RESTAURANTS: HIGH WIRE ACT DRAMA UNDERWAY
Special Guest Segment: Lauren Fernandez, Esq., CEO & Founder, Full Course, Restaurant Development and Investment Firm, Atlanta GA.
For those of us in restaurants a long time, we love it because it is ever changing, ever churning, fascinating to watch. The backdrop of new up and coming brands sustained strength of some brands and clear signs of struggle and decline at other brands.
Sales Pattern going into August.
Going into August, quick service restaurant sales continue to remain around zero year to year, while casual dining remains in the 5 to 6% range. This pattern hasn’t moved much from early March.[1]
Q2 Earnings: Not so good
Such is true in quarterly earnings to date. Per my favorite restaurant analyst (of several) that is an immediate must read, restaurant stocks have lost sentiment, particularly with the BLS jobs misses and the Chipotle (CMG) “surprise” SSS and shortfalls in August. As importantly, sales and earnings problems are very clear.
Chipotle and Starbucks are strong brands but in a difficult performance spot right now. SBUX results continue with both same store sales (SSS) and EBITDA misses at Starbucks (SBUX)—with a 10% EBITDA miss and a more minor 1% miss at YUM. [US KFC and Pizza Hut continue to run negative]. The negative Chipotle (CMG) report was market sentiment moving.
In all honesty, the CMG miss should not have been a surprise.
Fortunately, we have more casual diners left to report. Both Cheesecake and First Watch have raised guidance, and IMO Darden will look good, later. Overall, there has been notable sales trend improvement in casual dining over the last several quarters.[2] At the same time, US fast food SSS has flattened, typically with negative traffic (example McDonald US). [3]
McDonald’s US Problem
McDonald’s CEO Chris was hoping for ‘a big national single effort price point’ and hoped for lower menu board prices. [4] I worry if that means they learned little from the last year. However, a wave of special events and products has emerged of late, so I hope for better results.
There is a way to solve “combo meal price shock” in the burger space, which at least 2 brands mentioned as problems. For example, the average up charge for french fries and a soda in the McDonald’s Big Mac Combo is $5.19 on the high end and $4.14 on the low end, versus the base sandwich. Wow! Just for French fries and a soda. There is a fix to this that won’t kill margins. Call me.
International sales trends at McDonald’s and several other global brands were more positive. That should tell us something about numbers of restaurants per addressable market guest ratio, no doubt lower in some international markets.
Investor surprises that should not have been.
Thinking broadly, either positive momentum or negative at the brands organizationally takes time to build and shift. Remember, these are people organizations. For example, that CAVA and Dutch Bros are trending strongly are for solid reasons. Conversely, weaker brands may show negative trends that are unlikely to reverse right away.
Chipotle, Sweet Green, Krispy Kreme and Jack in the Box should not be surprises. [5]
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Guest Segment:
I’ve met up with Lauren Fernendez, a former franchise brand general counsel; owner/developer of Chicken Salad Chick locations, who now has steered her talents into founding restaurant investment and development firm, Full Course, which incubates and accelerates fast casual brands. I have found her perspective to be highly meaningful. In this segment, Lauren writes about the 2025 realities in restaurant development:
Growth at All Costs Is Dead: What Smart Expansion Looks Like in 2025 & Beyond
It used to be a badge of honor: how many units you opened last year, how many markets you’re entering next quarter, the strength of the franchise deal pipeline. “Unit envy” was the quiet scoreboard driving private equity, boardrooms, and franchise expos alike.
But in 2025? That playbook is getting rewritten.
I’ve spent years working alongside founders, investors, and operators across the country. Today, I advise leadership teams and boards as they navigate this evolving landscape. What I see more clearly than ever is this: The most successful leaders aren’t chasing growth. They’re designing it smarter for today’s environment and for future returns.
The Illusion of Scale
Let’s start with the uncomfortable truth. Many restaurant brands can’t make money at scale. They’d just lose more money, faster. In our industry, scale does not always equal $$$.
The Restaurant Finance Monitor said it best: take out top performers like Chipotle or Wingstop, and industry-wide returns are often negative. Store counts climb while margins shrink, debt grows, and real estate is sold off just to fund more growth. Operators burn through capital chasing TAM projections that were never grounded in reality.
In today’s environment, with higher interest rates, softer consumer demand, and more pressure on every P&L line, the old model of “growth for growth’s sake” is no longer sustainable.
From Viability to Velocity
So, what does smart growth look like now?
It starts with performance per unit. The strongest brands in 2025 are laser-focused on store-level EBITDA, cash-on-cash returns, and capital efficiency. Not vanity metrics like “unit count.” They ask:
Is this location accretive to the brand?
Will it outperform existing units?
Do we have the right team in place before we scale the next one?
This is not a call for caution. It’s a call for strategic restraint. You earn the right to scale by proving the model, not pitching the multiple at exit against your franchise system royalties.
Lessons from the Winners
The most resilient brands right now are those that invested in technology, systems, talent, and a future-proof digital footprint. Their advantage isn’t just in real estate. It’s in how they’ve positioned themselves to win across both in-store and off-premise channels.
Look at concepts like CAVA, Chipotle, or Salad and Go. These are brands that:
Use AI and site selection tools to de-risk development.
Build operations that scale culture and consistency, not just cost controls!
Invest early in digital ordering, CRM, and loyalty to capture off-premise demand, especially from younger, value-conscious consumers.
With Gen Z and Millennials driving digital and off-premise growth, this omnichannel readiness isn’t just a tech strategy. It’s a survival strategy.
As an advisor, I often help founders prioritize the right investments at the right stage. Those who double down on digital early, consistently outperform peers who focus solely on physical expansion. They are not going beyond digital for ordering, leveraging customer information for business intelligence such as guest demographics, marketing efficiency, and retention.
What Boards Should Be Asking
If you're sitting on a board or in an investment committee, the goal isn’t just to greenlight expansion. It’s to interrogate the assumptions behind it:
What’s the breakeven timeline on the last 5 units?
What’s the contribution margin on digital vs in-store channels?
Where’s the operational drag, and how are we building against it?
Growth capital today is more expensive and more selective. The smart money rewards plan that protects EBITDA, not just add locations.
Where We Go From Here
The restaurant industry is full of grit and innovation. But grit alone won’t protect returns.
The operators and investors who win in 2025 and beyond will be the ones who choose where not to grow. Those who understand that a smaller, more profitable footprint will unlock greater long-term value than expansion built on shaky assumptions.
The market doesn’t reward speed.
It rewards staying power.
If you're rethinking your growth strategy or evaluating unit economics across your portfolio, I’d welcome the conversation. As an advisor, this is the work I love most. Helping great brands scale with intention, not just ambition.
Lauren Fernandez, founder and CEO Full Course
(678) 389-4336
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Next Month: Starbucks and Franchising in China
[1] A outside proprietary blend of sales and traffic trackers for the industry, updated weekly.
[2] See Applebee’s Q2, same store sales increase of 4.9%, driven by traffic, for the first time in years. Restaurant Dive, August 7, 2025, Aneurin Canham-Cline.
[3] McDonalds Q2 Earnings Call.
[4] McDonalds Q2 Earnings call transcript, August 5, 2025.
[5] Reasons cited by then JACK management is that they hoped to make the combination of the two “more franchise centric—higher percentage of franchised stores.: No doubt to solve some perceived investor sentiment. However, if franchisees don’t see interest or can’t make it work then the effort is pointless.
