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Comp: Average Revenue per Square Foot of Fast Casual Restaurants

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Average revenue per square foot

Same-store sales growth also drives average revenue per square foot. Average revenue per square foot gives us insight into how efficiently a company is able to generate sales. Naturally, the higher the number, the better. The median revenue per square foot for the eight fast casual restaurants we are comparing is $143.

The above chart shows average revenue per square foot for fast casual restaurants in 2Q15, which was calculated by taking total company-operated revenue during 2Q15 over total company-operated restaurants’ square feet during the quarter.

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The leaders

Shake Shack (SHAK) and Habit (HABT) both have above median revenue per square foot at $387 and $202, respectively. Chipotle (CMG) and Pollo Tropical (FRGI) too have a high revenue per square foot. The Consumer Discretionary Select Sector SPDR (XLY) has 1% of its holdings in Chipotle and 3% of its holdings in Starbucks (SBUX).

Shake Shack’s primary operations in densely populated Manhattan account for its high revenue per square foot. But as the company opens newer restaurants outside Manhattan, its average revenue per square foot should fall. A decline in average revenue per square foot negatively impacts revenue growth.

Chipotle’s (CMG) high average revenue per square foot of $250 is positive, but this could also be a risk. How long Chipotle can maintain its high same-store sales growth is a question that remains to be seen. Moreover, the company continues to face risk due to its food policy, which calls for meat and produce from non-mainstream sources.

The laggards

While Panera (PNRA) is below the median at $140, Noodles & Co. (NDLS) had the lowest average revenue per square foot of $105 and Potbelly (PBPB) had average revenue per square foot of $119. Low average revenue per square foot can result from several factors, including but not limited to a weak or unclear business model that results in low retail space utilization.

On the other hand, companies with low revenue per square foot may turn out to be good turnaround stories.

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