We chatted with Sam Oches, editor of QSR magazine, to learn more about the future of fast casual.
Want to get the full scoop on where fast casual is going? Check out Oches’ NRA Show 2016 education session, Fast Casual 2.0: The Next Great Limited Service Wave, on Monday, May 23.
How sustainable is the current growth in the fast casual industry?
It’s very sustainable. Across the board, you’re seeing lines between categories blur. One of the things about fast casual is that we’re really looking at restaurants who are blurring the lines between fast casual and casual. We’re seeing proliferation of brands who are taking fast casual to the next level. That includes more chef-driven menus, less customization, and creating more of an experience. These are restaurants that invites you to sit down, they might have alcohol, and the dinner daypart is more important. Across the board, you’re seeing lines between categories blur. The fast casual 2.0 movement draws elements from casual dining into the new space, fine fast or fine casual. We see a lot of opportunity for growth because it could steal a lot of business from casual dining by creating gathering spots for consumers to get cheap, accessible tasty food in a hip branded environment.
Consumers don’t know the term fast casual. Customers don’t say, “Oh, I want fast casual for lunch.” They say “I want a $10 lunch.” or “I don’t want to sit down.” so the opportunity is for restaurants to take advantage of customers who want to sit down, but don’t want to spend a lot of money. Fast lunch, but not fast food quality. That’s where we’ll see a lot of the growth.
Which growth strategies do you see rising to the top?
For once, the growth opportunities aren’t rooted in general franchises. That’s a big change. Without franchising, you can more carefully control your brand so it doesn’t get away from you. It slows growth potential and you can’t really become a national brand sometimes. You have to be okay with just being a regional brand. A lot of these guys are okay with that. They see it as quality first and putting the consumers’ needs first. They aren’t putting growth in profits first. That’s paying dividends. You’re creating an experience at a grassroots level can build momentum.
Shake Shack is, of course, a prime example. Shake Shack developed a mystique carried by buzz from the loyalists that helped build its cult status. They’re an interesting model. A lot of other 2.0 brands are taking notes from what they’re doing, beyond menu and design and food. There’s an “otherness” that’s hard to describe. It’s a lifestyle brand. A brand that fits into your lifestyle more than just a meal. It’s pop culture, it’s something you talk about with your friends. A lot of these 2.0 brands are striving to do that. It does the marketing for you. You don’t have to buy TV; the grassroots momentum will help pave the way for your growth in new markets. You can’t even manufacture that. You have to build it into a lot of other things. Companies who want to emulate that have to be committed to premium ingredients, restaurant design and branding, the music, their employees--all of these things have to come together perfectly and nail it. It’s lightning in a bottle. When you don’t franchise, you can keep control of those things much easier.
This new crop that’s coming up, you get the vibe that they want ot learn from each other and want to enhance the customer experience. Mendocino Farms wants to be the third space, the gathering place for families. They don’t care if there bags of food from other places on their tables, just having a whole family gather there is a win because they’ve created a place where everyone can gather. Sometimes they will work with competitors to create a great experience in the neighborhood. It’s customer-forward and it fits into lifestyles. These guys all know each other and learn from each other and work with each other. It’s a communal thing. They want to do this for the customers and not just their own profits.
We have to ask… what will be the effect from Chipotle's recent issues?
Here’s a brand that up until about 6 months ago was the gold standard for the fast casual industry and for a while, the popular terms was “the Chipotle of…” because people were replicating it with so many different types of food. Not to point fingers, but to watch a brand fly so high and then come so low has been shocking. The problem is that they are going to be a victim of their own success. They inspired a movement and now have all of these competitors in the fast casual space who are going to benefit from the influx of Chipotle customers who don’t want to eat there anymore. There are so many options out there now, so it’s a really interesting situation.
Starting from a branding point of view, I’ve been curious if people who compared to Chipotle are backing away from that. From a sourcing point of view, Chipotle is going to be a textbook example of what brands should and shouldn’t do. Everybody is learning as they go through this. For the longest time they were popularizing fresh foods while we just assumed they could scale, but we’ve hit the ceiling. Brands who built their businesses the same way are surely going over their quality assurance practices to make sure nothing similar will happen to them. I don’t think it’ll change the local food movements or stop other brands from committing to those practices, but it will make them consider the impact of rapid growth.
What do you think will overtake that, the next big thing?
Sweet Green will be the next big thing. They’ll be the one everyone looks to to see how they grow and whether or not they can capitalize on the momentum. They started in DC and now they’re out in the west coast. They’ll be a model of the future for another wave in health-forward fresh food brand with customizable and signature salads. The salad space and sandwiches are due for a renaissance. Mendocino Farms has upscale sandwiches and is leading the fast casual space. Ethnic food is one of the categories that has really blown up. Italian, Indian, Mediterranean--it’s really unbound by the possibilities for combinations and different fusions. Fast casual now lets you put any type of cuisine in front of consumers.
How will fast casual push the growth of experimentation with global flavors?
Take something like Indian food. It’s a little scary for most American consumers because of the spice levels. There are so many flavors and spices, but the American palate isn’t set up to appreciate those things. If you take Indian food and accommodate the American approach to a meal with those same flavors, there’s an education that happens. You welcome the customers in and say these flavors and spices may be unfamiliar, but here’s a way to try them that in a way you’ll like. Some places are doing Indian burritos, so now what you put in your burrito, a familiar food, is opening the door to new cuisine and flavors. Various ethnic cuisines could stand to have that moment so the authentic places can also make inroads. Cities are going to have a more globalized audience, but I think there’s so much opportunity to open up in the smaller markets that rely on major fast food brands. You can teach them about the flavors and help them feel comfortable, but you just need to get it in front of them in a way that’s familiar.