This is an English adaptation of a FoodBud historical article originally published on March 19, 2022.
FoodBud reviewed Technomic's 2021 list of the top 500 U.S. restaurant chains and grouped the publicly listed restaurant-chain operators. The result was a set of 41 companies.
Most were quick-service chains. McDonald's was the only restaurant-chain company in the group with a market value above RMB 1 trillion. By category, the list leaned toward highly standardizable formats such as burgers, Mexican fast food, pizza and coffee, though full-service groups also appeared: Darden Restaurants, for example, was valued above RMB 100 billion.
For comparison, the highest-valued listed restaurant-chain operator in China was Yum China, the regional business spun out of Yum! Brands. It was valued at US$19 billion, or more than RMB 120 billion. Haidilao had once approached HK$470 billion in market value, but had fallen to HK$77.2 billion.
Even McDonald's, the restaurant-chain giant, looked smaller than global food and beverage companies.
Nestle's market value was US$365.5 billion, or about RMB 2.3 trillion. Coca-Cola, another symbol of U.S. consumer culture, was valued at US$260.5 billion, or about RMB 1.657 trillion.
The implication for operators is straightforward: restaurant chains can become huge, but the store-based model still carries more physical limits than packaged food and beverage platforms.
Several newer listed chains deserved attention, including Dutch Bros and Sweetgreen, both listed in 2021, and Shake Shack, listed in 2015.
Dutch Bros generated US$498 million in 2021 revenue, up 52.1% year on year. It had 538 stores: 271 company-operated and 267 franchised.
Sweetgreen, described in the source as the Apple of light food and salads, generated US$340 million in 2021 revenue, up 54%. It reported an operating loss of US$130 million and a net loss of US$150 million. By the end of 2021, it had 150 stores.
Shake Shack generated US$740 million in fiscal 2021 revenue, up 41.5%. Systemwide sales reached US$1.12 billion, up 44.2%. By the end of Q4 2021, it operated 218 company-owned stores and 128 licensed stores.
Dutch Bros and Sweetgreen were still relatively small in revenue terms. Yet Dutch Bros reached a market value of US$8.6 billion, while loss-making Sweetgreen, despite its smaller revenue scale, was approaching the valuation level of Jollibee, the Philippines' largest restaurant-chain group with many years of operating history and multiple brands.
These brands were not overnight stories. Dutch Bros was founded in 1992, Shake Shack in 2004, and Sweetgreen in 2007. Even for emerging offline restaurant chains, the path from founding to IPO took at least a decade.
Two listed bakery-related companies, Krispy Kreme and The Cheesecake Factory, had similar market values. Krispy Kreme mainly sells doughnuts. The Cheesecake Factory is best known for cheesecake and other products, but its restaurants also serve full lunch and dinner menus.
Krispy Kreme had no stores in China at the time. The Cheesecake Factory had stores in Beijing and Shanghai and was already a familiar older internet-famous brand there.
The Cheesecake Factory had 306 stores in the U.S. and Canada, plus 36 stores in international markets outside North America. Cheesecake and dessert revenue accounted for 16%, 21% and 19% of total revenue in fiscal 2019, 2020 and 2021, respectively. Average annual revenue per restaurant was high: US$10.7 million in 2019, US$7.8 million in 2020 and US$11.1 million in 2021.
Krispy Kreme sold 1.5 billion doughnuts in 2021. FoodBud compared it with China's Taoli Bread because both emphasize freshness and short-shelf-life products, though their operating models differ. Taoli Bread's market value was RMB 20.7 billion, while Krispy Kreme's was RMB 15.6 billion.
Krispy Kreme generated US$1.38 billion in 2021 revenue, or RMB 8.7 billion, up 23.4%. Taoli Bread generated RMB 6.335 billion in 2021 revenue, up 6.24%.
The difference was channel architecture. Taoli Bread did not operate offline stores in China. Krispy Kreme combined stores with convenience stores, supermarkets and other retail channels. In recent years, Krispy Kreme had cut its traditional wholesale business and pushed harder into fresh, made-on-site products.
Krispy Kreme's distinctive model was to use large stores plus retail channels to create small regional networks, reducing the limits of single-store economics. In practice, the company would first open a large store or pair it with a factory to create a regional hub. That hub became the relatively fixed cost center. Production from the hub then supported convenience-store distribution. FoodBud inferred that convenience-store sales data could help the company identify local demand potential before adding smaller stores as strategic fill-ins.
In 2021, each Krispy Kreme international hub generated US$9.1 million in annual revenue. In the U.S. and Canada, each hub generated US$4 million.
Krispy Kreme estimated that by 2024, each international hub could reach US$10 million in annual revenue, while each U.S. and Canada hub could rise to US$5 million.
Panera Bread was another North American bakery-chain asset to watch. Like Krispy Kreme, it was backed by JAB, which took Krispy Kreme public again in 2021. JAB combined Caribou Coffee, Einstein Bros and Panera Bread into Panera Brands, and announced in November 2021 that it was preparing for an IPO. In 2017, JAB acquired then-Nasdaq-listed Panera Bread for US$315 per share, valuing the deal at about US$7.5 billion.
Darden Restaurants ranked sixth in FoodBud's table and was mainly a full-service restaurant group. Its market value exceeded RMB 100 billion. In China, FoodBud saw Jiumaojiu as the closest comparable business model.
Darden had nine major brands, with Olive Garden and LongHorn Steakhouse contributing the largest revenue share. As of November 28, 2021, Darden had 1,852 stores. Olive Garden had 879 stores and LongHorn Steakhouse had 539 stores.
Olive Garden and LongHorn Steakhouse together contributed more than 70% of revenue.
Olive Garden was developed internally by Darden. LongHorn Steakhouse was acquired in October 2007. Seasons 52 and Bahama Breeze were internally incubated. Other acquired brands included Cheddar's Scratch Kitchen in April 2017, Yard House in August 2012, Capital Grille in October 2007 and Eddie V's in November 2011.
In fiscal 2021, Darden generated US$7.2 billion in sales, or RMB 45.8 billion, down 7.8% year on year.
Jiumaojiu had previously announced 2021 revenue of no less than RMB 4.1 billion and net profit of no less than RMB 330 million. Tai Er Sauerkraut Fish and Jiumaojiu Northwest Cuisine together contributed 98.2% of revenue. Jiumaojiu's market value was HK$22.5 billion.
Jiumaojiu was still supported mainly by two brands. When the Jiumaojiu Northwest Cuisine brand weakened, Tai Er took over as the growth driver. Its newer internally incubated brands, including Song Hotpot and Lai Meili Grilled Fish, were still early-stage. Whether they could become third and fourth growth curves remained to be tested over time.
On investment, FoodBud quoted Jiumaojiu's view: either incubate brands internally, or take only a small minority stake and act more like a coach or consultant. In their view, restaurant barriers are not especially high; capable operators often want to be their own bosses, while sellers may either want to cash out or lack capability.
FoodBud's conclusion was that Jiumaojiu's internal-incubation strategy fit China's restaurant context relatively well.
Among Starbucks, Peet's and Dutch Bros, Starbucks remained hard to challenge.
Peet's was backed by JAB, which used capital-market tools to consolidate multiple coffee-related companies into one listed company.
Dutch Bros, listed in 2021, had an advantage in turning coffee into a broader beverage platform. Outside coffee products, its best-selling items were functional drinks, effectively cup-based functional beverages.
In China, coffee was still strongly associated with alertness and energy. Whether cup-based functional drinks had an opportunity in China was uncertain. Whether Chinese tea-drink brands could grow to Starbucks-level scale also required more time to judge.
The reason to examine these international listed restaurant-chain operators was to understand the scale and operating models of global players. FoodBud's overall conclusion was that the market still had very large room for growth.
Note: IPO plans, market values, forward targets and valuation figures above are historical figures from the 2022 source article.