Q: How do you define Fast-Casual Restaurants (FCR)?
A: Fast-casual is not very well defined in the marketplace. We have a general view, though, and it includes establishments with a limited-service or self-service format, no drive-through, food made-to-order at the counter, often brought to the table, fresh (or perceived fresh) ingredients, innovative food suited to sophisticated tastes, upscale interiors and price points between $7 to $11 dollars per person.
Q: What role does produce play, and where are the opportunities?
A: The way fast-casual has succeeded is with freshness, and produce is a big part of that. Consumers from our research have reacted that fresh is better for you. Produce provides freshness, variety and enhanced flavors; infused in burgers, novel sandwiches, creative toppings on pizzas, and more center-of-the-plate with salads. Vegetarian restaurants are starting to grow in the fast-casual space, as are all chains classified as healthy.
Look for offerings lower in sodium; new gluten-free ingredients, multigrain breads and baked goods; more vegan/vegetarian options; and local produce for use in salads and sandwiches. Additionally, now that laws in some states are requiring restaurants to post calorie counts, more menus will tout lighter, lower-calorie and lower-fat versions of signature entrées.
Local has usurped organic, which was popular for years, and is a trendy term in the FCR arena. Everyone wants to support the local concept, and it’s crazy how strong it’s become. Panera Bread/Saint Louis Bread Co., which doesn’t specialize in salads, is using strawberries right now in its salads, embracing the strategy of rotating seasonal produce into its offerings. Pret a Manger has driven European-style grab & go that is made fresh on the premises.
Q: How has the economy impacted this segment in the context of restaurants overall?
A: The big news is that in spite of the economy and larger fast food chains, fast casual has doubled its share size and continues to grow when a number of chains are struggling and having trouble finding their identity. Consumers want better, more healthful food, so they’re trading up to fast-casual while trading down from full-service. And the longer it takes to get the economy moving, we’re going to continue to eat at fast-casual.
Restaurants like Panera and Chipotle have skyrocketed in both sales and units; $350,000 can open up a Five Guys Burgers and Fries, so it’s easily franchised and increasingly stealing shares from other restaurants. Still, fast-casual only represents 5 percent of the total industry so it has plenty of room to grow. Limited service is relatively flat; full-service has declined; and yet fast-casual is up 4.5 percent.
Consumers perceive fast-casual as a good value. They can customize toppings on their burgers, pizza, or burritos, and choose fresh ingredients in their sandwiches. Quality of toppings is visible, and they’re interacting with the person making their food. Consumers interpret fresh as better and more flavorful, and in the fast-casual format, they can see it is not processed or frozen.
Q: What food categories in fast casual are most popular?
A: Across the board, the biggest growth came from burgers, really driven by Five Guys Burgers and Fries. They’ve become specialists in made-fresh and made-to-order burgers and fries. Traditional fast-food lost focus on burgers. Culvers is popular for its frozen custard and butter burgers, which are cooked to order. McDonald’s won’t ever get to that point. As far as ethnic trends, we’ve seen a much more traditional approach, and most ethnic chains are Americanized versions.
Q: What advice do you have for produce executives wanting to capitalize on the fast-casual boom?
A: One challenge is how to maintain and promote fresh produce during colder seasons, especially up north, when there is no local produce. Five Guys does it by telling consumers where the potatoes come from in each restaurant, featuring the location in friendly signage, and relaying a bond with suppliers. We’re all willing to pay a little more if we’re comfortable the product is safe and we know its origins.
Sweet potato fries are a trend, but ultimately, creating demand means limiting certain product and not overproducing. Otherwise, you risk the Krispy Kreme affect. When the consumers could only get Krispy Kreme donuts in a few places, they were perceived as special and unique, but when they appeared everywhere people stopped wanting them.
Q: What are your future predictions?
A: Over the next two to three years fast-casual will continue grabbing shares from full service, growing and outperforming the industry as a whole. We’re seeing shifts to that segment from fast food; McDonald’s improved price points and atmosphere. In full service, chains are putting in drive-through windows and creating fast-casual concepts. Those that aren’t fast-casual want to be.