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Which Fast Casual Restaurant Leads in Retail Space Utilization?

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Oct. 8 2020, Updated 1:37 p.m. ET

Average revenue per square foot

A company’s average revenue per square foot gives us an idea of how efficiently the company has been utilizing its resources. In 2Q16, the eight fast casual restaurant companies under our review in this series generated an average revenue per square foot of $149.6.

The above chart depicts the average revenue per square foot generated by each of our eight companies. (Revenue per square foot is calculated by dividing a company’s restaurant revenue by its total square footage.)

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The leaders

With average revenue per square foot of $388.6, Shake Shack (SHAK) beat the other eight fast casual brands under review in terms of retail space utilization. Through menu innovations, SHAK was able to generate higher revenue per square foot even after expanding beyond Manhattan. Previously, it had been forecast that SHAK’s revenue per square foot could fall once it expanded beyond Manhattan, which has a high population density and offers high brand familiarity.

SHAK was followed by the Pollo Tropical brand of Fiesta Restaurant Group (FRGI), which saw revenue per square foot of $202.5 in 2Q16. Despite declines in its same-store sales growth, Chipotle Mexican Grill (CMG) generated revenue per square feet of $186.1, which is higher than the median value. Chipotle was followed by Panera Bread (PNRA), which saw revenue per square foot of $182.3, respectively.

The laggards

With average revenue per square foot of $102.4, Taco Cabana of Fiesta Restaurant Group (FRGI) generated the lowest average revenue per square foot among peers. Taco Cabana was followed by Potbelly (PBPB), Zoe’s Kitchen (ZOES), and Habit Grill (HABT), which saw revenues per square foot of $118.9, $131.6, and $137.6, respectively.

Noodles & Company (NDLS) generated a revenue per square foot of $149.6, which is equal to median value.

Remember, the lower average revenue per square foot indicates that some of these companies are under-utilizing their resources and need to improve their business model to increase sales.

Continue to the next part for a look at the EBIT (earnings before interest and tax) margins of our group of fast casual restaurants.

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