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QSR: Taco Bell's Innovative Value, Dining's Late Night Recovery, and Subway's Buyers

R.J. Hottovy
Aug 30, 2023
QSR: Taco Bell's Innovative Value, Dining's Late Night Recovery, and Subway's Buyers

Taco Bell Continuing to Lead on the “Innovative Value” Front

Last year, we spoke about how both McDonald’s and Yum Brands outperforming the QSR category with respect to visitation trends, but doing it in different ways. McDonald’s has (and continues to) lean into its “Famous Orders” promotions and loyalty programs, while Yum has emphasized more of a focus on value. This has continued throughout 2023 for Yum Brands, with Taco Bell driving visits through $5 Cravings Trio, Deluxe Build Your Own Cravings Box, and a global Taco Tuesday campaign with LeBron James. Taking all of this into account, it is no surprise Taco Bell continues to be a leader in value perception while also delivering strong visitation gains (below). Additionally, Yum’s leadership noted that strong visit trends have played a part in Taco Bell’s unit economics being near an all-time high.

The QSR Late Night Recovery

One of the more interesting trends taking place in the QSR sector this past quarter is improved visitation trends for the late night daypart. As we told Restaurant Dive this week, there are some seasonal factors at play--QSR chains tend to have greater late night visits during the summer months--but a number of chains are also spending more on their late-night advertising, expanding hours of operation, and entering into partnerships with delivery services.

Below, we've included daypart visitation trends for some of the largest QSR chains.

Subway Finally Finds A Buyer

We’ve spoken about Subway’s menu overhaul and refreshed franchisee base in the past as well as the company’s plans to explore a potential sale (rumors about a potential sale have been around as far back as 2020). Thus, it wasn’t a surprise when Subway announced that it had entered into an agreement to sell to private-equity company Roark Capital this week for a reported $9.6B price tag. Roark is one of the most experience private-equity firms making investments in the restaurant space, with a portfolio that currently includes Auntie Anne’s, Buffalo Wild Wings, Cinnabon, Carl’s Jr., Hardees, Dunkin’ Brands, Jimmy John’s, McAlister’s Deli, and Moe’s Southwest Grill. We don’t expect this transaction to have an immediate impact on the overall restaurant space, but we would not be surprised to see additional Subway locations closed through continued franchisee consolidation.

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R.J. Hottovy

Head of Analytical Research,

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank. R.J. also brings a wealth of experience with early-stage investments as a committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he advised over 50 food service companies on more than $200 million in early-stage capital raises and M&A transactions.

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