I N D U S T RY C R E AT I O N
R E P O RT :
Fast Casual Food Industry
By:Matthew Sonnenfeldt, Halsey
Merrit, Sarah Cummings, John
Duke, Pamela Myers
TA B L E O F C O N T E N T S
Definition 3
History 5
Rules of the game 6
Structure 8
Competition 9
Attractiveness 10
Appendices 12
3
DEFINITION
In this new era of technological advancement, everything seems to be
instantaneous. You can send an email from one end of the world to the other and it
will be received in a matter of seconds. People love fast and it’s no different in the
food industry. In this fast-paced economy, consumers have less and less time to
enjoy the, “sit down,” dining experience, but still want the quality. Fast casual
dining allows you to have your cake, and eat it too.
Fast casual is a mix between fast food and a sit-down casual restaurant with a
refined dining environment and modern, elegant decor; Offering better quality food
than a fast food chain, and faster service than a sit-down casual restaurant. Along
with better food quality than fast food, fast casual restaurants often have healthier
menu options than fast food, combined with prices ranging from $8-$15 ( Sena,
2012, para. 5) ; making it more economically friendly than fine dining
Matt Sena: Co-founder FieldLens
The Facts
•
Sales reached 30 billion in 2010. A 30% increase from 2006 (Sena, 2012, para. 6)
•
In 2008-during a time of economic downfall- Chipotle and Wingstop 20.7% and
17.8% respectively. McDonalds only grew 4.4%. Burger King on grew 6.6% (Sena,
2012. para. 6)
•
There were 600 fast casual concept in 2009-leading the restaurant industry (Sean,
2012, para. 6)
4
TRENDS
•
“There were 4,442 more restaurants in the U.S. in fall 2012 than there
were in fall 2011, according to a recent U.S. restaurant census
conducted by The NPD Group. The total number of U.S. restaurants is
now 616,008, a 0.7 percent increase over last year (pizzamarketplace,
2013, para. 1)
•
Average lunch prices dropped from $9,06 in 2010 to $8.12 (Maze,
2012).
•
Ever since the Economy collapsed in 2008, trends show that people are
more concerned with their money and are flocking to healthier, more
inexpensive restaurant options. This is shown in the 4.5% increase in
sales during the economic crisis (Technomic). Sales are strongest
during lunchtime according to Matt Sena of FieldLens.
•
Although, on paper the fast food is controls the majority of the markets
share, 30% of people said that they did not eat at fast casual
restaurants solely from lack of availability. "Growth within the fastcasual segment reveals positive consumer preferences for the service
format, concept and menu positioning, and price points." says Darren
Tristano, EVP at Technomic. "But competition is still fierce and diningout dollars are still minimal. Fast-casual operators will have to continue
being creative with value-oriented menu offerings, uniqueness in terms
of flavor, preparation and quality, and new ways to bolster the bottom
line. (BBM, Tristano, 2010),.”
5
HISTORY
•
•
•
•
Shifts in consumer demand for more having good food quickly
and “on the go” have made “fast casual” style restaurants grow
faster and faster from the 1990’s to their all time high today.
With more and more people buying pre-cooked meals and using
drive-thru, there has been a large shift in what consumers want
from a restaurant.
The first pioneers of this type of industry were restaurants such
as Fudruckers, Taco Cabana, and Au Bon Pain. From there,
companies such as Boston Market grew up until today, the
leaders of this type of industry are Panera Bread, Five Guys,
and Chipotle.
This is still a very very new type of industry as it has only been
around for roughly 20 years.
recent poll from Consumer Edge Insight found that of 3,100
U.S. consumers visiting restaurants at least once per month,
those choosing fast casual restaurants more often, did so
because they were less expensive (37 percent) and offer better
value (31 percent), but also because they are seen as "more
convenient" than other restaurants (33 percent). Many people
visiting fast casual restaurants cited their better-tasting food (30
percent), greater variety of menu options (27 percent), healthier
food (26 percent) and better atmosphere (24 percent).
6
RULES OF THE GAME
The fast food industry has long been a convenient, easy, and fast way for people to grab
food on the go or sit down and eat it. However, fast casual food redefines the lines and
standards expected of these restaurants. This evolution of fast food started with the
growing popularity of sophisticated food culture, coming from exposure to things like
the Food Channel and food blogs (Jargon).
Fast food restaurants have been criticized for years for using pre-packaged, frozen, or
other products made in advance (Jargon). The attempt to advance the freshness and
perception of their food has made way to the fast casual industry, which demands
freshness and high quality ingredients (Jargon).
Leaders in the industry, like Panera Bread and Chipotle, have adopted a simple logo, a
niche menu, and fresh options for every diet. Such standards are expected in the
industry in order for the restaurant to survive. Panera has opened close to 500 outlets
since 1997, serving freshly baked goods as well as sandwiches, soups, and salads (Fast
Casuals Come of Age). While restaurants have set a bar for fast casual, the real
standards come from the customers. Customers demand fresh food, contemporary flavor
profiles, healthful options, and the ability to customize orders (Dailey).
The National Restaurant Association (NRA) has a networking group called the Fast
Casual Industry Council (FCIC), which is the primary advocate for the fast casual
segment. The group consists of top executives from fast casual restaurants who discuss
common concerns and advise the National Restaurant Association (NRA website). The
FCIC offers an online program for the industry called Fast Casual TV, which helps
others learn from key players in this particular industry segment (NRA website). The
FCIC also hold conferences to give a comprehensive look at where the industry is now
and where it will be in the future. These meetings provide insight for executives in the
industry and allow them to learn from the success of other related industries (NRA
website).
7
STRUCTURE
About the Industry
A fast casual restaurant offers a dining option in between fast food joints
and full service sit-down restaurants. Orders are usually taken at the counter but
table side food delivery is provided. Prices are more affordable than sit-down
restaurants but more expensive than fast food. Food is not pre-assembled; it is
made to order. Improved food quality is present in the fast casual restaurants
commitment to fresh ingredients, professional preparation and a visually
appealing presentation. The atmosphere and décor is very comfortable with
comfy chairs and wall art in comparison to the plastic look of fast food joints and
the upscale atmosphere of sit-down restaurants. While fast casual restaurants
retain the concept of fast food, they promote food quality and the comfort of
casual dining. (Parpal)
Relationships between Producers and Consumers
While fast casual restaurants are a growing trend in the market,
restaurant owners must keep up with the trends in the surrounding community.
Such trends may be in design or in the food offered. The design of the restaurant
must be attractive to consumers. Whether it is contemporary furnishings at
Chipotle or comfy sofas and chairs near a fireplace at Panera, it must appeal to
the target market. Another trending matter is healthier options at restaurants.
Many consumers are trying to be healthy so producers must take this into
consideration when creating the menu. Fresh ingredients and an open kitchen
assembly line should be incorporated so consumers know exactly what is going
into their food. Trends are a constant factor that producers must adapt to in the
industry.
8
STRUCTURE
Five Forces Analysis
Rivalry among existing competitors - Rivalry is not great between fast
casual restaurants just yet as the market is growing and menus differ
amongst existing competitors.
Threat of New Entrants - The entrance of new fast casual restaurants
is very likely as the trend is growing in the market. Some new entrants
in the industry are Chipotle and Noodles & Company.
Bargaining Power of Buyers - With few competitors in the industry,
buyers have much bargaining power. Fewer choices cause buyers to
be more conscious of prices. Consumers must be priced
competitively to get business in the industry.
Threat of Substitute products or services - Fast food and casual
dining establishments are both possible substitutes. A fast food and
casual dining restaurant exists for every type of food offered at a fast
casual restaurant.
Bargaining power of suppliers - With a growing demand for supplies
due to new entrants, suppliers have bargaining power. Supplies such
as fresh ingredients, paper/plastic tableware and kitchen equipment
and supplies are all in high demand in the fast casual industry.
9
COMPETITION
Restaurants of this fast casual concept are a growing
trend in the food service sector. Fast casual
restaurants currently only make up 6% of the market
but there are many coming about in chain franchises
or by independent entrepreneurs. Some well-known
competitors of the fast casual industry are Panera
Bread, Chipotle, Five Guys and Noodles & Company.
These along with other chain franchises and
independent restaurant owners have made the
concept of fast casual the fastest growing restaurant
sector since 2006. The sector will continue to grow
with the emergence of new fast casual restaurants in
the market.
10
WHY FAST CASUAL IS ATTRACTIVE
As the restaurant industry has evolved, three types of Chinese restaurant developed: authentic
family-operated Chinatown restaurants exclusive to mainly Chinese people, single-unit independent
Chinese restaurants outside Chinatown catering to American customers, and multi-unit operations, which
started around 1970s with noticeable establishments such as Panda Express and Leeann Chin. Even until
1980s, the Chinese restaurant sector was dominated by the second type of independent family
restaurants, leaving a visible market gap for national Chinese restaurant chain business (Parsa & Kwansa,
2002).
Chinese restaurant chains are affected by the changing demographic makeup of customer
population as more Asian immigrants arrive at this country. These customers are accustomed to the
Chinese food in China and require more than just convenience and affordability but authenticity.
Meanwhile, the domestic American customer profile has shifted as people nowadays become more
conscious and aware of their eating habits. A variety of low-fat diets have become socially trendy hype. As
more advanced communication technology and transportation channels become accessible, the obtaining
of fresher and better ingredients provides bigger opportunities for Chinese restaurant chains to cut cost
and achieve greater authenticity. Chinese restaurant market is a great appeal to the fast-casual segment of
the restaurant industry also because the intense competition in general in this segment, yet there seems to
lack an authentic national Chinese chain superbrand (Parsa & Kwansa, 2002).
“Lack of differentiation and shifts in consumer behavior and lifestyle have since led many
consumers to largely abandon or dramatically cut back on their traditional casual-dining visit.” Technomic
VP Pawlak continued to point out that modern people “don’t take time to sit down for meals very often
anymore, and when they do go out they find they can get equal if not even better-quality food for
considerably less time and money at fast-causal alternatives where, by the way, they also don’t have to add
on a 15 to 20 percent tip” (Tanyeri, 2012).
As large restaurant chains expanded, many restaurant segments entered the mature stage of the industry
life cycle. The fast-casual segment has been highly competitive and difficult to create advantageous
locations for new chain units. The large chains that enjoy the high brand-awareness have also diffused into
more diversified market sectors such as contract feeding and institutional foodservice (Parsa & Kwansa,
2002).
The country’s largest fast-causal chains continue to outpace other segments in the restaurant
industry with their sales and unit growth performance ("Top 150 fast-casual," 2011). The top 150 largest
fast-causal brands had sales revenue of $21.5 billion with 8.4% growth in 2011, comparing to 6.6% in
2010. The restaurant industry as a whole had an aggregate 3.5% in 2011, outshone by the fast-casual
segment. “Panera had the most sales in the bakery-café segment with $3.3 billion in 2011, while Five Guys
led the “better burger” sector with $950 million in annual sales. Chipotle Mexican Grill’s $2.3 billion in
sales in 2011 paced the Mexican category, while Panda Express led the Asian segment with $1.5 billion”
(Brandau, 2012).
11 WHY FAST CASUAL IS ATTRACTIVE
CONT..
There are many difficulties in creating an authentic nationally-recognized
Chinese chain brand. One big challenge is culinary authenticity and consistency of
food quality. Often categorized as “cheap, generic, and Americanized”, the second
type of Chinese restaurants tends to offer a similar menu across the country,
inventing dishes often unheard of in China. The cooking process differ that of any
other type of cuisine: majority time and effort go into the preparation. This creates a
mental challenge for the local kitchen staffs who are unfamiliar with the system.
Employee management becomes a greater challenge when there is a cultural gap to
surmount. Last but not least, the competition from independent “type II” Chinese
restaurants remain strong, because American appetite still craves the sweet and
sour version covered in greasy sauce (Parsa & Kwansa, 2002).
“That's how much the Panda Express restaurant chain plans to grow in the
next five years, at least in terms of locations. The company now operates 1,350 "fast
casual" Asian restaurants and wants to raise that to 2,300. "Asian is the new
Mexican," says Glenn Lunde, senior vice president of marketing at the closely held
firm, which was founded in 1973 by Chinese immigrants Andrew Cherng and his
father with one restaurant in Pasadena” ("Panda express plans," 2010).
“Asian Segment Provides Untapped QSR Niche” Christa Hoyland June 2, 2009
Authentic Asian foods will be difficult to succeed in US fast-casual segment,
in spite of Americans’ increasingly adventurous spirit. East West Hospitality Group
President Joel Silverstein claimed that the closer to authenticity, the more limited the
US market. Like most Western brands entering Asian market and adapting to Asian
tastes, Asian brands need to adapt to succeed” (Hoyland, 2009
12
APPENDIX
Source: Prepared from Technomic's 2010 Top 100 Fast-Casual
Chain Restaurant Report
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