Download the 2010 OC-BASED RESTAURANT CHAINS List (pdf)
The largest restaurant chains in Orange County are seeing some stability after a challenging 2009 that saw lower revenue and job cuts.
Revenue for the 25 largest OC-based restaurant chains fell 1.4% in 2009 from a year earlier to $6.5 billion, according to this week’s Business Journal list.
The decline was tempered by a handful of chains that opened restaurants in what otherwise was a down year for the industry.
The list ranks restaurant operators based in the county by 2009 revenue. It includes subsidiaries of companies based elsewhere with chains run from here.
Four companies reported lower revenue. Five reported revenue gains. Figures for 16 companies were Business Journal estimates, with most pegged to be lower based on industry trends.
For nearly two years now, things have been rough for restaurant chains as diners have cut back on eating out or switched to cheaper restaurants.
The trading down trend has benefited some chains. But also it’s spurred price wars among some.
The list’s perennial No. 1, Irvine-based Taco Bell Corp., a unit of Louisville, Ky.-based Yum Brands Inc., is estimated at $1.9 billion in 2009 revenue.
Taco Bell recently began pushing its $2 value meal deal and saw gains during the downturn with inexpensive tacos, burritos and other items.
But in the first quarter, Taco Bell saw a 2% drop in sales at restaurants open at least a year as price wars played out and some diners opted instead for quick-casual eateries, which are in between fast food and family-style restaurants.
No. 2 Lake Forest-based Del Taco LLC has ramped up promotions around its value-priced tacos and other promotional items.
“We have seen an aggressive movement by other chains with value claims,” said Paul Murphy, chief executive at Del Taco.
Del Taco saw largely flat 2009 sales of $568 million, up 1% from a year earlier.
In May, the chain refinanced its major debt to help it expand. Del Taco plans to open another 10 to 11 stores in 2010.
“Franchisee financing availability is still limited, but we are building the infrastructure to grow now to take advantage when the market improves,” Del Taco’s Murphy said.
The quirky, Mexican-flavored burger chain, which used to be part of Nashville-based Sagittarius Brands LLC, struck a $160 million loan and $39 million credit line led by San Francisco-based Wells Fargo & Co. and General Electric Co.’s GE Capital.
Unemployment
Persistently high unemployment remains a drag on the industry, according to Stephen Carley, chief executive at No. 7 Costa Mesa-based El Pollo Loco Inc.
“While we have benefited from people trading down from more expensive eating occasions, people who lost their jobs or who are looking at their budgets are opting to eat rice and beans at home,” he said. “Our business is correlated almost perfectly with unemployment.”
No. 4 Irvine-based In-N-Out Burgers Inc. is estimated to have seen 2009 sales rise 3% to $465 million with the opening of restaurants and the burger chain’s cult-like, recession-resistant following.
In-N-Out recently announced plans to expand into Texas in what is its biggest expansion yet.
The burger chain plans to open restaurants, as well as a processing and distribution center, near Dallas as part of its hub-and-spoke strategy.
Up to now, In-N-Out only has opened restaurants within 500 miles of its sole distribution center in Baldwin Park, where butchers mix a proprietary blend of beef from local suppliers.
Most chains have put expansion plans on hold with financing still tight and demand remaining soft.
El Pollo Loco now plans to open two restaurants this year, down from an earlier projection of about a dozen.
Others have been reevaluating their plans.
No. 3 Cypress-based Real Mex Restaurants Inc., which operates Acapulco, Chevys Fresh Mex, El Torito Grill and other chains, and No. 9 Irvine-based Claim Jumper Restaurants LLC have halted plans for new restaurants until after 2011.
Real Mex Restaurants saw 2009 revenue decline 9.6% to $500 million.
Claim Jumper is estimated to have seen lower 2009 sales of $200 million.
The chain is in the process of being bought after Los Angeles-based Leonard Green & Partners LP put Claim Jumper up for sale last December. The private equity firm bought a majority stake in Claim Jumper in 2005.
BJ’s, Yard House
No. 5 Huntington Beach-based BJ’s Restaurants Inc. and No. 11 Yard House USA Inc. bucked the trend by expanding.
BJ’s, a pizza and brewery chain, saw 2009 revenue rise 14% to $427 million, thanks to new restaurants. BJ’s employment in the county grew 5.8% to 1,005 workers.
The company plans to open 10 to 11 restaurants in 2010, taking advantage of lower rents. Much of BJ’s expansion is focused on California and Texas, where the company has seen its strongest business.
“A lot of our competitors have curtailed their new restaurant development programs significantly,” said Jerry Deitchle, chief executive at BJ’s.
No. 11 Yard House USA Inc., known for its specialty beer on tap, saw revenue grow 9% last year on the heels of restaurant openings.
The chain plans to add another five to six restaurants this year, including one near Fenway Park in Boston.
Without BJ’s and Yard House, revenue at the other 23 companies on the list was down nearly twice as much, or about 3%.
The chains have slowed job cuts from local offices and restaurants with a 0.7% decline to 14,542 OC workers. Last year at this time, chains were cutting local jobs at a 5% clip.
The biggest drop in employment came at El Pollo Loco. The chain shed 52 jobs, an 8.2% drop, for a total of 584 local workers.
The company, which runs 172 of its own restaurants and has 243 franchises, saw 2009 revenue from its restaurants and franchisee fees of $278 million, down 7% from a year earlier.
The list has seen a number of newcomers this year including No. 19 Irvine-based Z Pizza, No. 23 Costa Mesa-based Flame Broiler Inc. and No. 25 Habit Restaurant Inc.
The list, always a work in progress, should have included Z Pizza and Flame Broiler in the past.
Habit Restaurant moved its headquarters from Santa Barbara to Irvine after appointing longtime Orange County restaurant executive Russ Bendel as its chief executive. The chain has opened two restaurants in OC in the past year, adding 30 workers in 2009.
