The following is a guest post from reader Dave Clark. I'm getting interested in the franchise business space (though not likely food) and this article seemed appropriate. Personally, I love Chipotle. The wife is more a Panera person.
A new trend for eating out is emerging and beginning to attract the attention of consumers and investors alike. A shift can be clearly seen away from traditional restaurants and towards restaurants offering a fast casual dining experience. According to industry expert and NPD restaurant industry analyst Bonnie Briggs “Fast casual concepts are capturing market traffic share by meeting consumers' expectations, while midscale places continue to lose share." Openly acknowledging how fast casual food is gaining success at the expense of other dining experiences.
It is not just traditional dining experiences which are under threat from fast casual however; fast food is also suffering as a result. Over the last few years fast food has been suffering from something of a PR crisis anyway, the association of fast food with unhealthy food is leading companies to attempt to rebrand themselves as “Quick Service” establishments, although whether the public will catch on is doubtful. This rise in fast casual dining can only worsen the situation for fast food, as this is a new trend coming in with none of the bad associations. The growth of two of the US market leaders – Chipotle and Panera Bread – has outperformed that of McDonald’s. The growth of these two leaders’ top-line revenue has been 133% and 75% respectively over the last five years compared to McDonald’s 22%. This gives an indication of the increasing trend towards fast casual, while showing fast food is not growing as quick.
The reason why many people are increasingly going to fast casual dining establishments is that it is seen as the best of worlds. With better service than fast food and the lack of association with un-healthiness, it is also seen as a more affordable option than standard dining. This may be why in America visits to fast casual dining restaurants rose by 8% in 2013, while the year also saw an impressive 10% increase in spending when measured next to the 2012 financial year. There is also solid growth in the sector as shown by a 6% US increase in the number of fast casual units in 2013, it is clear that if business’ were struggling there would be cut backs, whereas this growth only indicates the promise which has been seen. This trend is also seen in the UK with two restaurants chains, The Giggling Squid and Wahaca, opening multiple locations across the south of the country; as well as companies such as McCain launching products especially for the casual dining sector.
With these factors in mind it looks like 2014 will see a continued increase in the size of the fast casual sector, with both the traditional and fast food restaurants suffering. While other factors may lead to this changing over the next year, indicators suggest that this will be a big year for the industry.
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