QSR Texas Insights
The quick-service restaurant (QSR) sector in Texas showed remarkable strength during the first half of 2024, despite ongoing economic hurdles. Investment sales and leasing activity remained strong across major metropolitan areas, with several chains expanding their presence in the Lone Star State.
According to CoStar data, the Texas QSR market saw 192 transactions in the first six months of 2024, totaling $70.2 million in sales volume. The average cap rate stood at 5.8%, while the average sale price per square foot reached $742. Rent growth, however, showed signs of slowing. After a strong first quarter with 1.61% growth, the second quarter experienced a more modest 0.38% increase. Vacancy rates in the Texas QSR sector improved significantly, dropping from 8.5% in Q1 to 6.4% in Q2. This decline suggests increased demand for QSR properties, particularly in high-traffic locations. Sale prices per square foot fluctuated, with Q1 averaging $837 and Q2 dropping to $688.
Major Metros Lead the Way
Houston, Dallas-Fort Worth (DFW), and Central Texas emerged as centers for QSR activity. These metropolitan areas benefited from population growth and economic diversification, attracting both established chains and emerging concepts.
In Houston, Raising Cane’s continued its aggressive expansion, capitalizing on the city’s diverse demographics and strong suburban growth. The chain’s focus on a simple menu and efficient operations resonated with time-pressed consumers seeking quality fast food options.
DFW saw increased activity from Taco Bell and KFC, both part of Yum! Brands. These established players targeted high-visibility locations in rapidly growing suburbs, leveraging the area’s strong job market and population influx.
Central Texas, anchored by Austin and San Antonio, attracted significant interest from regional players like Whataburger and newcomers such as Black Rock Coffee. The latter’s expansion in the area highlights the growing demand for specialty coffee concepts in the QSR space.
Top Growing and Most Active Tenants
Several QSR chains stood out for their growth and activity in Texas during the first half of 2024. Burger King, under its new ownership, accelerated its remodeling program and targeted new locations in underserved markets. This strategy aimed to reinvigorate the brand and capture market share in competitive urban areas.
Arby’s continued its Texas expansion, focusing on drive-thru-only formats in suburban locations. This approach aligned with shifting consumer preferences for convenience and contactless service options.
Popeyes maintained its momentum from previous years, leveraging its popular chicken sandwich to fuel growth across the state. The chain targeted both urban and suburban locations, with a particular focus on expanding its presence in smaller Texas cities.
Wendy’s pursued an aggressive growth strategy, emphasizing its breakfast menu and online ordering capabilities. The chain’s expansion focused on locations with strong morning traffic patterns, capitalizing on the growing breakfast segment in the QSR market.
Coffee and beverage-aligned QSR chains have made significant inroads in the Texas market. Notably amongst the group, Black Rock Coffee Bar and 7 Brew Coffee are seeing continued gains in their unit counts across the state. Black Rock Coffee Bar is opening its 34th unit in the state since entering the market in 2020. Meanwhile, 7 Brew¬—founded in 2017—has brough their unit count in Texas up to 45 operating sites and are committed to developing more across the state. This highlights a growing overlap between traditional coffee concepts and the fast-food business model as consumers increasingly seek premium beverage options alongside quick service offerings.
Consumer Behavior and Market Trends
Placer.ai data provided insights into consumer behavior and market share among QSR chains in Texas. The state recorded an impressive 1.5 billion total visits to QSR establishments in the first half of 2024, with an average of 11.6 million visits per chain. The average visit duration of 16 minutes highlighted the continued emphasis on speed and convenience in the QSR sector.
McDonald’s dominated the market with 344 million visits, followed by Texas-based Whataburger with 168 million visits. SONIC Drive-In and Chick-fil-A rounded out the top four, with 128 million and 122 million visits respectively. These figures highlight the enduring popularity of established brands and the strong performance of regional players in the Texas market.
The strong showing of drive-in and drive-thru-focused concepts like SONIC and Chick-fil-A emphasizes the ongoing importance of convenience and speed in the QSR sector. Accelerated by the pandemic, this trend has continued to shape consumer preferences and influence expansion strategies for QSR chains.
Economic Factors and QSR Market Outlook
The performance of the QSR sector in Texas during the first half of 2024 must be viewed in the context of broader economic trends. Inflation, while moderating, continued to impact consumer spending patterns. The Federal Reserve’s interest rate policies added another layer of difficulty to the investment environment, influencing cap rates and transaction volumes.
Despite these challenges, the Texas QSR market demonstrated remarkable resilience. The state’s strong job market, continued population growth, and business-friendly environment provided a solid foundation for the sector’s performance.
Looking ahead, several factors will likely influence the Texas QSR market in the latter half of 2024 and beyond. The ongoing changes in consumer preferences, particularly regarding health-conscious options and online ordering capabilities, will shape expansion strategies for QSR chains.
