Independent vs. Chain Restaurants

The Battle for Share of Stomach

Index of Casual Dining Restaurant Trips for the past two years Independents show stronger year over year growth
  • Independent
  • Chain

Casual Dining

Early 2017 summer restaurant traffic shows year-over-year trip growth of 8.1% for locals and 1.6% for national chains. During the 2016 holiday shopping season, local restaurant trips grew 8.3% year-over-year, while national chains witnessed a 2.4% year-over-year decline.

Methodology: Data based on number of restaurant transactions across Cardlytics network. The network attributes transactions to 4,192 individually named restaurants and cuisine-based aggregates. Evaluation Period: Weekly snapshots of Number of Trips from June 2015 to May 2017 indexed to 100 to account for seasonality. Segments evaluated: casual dining. Cardlytics sees $1.5 trillion in spend and 20+ billion transactions annually.

With the post-recession increase of restaurant spending, there is a battle for diners. From offering new ways to order, e.g. table kiosks, to adding menu items that align with new popular eating times, e.g. brunch and late night, restaurant owners are constantly thinking of fresh ways to attract new stomachs. Historically – a decade’s long trend – chain restaurants have been the victor of the spoils. However, as the battle heats up, an underdog winner is emerging from the smoke: independent restaurants.

With a view into $1.5 trillion in annual spend across credit, debit, ACH, and bill pay, we thought it would be interesting to have a look at what’s happening in this space – from the perspective of how consumers are actually spending their money. We found that independents are seeing fast yearover-year growth in key seasons like summer and holiday, while chains are experiencing substantially slower growth, or even declines, during the same seasons.

Some interesting purchase insights to note:
  • In early summer 2017, restaurant traffic for independent restaurants shows year-over-year trip growth of 8.1 percent and only 1.6 percent for national chains.
  • During the 2016 holiday shopping season, independent restaurant trips grew 8.3 percent year-over-year, while national chains witnessed a 2.4 percent yearover-year decline.

The reversal in trend of independents catching up with chains is best exemplified by looking at the trip index over two years. During the holiday season, the scales are tipping in favor of Independents as the index gap narrowed in 2016 reflecting a YOY surge in independent trips and decline in chain trips. See graph above.

Why is independent winning? Here are three reasons that could be causing diners to go independent to satisfy their appetites.

The Ever Sought Review

In the age of the internet, word-of-mouth marketing is an extremely powerful tool for creating brand awareness. Be it social media, a blog, or a review site, consumers now have more tools than ever to help restaurateurs spread their brand. But, chains usually get the short end of the stick of this marketing tool. People are generally more willing to review the “darling, hole-in-the-wall” they discovered than the chain restaurant that everyone knows about. Consumers like feeling like they’ve uncovered a secret. And, furthermore, they like to spread that secret. They are less willing to take the time to write a review about a ubiquitous brand.

The Demand for Locally Sourced

In recent years, restaurant consumers have become increasingly conscious about the food they consume. From locally sourced, to farm-to-table, consumers want to feel good about what they’re eating, AND, they want it at a low price. This position is more easily winnable by independents, who can buy local and serve farm-to-table because they are local. Additionally, for consumers, the meal they’re being served at an independent restaurant feels more homemade, with more attention paid to it. And, in some cases, it is. With independents, owners of the establishments are able to be more hands-on, overseeing every meal that is served. With chains, the owner has to rely on each location to serve as a proper brand ambassador, which often means commercialized food processes

Precise Target Marketing

Chain restaurants, with big marketing budgets, tend to opt for large scale advertising that is broader, trying to reach everyone. Independent restaurants have to be more scrupulous with their smaller marketing funds, opting for approaches that are more targeted and precise, like using purchase intelligence to reach consumers that are most likely to dine with that brand, based on their actual purchase behavior.

There are plenty of articles that offer independent restaurants tips on how to compete with chains. However, based on the insights we see from our view into consumer purchases, we think it might be time chains start adapting tips from independents’ targeted marketing playbooks.