out as inflation intensifies.
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Chipotle and McDonald’s Strength Continues into July
Chipotle and McDonald’s appear well-poised to continue their success in the second half of 2022. McDonald’s has been posting consistently elevated YoY visits, with foot traffic during the first full two weeks of July up 10.7% and 6.1%, respectively, relative to the equivalent weeks in 2021. And Yo3Y numbers have been up as well, with visits during the week of July 11th up 5.0%. The ongoing strength gives added credibility to the thought that customers may be ‘trading down’ in food spending - a trend for which McDonald’s is very well aligned.
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Chipotle saw a slight downturn in the week of July 4th, with 11.8% fewer visits than the previous year – but for good reason. On July 6th, 2021, Chipotle offered a buy one, get one free deal in support of the White House’s National Month of Action for Vaccinations, leading to a spike in visitors that week – so the YoY comparisons for the week of July 4th, 2022 reflect the success of 2021’s campaign rather than any drop in demand. By the week of July 11, Chipotle was once again outperforming the previous year, with YoY visits up 8.8%.
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Chipotle Expanding into Rural Markets
Chipotle announced in early 2022 that it was increasing its long-term projections to 7,000 locations from 6,000 with a focus on smaller cities. Opening locations in smaller, suburban areas lets the chain capitalize on lower rent and reduced operating costs – and as we analyzed on The Anchor previously, the foot traffic numbers show that smaller locations are also bringing in more consumers per store. Looking at Q2 2022 visits per venue indicates that the smaller markets are continuing to outperform the larger ones.
Comparing Chipotle locations in the top ten DMAs (designated market area) with visits per venue in the non-top-ten DMAs showed that the locations in smaller markets received on average more than 2,000 more visits per venue than the locations in the larger markets. The outperformance of the smaller DMA locations makes a strong case for the company’s expansion into these smaller markets.
As Chipotle is seeing strength in smaller markets, we looked at the data to see if the same pattern was holding true for McDonald’s as well. The fast food giant, which has firmly established itself as both a city and rural QSR leader, is also showing strong visits per venue in its smaller-market locations, as well. The brand’s top ten largest market areas captured 46k+ visits per venue in Q2 2022, while its non-top ten average saw 57k+ visits per venue.
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Both companies are playing to their strengths – McDonald’s is focusing on its top-performing venues and closing ones that aren’t offering strong foot traffic returns, while Chipotle looks to smaller markets and its loyal customers to expand its base.
McDonald’s strength in these smaller markets, combined with Chipotle’s new suburban expansion plans may incentivize other restaurant chains to expand into smaller cities.
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