Fastest Growing Restaurant Concepts 2009
Introduction
One of the most consistently successful industries in the United States is the restaurant industry.
Even in the country’s current economic state, it remains prosperous and continues to grow. The
restaurant industry has projected total sales for 2009 of $566 billion, which is an increase of $187 billion
over the last nine years (See Graph)1. This increase in sales means the industry will advance 2.5% and
equal 4% of the U.S. GDP. Leading to this success is a greater share of the food dollar, the restaurant
industry accounts for 48% of the food dollar. People are spending more of their money for food at
restaurants, than ever before.
The Industry is always changing and has a constant influx of new concepts, offering a plethora of
options for investors. We researched the hottest concepts reviewed over the 3/21/09 – 6/20/09
quarter with the mission of selecting which concept offered the best potential return on investment.
We were given ten million dollars to invest in one concept and the following pages present our research,
analysis, and choice.
Restaurant Sales Since 1970
$600.0
$400.0
$300.0
$200.0
Restaurant Sales
$100.0
$0.0
1970
1980
1990
2000
Year
* Projected
2009*
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Sales in Billions
$500.0
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Fastest Growing Restaurant Concepts 2009
Criteria
Able Leaders was very meticulous with its research and analysis of the top ten restaurant concepts.
We used a specific set of criteria for our selection of the top three companies to invest in along with our
final selection. The following were the most important questions we had to answer before we made our
decision. Our ultimate goal was to use the information we gathered to select the concept that offered
the best potential return on investment.
Restaurant Trends
o

Growth Potential
o

Who are the major competitors, how successful are they?
Market Share
o

What is the growth plan in place, what is the growth to date?
Competitors
o

What is trending up and down in the industry?
What is our main competitors market share in comparison to ours?
Management
o
What is the management’s vision for the future of the company? Has the management
been successful in the past?
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
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Fastest Growing Restaurant Concepts 2009
Du-Par’s
Restaurant &
Bakery
Dazbog Coffee
Company
El Taco Tote
Pros
Cons
-Offers Happy Hour bargains that appeal
to families on a budget
-Open 24/7
-Offers casual dining2
-Main competitor is Denny’s
-Denny’s has 394 company owned
restaurants and 1,152 franchised and
licensed units in the United States,
Canada, Costa Rica, Guam, Mexico,
New Zealand and Puerto Rico.3
-Du-Par’s only has 5 locations all in
California.
-Offers support to a myriad of
-Competitor with Starbucks
organizations; which appeals to
-Starbucks’ target market is any
4
customers.
person at any age. Starbucks
-Offers online ordering; this is convenient. continues to refine and target their
product offerings to the changing
tastes of consumers.5
-Starbucks has over 8,229 locations
just in the United States.6
-It is fast and casual.
-Competitor with Chipotle
-Offers an ethnic flavor; which is a trend
-Chipotle is a chain of over 800 quickthat has been developing in the restaurant casual restaurants in more than 30
business.7
states.8
Happy’s Pizza
-Offers take-out and delivery.9
-Commodity prices have fallen; the prices
of cheese, wheat, and most pizza toppings
have fallen in 2009.10
-Pizza market is experiencing a
financial down turn in 2008 and it is
expected to continue.11
-Many competitors such as Pizza Hut,
Domino’s Pizza, and Papa John’s.
Buffalo Wings
& Rings
-Menu has variety while the prices are still
comparable to fast food
-Offers casual family dining and serves
alcohol which draws in extra revenue.12
-Buffalo Wild Wings has 620
locations and in the 3rd quarter of
2009, sales were reported to be
$132.7 million.13
-Fluctuating chicken prices that are
at an all time high.14
-Competitor with American Coney
Island and Lafeyette Coney Island.16
-In Chicago alone, there are over
1,800 hot dog vendors.17
-Competitor with Subway
-Subway has over 21,000 locations in
75 countries.19
Leo’s Coney
Island
-It’s quick service and fast casual appeals
to families.15
Capriotti’s
-The sandwich market should continue to
Sandwich Shop grow because of price and it’s a healthier
option.18
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Restaurants
3
Fastest Growing Restaurant Concepts 2009
Crumbs Bake Shop
Overview
Crumbs Bake Shop was founded in March of 2003 in Manhattan by Mia & Jason Bauer.
Crumbs specializes in gourmet cupcakes and offers 50 different variations, three different sizes and
are prices at around $4.5020 each. They also offer personalized cakes for special events. Since its
founding, they have rapidly expanded in New York and started stores in three other states with 23
stores.
Pros
 Cupcakes prove to be trendy and hip.21 22

Crumbs offers shipping options on their cupcakes. Online retail sales rose 17 percent from 2007 to
2008 to $204billion and are expected to continue growing exponentially.23

Strong market position in gourmet cupcakes market. Has clear head start in the industry and is
aggressively expanding. 2
Cupcake Franchise
Yummy Bakeshop
Famous Cupcakes
Sprinkes Cupcakes
Dots Cupcakes
Mrs Beasley's
Red Velvet
GiGi's Cupcakes USA
Cupcake Station
Magnolia's Cupcakes
Crumb's Cupcakes
number of stores
2
2
7
2
6
3
6
2
3
27*
24
* As of November 2009, 23 stores are open while four are opening soon.

Identifiable growth. Opened 16 stores in the last year alone. Has currently 23 open stores and 4
stores opening soon. Plans to open a dozen stores within the next twelve months not only in the
plan is to have 150 stores over the next five years2.

Crumbs offers carryout, and delivery in LA and NYC areas while 61% of adults says carryout and
delivery makes their lives easier to manage.26
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NYC area but also in Boston, San Diego, Philadelphia as well as Washington D.C.25 Broader expansion
4
Fastest Growing Restaurant Concepts 2009

Crumbs carries a New York Yankee's cupcake, this shows support for their local community. 52% of
adults will make a restaurant choice based on support for local community.

Cupcakes offer great value compared to a conventional meal.

Crumbs uses technology, including the trendy Facebook and Twitter to promote, as well as a sheik
website which provides a shipping option of their cupcakes.

Experienced and motivated management. Mia Bauer has baking expertise while CEO and president
Jason Bauer has had previous entrepreneurial experience in founding a company which developed,
manufactured, and distributed celebrity-licensed products.27
Cons
 Cupcakes not considered a health conscious food.28
Financial Information

Revenue grew to $8million in 2008 from $2.2million in 20078.

Crumbs business grew at a rate of 40% (year over year) prior to recession and still maintains a 20%
growth rate during recession.29

Has had a percent revenue growth rate of more than double the industry mean.
8
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(based on 2005-2008)
5
Fastest Growing Restaurant Concepts 2009
Genghis Grill
Overview
Genghis Grill was founded in 2001 in Dallas, Texas. The first location was a success that the
concept’s founder decided to start its franchise program in August of 2001. They currently have 37
stores in 16 states and plan to have more in the near future. They offer Fast-Casual, “Build Your Own”
Asian Stir Fry.
30
Pros

Aggressive expansion: Plans to have 100 locations by the middle of 2011. 31

Sales from 2007 to 2008 increased by 12%. 10

Genghis Grill is the largest Mongolian Barbeque Restaurant with 37(16 states) stores compared
to BD’s Mongolian Grill, which only has 36 (14 states). 10

Flat Top Grill and Stir Crazy have merged into one company to fight for market share with BD’s
Mongolian Grill and Genghis Grill. They have 28 restaurants in 8 states.
32

15 more locations within 18 months (May 2009). 10

Genghis Grill is still growing despite the economic situation

A prevalent assumption is that the Fast-casual market will continue to expand in the future
based on a projected increasing demand for value, convenience, and health-conscious options.

Fast Casual magazine named them to their 2008 and 2009 listings of the Top 100 Movers and

Ranked in Franchise 500 by Entrepreneur magazine. 34

Genghis Grill has some impressive supporters, including franchise vet and Pizza Hut founder
Frank Carney. In 2007, Carney signed a 10-unit franchise agreement with Genghis Grill. 35
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Shakers. 33
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Fastest Growing Restaurant Concepts 2009

Genghis Grill has been also looking to promote its concept through education about healthy
eating habits. The chain has worked with local schools. They have introduced a “Heart Healthy”
line. 35

Despite the economy and the restaurants industry struggle, Genghis Grill has seen continued
growth due to an average ticket price of $11 and the chain’s healthy fare. 35 above

Total Initial Investment: $289,000 to $650,00036

Annual Sales: $29.5 million 37

Average Unit Revenue: $1.4-1.6 million38

Average check: $9(lunch), $14(dinner) 39

Genghis Grill charges $30,000 for the initial franchise fee, and weekly, 5% royalty payments. 40
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Financial Information
7
Fastest Growing Restaurant Concepts 2009
Vapiano
Overview
Vapiano was founded in Germany in 2002 and achieved success in Europe before crossing the
Atlantic in 2006. The concept is fresh, authentic Italian fare served a-la-carte in a modern setting which
fuses café with lounge. Chip-card technology, in-house herb gardens, and interactive cooking are a few
of the unique features used to attract a target demographic of young urban professionals. The chain
currently has 46 locations worldwide, six of those in the US, and plans to open 100 more US stores by
2012.41
Pros

Management team with impressive credentials42:
President and Founder Kent Hahn began his restaurant career at McDonald’s at age 15 and went
on to open 14 McDonald’s franchises before founding Vapiano in 2002. He is also founder and owner of
three other restaurants as well as a restaurant and retail management company.
CEO of Vapiano USA, Middle & South America,Bill Bessette, began his career in the restaurant
industry working with Outback Steakhouse. His achievements led him to the Chart House Restaurants
where he spent 8 years and worked his way up to Regional Manager. He accepted the position of
Director of Operations for Legal Sea Food in 2004 and later rose to the position of Senior Vice President
of Operations.
CFO Gregor Berlach was Vapiano’s original investor and continues to serve as the Chairman of
the Board. He is currently the CEO of Seaside Hotels, a European boutique hotel chain with 7 world class
hotels.

Aggressive expansion: Planned expansion of 44 to 55 new locations by the end of 200943 (aprox.
108% growth from present 46 units): 100 US stores by 2012

Sales increased by 20% over 2008

The Vapiano concept has proven solid in Europe but has also successfully navigated transition

Vapiano has created its own niche

Vapiano is well aligned with industry trends and balances innovation with elements of comfort.
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into the US market.
8
Fastest Growing Restaurant Concepts 2009

The demand for both ethnic and comfort foods is projected to increase thus contributing to
potential success given the fact that Italian cuisine covers both of those categories.

Vapiano has a history of steadily increasing growth beginning in 2002 which has persisted
despite a faltering economy.

A prevalent assumption is that the Fast-casual market will continue to expand in the future
based on a projected increasing demand for value, convenience, and health-conscious options.44

Fast Casual magazine named them to their 2007 and 2008 listings of the Top 100 Movers and
Shakers.

Was named one of the top ten “Best Employers” in Germany for 2008.

Vapiano President, Kent Hahne, was named a finalist for CMO of the Year by Booz Allen
Hamilton in 2007.

In 2006, Vapiano won the coveted European Hot Concept Award from Food Service Europe &
Middle East.
Cons
Vapiano has created its own sub-niche inside Fast-casual dining and the concept is still in infancy
in the US (since 2007). These factors, along with the hiring of Bessette as CEO in January 2009, add to
the allure of the company but also to its potential risk for Investors.
Financial Analysis
Costs/Requirements

Net worth requirement: $2M-4M45

Cash liquidity requirement: $300K-600K(4)

Franchise fee: $45,000(4)

Total Initial Investment: $711,350 to $1,847,00046

Royalty fee: 6% of gross sales (paid monthly)(4)

Annual Sales: $200 million(6)

Average Unit Volume: $2.5 - $3 million47

Average check: $14.50(lunch), $22.00(dinner)48

Vapiano made major changes in January 2009 to kick-start expansion:
o
Hired Bill Bessette as CEO of US operations
o
Received $62.5 million from three European banks to fund expansion
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Revenues
9
Fastest Growing Restaurant Concepts 2009
o
Acquired strategic equity partner who will provide another $7 million
Verdict
After thoroughly researching and analyzing data about the ten-restaurant concepts, team Able
Leaders has chosen to invest the ten million dollars in Vapiano. We chose against Genghis Grill due to
their intense competition, we felt this hurt their return on investment potential. Crumbs was not
chosen because we felt that their yearly sales while successful could not compare with that of Vapiano.
Vapiano is a new concept to the United States having already established itself as a successful and
growing concept in Europe. Management brought Vapiano to the States in 2006 and it has caught on
quickly growing throughout the southeast. Their early success has put them on an ambitious expansion
plan both in the states and overseas. Their plan is to open one hundred more U.S. stores by 2012.49 An
experienced and very successful management team backs this early success.50 Due to their ambition
Vapiano is on it is way to becoming an international presence. Their success in both the U.S. and Europe
leads to impressive annual sales of 200 million dollars.51 Vapiano has already garnered backing from
outside investors, furthering our confidence in our choice.
Team Able Leaders recognizes that Vapiano has been in the states for only 3 years, which leaves
them relatively unproven here. However, we felt that their early success combined with the popularity
overseas were enough to make a confident decision. After analyzing all of our research, Vapiano is the
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clear choice because it gives us the best potential return on our investment.
1
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Fastest Growing Restaurant Concepts 2009
1
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2Web.
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4
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5
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6
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7
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9
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10
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11
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14
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15
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16
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17
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18
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19
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20
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24 http://yummycupcakes.com/
http://famouscupcakes.com/
http://www.sprinkles.com/locations.html
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25 Kathrine, Mary. "RE: Business Student - ROI Business Analysis." Message to the author. 10 Nov. 2009. E-mail.
26 Cupcakes - Crumbs Bake Shop - Store Locations." Cupcakes - Crumbs Bake Shop - Home. Web. 13 Nov. 2009.
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27 Interview with Jason Bauer, CEO and President of CRUMBS." Washington DC News, Restaurants, more by Top Local Experts. Web. 13 Nov.
2009. <http://www.examiner.com/x-2901-NY-Business-Strategies-Examiner~y2009m8d18-Interview-with-Jason-Bauer-CEO-and-President-ofCRUMBS>.
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Fastest Growing Restaurant Concepts 2009
28
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<http://www.nytimes.com/2007/09/23/weekinreview/23kershaw.html?_r=1>.
30http://www.inc.com/inc5000/2009/company-profile.html?id=200908580
31 http://www.genghisgrill.com/pressdir/admin@genghisgrill.com_20090713_144427[1].pdf
32 http://www.fastcasual.com/article.php?na=1&id=15584
33 http://restaurant-hospitality.com/features/rh_imp_3164/
34 http://dallas.bizjournals.com/dallas/stories/2002/06/24/story6.html
35 http://www.genghisgrill.com/pressdir/GG%20-%20Restaurant%20Business%20article.pdf
36
http://www.indusbusinessjournal.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications::Article&mid=8F3A7027421841978F1
8BE895F87F791&tier=4&id=565ABDD04E2B42149583048AA75BAD28
37 http://www.genghisgrill.com/pressdir/FC%20-%20Top%20100.pdf
38 http://www.genghisgrill.com/franchise_faqs.php
39 http://genghisgrill.com/pressdir/GG%20-%20Restaurant%20Business%20article.pdf
40 http://www.nrnhotconcepts.com/Main.aspx?id=324
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2008.http://www.vapianointernational.com/images/Vapiano_hot_concepts.pdf
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43
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44 CIRE Magazine Online. “Feasting On Fast-Casual”.http://www.ciremagazine.com/article.php?article_id=1035
45
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46 Vapiano International company website. Franchise Disclosure Document.http://www.vapiano-international.com/vapiano/FDD/FDD.html
47
Nation's Restaurant News Online."Sales Lightning In A Bottle".August 2009.http://www.nationsrestaurantnewsdigital.com/nationsrestaurantnews/20090831/?pg=34
48
QSR Magazine Online. "Ones To Watch: Vapiano". November 2009. http://www.qsrmagazine.com/articles/ones_to_watch/115/vapiano1.phtml
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2008.http://www.vapianointernational.com/images/Vapiano_hot_concepts.pdf
50
Vapiano International company website.http://www.vapiano-international.com/vapiano/cms/about/executive-bios/execuitve-bios.html
Nation's Restaurant News Online."Sales Lightning In A Bottle".August 2009.http://www.nationsrestaurantnewsdigital.com/nationsrestaurantnews/20090831/?pg=34
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