The 500 largest restaurant chains in the United States accelerated their cumulative sales growth in 2014 to a 4% increase, totaling an estimated $274.4 billion. But some of the biggest brands among them, namely Subway and McDonald's, lost ground to focused-menu competitors and emerging fast-casual chains and reported overall sales decreases for the year.

According to data released today by Technomic Inc. in an advance brief of its annual report on the largest U.S. restaurant companies, the nation's 500 biggest chains improved their sales growth from a 3.4 percent increase in 2013, when they collectively reported $264.4 billion in sales. The Top 500 Chain Restaurant Report also found that the industry's 500 biggest brands grew their overall unit count 2.2 percent in 2014, to more than 220,000 locations. 

However, four of the five largest brands in overall sales—McDonald's, Subway, Burger King and Wendy's—struggled in 2014, including estimated declines of 3.3 percent for Subway and 1.1 percent for McDonald's. Taken together with Starbucks, which leveraged an 8.2 percent increase in sales to $12.7 billion and leapt over Subway into the No. 2 ranking behind McDonald's, the top five brands eked out just a 0.3 percent increase in annual sales.

"Brands focused on being the best, not the biggest, were the real winners in this year's Top 500," said Darren Tristano, Executive Vice President of Technomic. "In many cases throughout fast casual and specialized segments within quick service and casual dining, narrowly focused menus and straightforward models for service and pricing have let brands put forward a value proposition and an image of high quality that definitely appeal to consumers. They are seizing market share, and big names like McDonald's and Subway will continue to lose share if their loss of focus continues to erode brand standards."

Subway's sales decline reflected a 3.1 percent decrease in its estimated average unit volume offsetting an estimated 2.9 percent unit count gain to 27,205 U.S. locations. Even as the chain continues to add franchise locations, it is losing share within the limited-service sandwich segment, which grew 1.9 percent in 2014. Jimmy John's Gourmet Sandwiches and Firehouse Subs appear to be benefiting most within the sector, with unit growth rates in the high teens and annual sales growth of 17.9 percent for Jimmy John's and 24.7 percent for Firehouse.

The limited-service burger segment achieved 2014 sales growth of 1.3 percent among Top 500 brands, despite McDonald's struggles, a slight 0.4 percent sales decrease for Wendy's, and sales growth of 1.6 percent for Burger King, which retook its place in 2014 as the second-largest burger brand from Wendy's. Those brands have tried to fight stagnation in the past year by promoting non-burger items, especially chicken nuggets, while competition intensified from outside the segment with Taco Bell, Dunkin' Donuts and Starbucks making gains in the breakfast and snack dayparts. Fast-casual burger brands with smaller menus showed consistent unit and sales growth, including sales gains of more than 20 percent for chains like Wayback Burgers, Smashburger and Shake Shack.

Limited service: 'Built' to succeed

Limited service overall registered a 4.2 percent gain in sales in 2014, and fast casual dominated that expansion with a 12.8 percent sales surge. Within fast casual, brands with a customizable menu that allows guests to build their own entrées grew even faster than chains with standard made-to-order menu items.

Fast-casual success stories also powered growth in several other limited-service sectors. The Mexican and Asian/noodle categories led the way with sales gains of 10.4 percent and 10.2 percent, respectively.

A burgeoning "QSR-plus" sector, in which chains are finding a way to offer foods higher in perceived freshness and quality but without hitting fast-casual price points, also is driving growth. A group of QSR-plus brands that included Chick-fil-A, In-N-Out Burger, Culver's, El Pollo Loco, Potbelly Sandwich Shop, Pita Pit and Freddy's Frozen Custard & Steakburgers logged a collective 9.2 percent sales gain in 2014.

Full service: Wing houses take flight

The full-service segment recorded a 3.5 percent increase in annual sales in 2014. The steak category led the way with a 5.5 percent gain in sales, paced by chains like Texas Roadhouse, LongHorn Steakhouse and Fogo de Chao.

The "varied menu" segment also showed healthy growth, with a 4.7 percent uptick in annual sales. Within this all-encompassing category, wing houses fared particularly well, from mainstream casual-dining chains Buffalo Wild Wings (16.7 percent) to brands focused on entertaining a mostly male clientele, like Twin Peaks (44.7 percent) and The Tilted Kilt (19.1 percent).

The Technomic Top 500 Chain Restaurant Report provides Technomic's exclusive one-year sales forecast by menu category, an update on franchise and international activity, an expanded Outlook & Opportunities section, new Key Themes, and much more.