News

Study on independent brands: Only the strong survive, but they also thrive

July 11, 2017

Staying independent is a pretty rough game for U.S. restaurateurs. Still, survival is not only possible but also relatively profitable for solid concepts with equally solid leadership, according to global information company, NPD Group.

In its latest analysis of this relatively small segment of the food service industry, NPD found that independent restaurant visits dropped 3 percent in Q1 2017 compared with Q1 2016, a news release said. 

The declining number of visits resulted from a 4 percent drop in independent restaurant unit count, NPD said, but added that since the number of visits fell only 3 percent over that same period, it's clear that the 323,456 stalwart U.S. independents remaining in the game are actually growing their domestic business.

To highlight the relative "wealth" of surviving independents, NPD cited data showing that independents are doing well enough to boost their overall dollar spend with broadline food operators by 2 percent, with the number of cases ordered up slightly in Q1 2017 from last year. 

"However you define 'independent' restaurants, the macro environment is not generating demand growth," NPD Vice President of Industry Analysis David Portalatin said in the release. "But even in this challenging environment there are many examples of major chains, microchains, and independents that are thriving because they have a differentiated experience, superior quality and excellence in execution. These fundamentals are key to restaurant success at every segment of the industry and in any macroeconomic environment."  

In fact, NPD found that some independents are expanding into microchain status, defined as having between three and 19 units. And the number of microchains is growing, an important signbecause these smaller groups tend to innovate many new trends in areas of food served and customer experience, according to NPD. The research revealed that microchain case orders from broadline foodservice distributors grew 3 percent in Q1 2017 over the same period last year. 

However, comparing the growth of independents with that of big chains provides little insight into the overall state of either category, according to NPD Group. Major chains comprise 64 percent of restaurant industry traffic, while those brands with one or two units are just a sliver at 22 percent of overall visits. 

So while major chain visits grew 1 percent in Q1 2017 and independent visits dropped 3 percent, it's a David and Goliath comparison that is hard to draw any immediate conclusions from. For spending too, independents were flat, while major chain spending grew 3 percent over that same period, the company said.