Click to enlarge (infographic courtesy of Technomic)

CHICAGO — Bigger is not always better, at least not in the restaurant industry.

Though the 500 largest brands in the United States drove a 4% increase in cumulative sales growth to an estimated $274.4 billion in 2014, according to a new report from Technomic, Inc., such giants as McDonald’s and Subway reported overall sales declines for the year as focused-menu concepts and emerging fast-casual chains gained ground.

The 500 biggest chains improved their sales growth from a 3.4% increase to a collective $264.4 billion in sales in 2013. These brands also grew overall unit count by 2.2% in 2014 to more than 220,000 locations.

But four of the five leaders struggled during the year. Subway had an estimated sales decline of 2.2%, slipping down the ranking as Starbucks claimed Subway’s previously held No. 2 spot with an 8.2% increase in sales to $12.7 billion for the year. McDonald’s sales fell 1.1%, Wendy’s posted a 0.4% decrease, and Burger King logged a modest gain of 1.6% for the year.

Source: Technomic, Inc.

“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 has lost share in the limited-service sandwich segment, which grew 1.9% last year. Jimmy John’s Gourmet Sandwiches and Firehouse Subs led the segment with annual sales growth of 18% and 25%, respectively.

Despite McDonald’s and Wendy’s problems, the limited-service burger segment grew 1.3% among the top 500 chains, as brands in the past year promoted non-burger items like chicken nuggets and fast-casual burger brands maintained consistent unit and sales growth. Such chains as Wayback Burger, Smashburger and Shake Shack reported sales gains of more than 20%.

The mighty are falling while emerging brands and build-your-own concepts like Pieology Pizzeria are taking off.

In limited-service, which overall grew 4.2% to $201 billion in sales in 2014, fast-casual continued to dominate with a 13% surge in sales. Within fast-casual, brands with a customizable, build-your-own menu grew faster than concepts with standard, made-to-order items. Mexican and Asian/noodle categories showed significant growth with sales increases of about 10%.

Also driving gains in the limited-service sector is what Technomic called “QSR-plus” — brands that offer food perceived as fresher and higher quality but at more affordable price points than that of fast-casual restaurants. Such brands include Chick-fil-A, In-N-Out Burger, Culver’s, El Pollo Loco, Potbelly Sandwich Shop, Pita Pit and Freddy’s Frozen Custard & Steakburgers and registered a collective 9% sales gain in 2014.

Within the full-service segment, which grew 3.5% to annual sales of $74 billion for the year, steak chains sizzled with a 5.5% increase in sales, led by Texas Roadhouse, LongHorn Steakhouse and Fogo de Chao. The varied menu segment recorded a 4.7% uptick in sales, with help from such wing houses as Buffalo Wild Wings (up 17%), Twin Peaks (45%) and The Tilted Kilt (19%).