Aaron Noveshen has dedicated a considerable portion of his adult life to the food industry.  Once a chef at noted California restaurants L’Orangerie, Alain Rondelli and La Scene, Aaron later founded The Culinary Edge, a food and beverage consultancy dedicated to creating actionable business strategies that strengthen brands, extend reach and increase the profitability of its clients ranging from multi-unit domestic and international restaurant chains, to entrepreneurial startups, and consumer packaged goods.

This May, as part of the Education Sessions at NRA Show 2015, Aaron will travel to Chicago to present a session entitled “From Main St. to Wall St.: The Secrets Behind America's Great Growing Brands.”

A more timely topic would be hard to imagine.

As noted in a recent QSR Magazine article, the last few years have seen investors develop “an increased appetite for restaurant companies…fast-casual brands in particular.  The market is welcoming to limited-service brands—even smaller chains can make a go on Wall Street, especially those with plenty of potential for future growth.”  One needs to look no further than the recent, high-dollar IPOs for Potbelly Sandwich Shop, Noodles & Company and Shake Shack to understand how seriously the investment community now views certain restaurant concepts.

To whet our collective appetites, Aaron, along with colleague Rachel Kalt, have agreed to a sneak peek of his presentation, one that promises to shed light on the “special sauce” used by today’s fastest-growing restaurant brands to make them exciting to consumers and investors alike, drive their valuation and set them apart from the competition.

NRA:  What’s behind Wall Street’s increasing acceptance of restaurants as viable investments?

Aaron:  The retail industry overall is evolving.  Retail dollars are moving into the restaurant space right now because the retail shopping experience of brick and mortar is losing its appeal to consumers in today’s age of on-demand deliver-to-your-door services. Restaurants, with their immediacy of need, haven’t run into the same problem.  As a result, there are a lot of dollars going into the restaurant space, including big IPOs this year and last involving Zoe’s Kitchen, El Pollo Loco and Shack Shack.  And it’s not just IPOs.  The private equity world, companies like Catterton, are also putting money into cool, emerging, and differentiated brands, especially in the fast-casual space.

Rachel:  Another trend we’ve seen [from the investment community] is huge interest in the food-tech space.  A company like Sprig does an amazing job, from both a convenience and quality standpoint, at bringing farm-fresh food on-demand to consumers’ doors within 20 minutes of ordering. Sprig is in the process of raising significant capital to expand into other markets.  And then there’s the $120M raised for Juicero, a company that is poised to be the Keurig of fresh pressed juice.

NRA:  What makes a certain restaurant concept a Wall Street darling?

Aaron:  How [restaurant] brands connect with consumers is a big part of it.  The brands that are making waves connect with consumers in non-traditional ways:  around health, around people’s values, around what makes them feel good about themselves and the world. Businesses that can connect with consumers in a way that has the consumers saying, “Hey, I’m a part of this community” really have a leg up on competition.  That kind of connection really drives topline.

Rachel:  Restaurants aren’t the only ones defining the brand.  Individuals [tend to] define their own brand.  Where they dine, where they allocate their [food] dollars, are very intentional decisions that say much about their personal brand and their personal agenda.  So the decision to eat at a quick-serve restaurant as opposed to a fast-casual one may not be driven just by convenience and portability.  Rather, what may resonate with individuals at a baseline socio-cultural level are the types of ingredients used.  Or maybe it’s the community, philanthropic and food-policy initiatives a certain restaurant brand stands for.  Food has become democratized.  Techniques once relegated to the world of fine dining, places like French Laundry, for example, have been distilled to the point where they, along with certain ingredients, can in some fashion be found in fast casual.

Aaron:  Many people would like a taste of the fine-dining experience.  And the huge proliferation of democratized food allows for this access.  Maybe they can’t eat at Eleven Madison Park [in New York], but, with Danny Meyer building more and more Shake Shacks, everyone can be part of the Union Square Hospitality Group experience.  [And, consequently], become part of a community whose values and ideals are similar to their own.

NRA:  Recently we’ve seen McDonald’s struggle mightily, whereas a concept like Chipotle is going gangbusters.  Is this because one is perceived as healthier than the other?

Aaron:  Not necessarily.  People have always been concerned about their health, but they’re also excited about [things like] the environment, their communities and doing what’s right for the world around them.  They have a great sense of responsibility and self-accountability.  A brand like Chipotle not only understands this about their customers, but also has the same ideals.  And so they leverage this as a differentiator.

Rachel:  Even McDonald’s is introducing kale to their menu.  So while they’re not the frontrunner of trends, they are conscious of what is taking their consumers away and how they might recoup some of that market share.  Meanwhile, IHOP plans to add kale pancakes to its menu.  And Hooters will add kale-encrusted wings.  And Pizza Hut will introduce kale-stuffed crust….has kale jumped the proverbial shark?

Aaron:  That said, is there any added nutritional value to kale in a pizza crust?  In a case like that it’s really just [taking advantage] of a buzzword.  There has to be some purity and integrity to that kind of stuff or else it comes across [to consumers] as nothing more than marketing-speak that’s hollow and usually short-term.  On the other hand, something like Sriracha [the hot sauce made from chili peppers, distilled vinegar, garlic, sugar and salt] has taken off and been very successful in many ways across all segments.  Not only is it an ingredient in fine dining, it can also be used as a flavor component in a chicken sandwich at Subway.  There’s a certain universal acceptance to this product, which really just tastes delicious and is extremely versatile.  So [unlike kale], Sriracha seems to cross boundaries in a more meaningfully way.

 

Want to learn more?  Please join Aaron at his session on Sunday, May 17, at 11:30 a.m., at NRA Show 2015.