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In the Fast Lane

By Hope S. Philbrick

Back in the 1990s, if you wanted a quick meal on the go, fast-food was pretty much your only choice.

But then a few companies figured out a way to raise the bar with their product but still commit to quick service while providing a slightly more upscale environment. A new restaurant segment was born.

Today, fast-casual is the restaurant industry’s fastest-growing segment. Increasing 550 percent since 1999, it reached $30 billion in annual sales in 2014. That’s more than 10 times the growth of the fast-food industry over the same period, reports Nation’s Restaurant News and The Washington Post. A slowdown isn’t expected: Double digit growth is forecast through 2022.

Fast-casual is a hybrid mixing the convenience and quick service of fast-food with the healthier ingredients and more upscale settings of casual restaurants. For many people, especially those in the coveted 18-35 year old demographic, fast-casual is perceived as healthier than their fast-food counterparts.

“There are three key drivers of ‘fast-casual,’” says Matt Andrew, founder and CEO of Uncle Maddio’s, an Atlanta-based fast-casual pizza concept with 57 locations in 18 states. “Higher food quality, made to order and price – of course, customers pay a little more for a premium product [compared to fast-food], but it’s still affordable.” A meal might cost $10 rather than $5.

Fast-casual gives people what they want: Quality food fast for a reasonable value.

Define, Differentiate

To compete, any restaurateur needs a defined concept and a marketplace differentiator. Fast-casual is no exception. “Identify consumer demand and fill the void,” says Andrew.

Uncle Maddio’s key differentiator is its specific niche: New York-style pizza. “New York-style pizza appeals to 40 percent of the market,” says Andrew. “But our competitors play in wood-fire or Neapolitan, which is 17 percent of the market.”

Of the $40-billion a year in pizza sales in the U.S., he notes, New York-style pizza accounts for $16-billion worth of sales. “That translates to tens of millions of consumers – a much larger pool of people who demand and crave New York-style pizza as opposed to wood-fire or Neapolitan pizza, which is a $5- to $6-billion market.”

While pizza is a large market, “fast-casual pizza appeared about five to seven years ago; it’s an awakening of a new category,” says Andrew. “While it took 25 years for the burrito [concept] to get 1,000 stores, it won’t take that long for pizza. There’s a major paradigm shift in how consumers are using pizza.”

Traditional options (delivery to home or office, whole pie or slices at a restaurant) have been reinvented as Uncle Maddio’s serves craft pizza in eight minutes or less. “That’s transitioning the occasion from dinner to lunch,” says Andrew, who sees a 50-50 split in lunch and dinner, “a major shift.”

Newcomer Rize Artisan Pizza + Salads is “fast-casual 3.0,” says John Smith, founder and CEO. At Rize, guests order when they walk in the door then sit anywhere in the open dining room of tables, booths and pizza bar. Once seated, there’s tableside service until they decide to close their check. Everything is handcrafted, but the approach isn’t build-your-own.

While Smith cites the “amazing pizza crust” as Rize’s biggest differentiator, service is equally essential. He sees his restaurant as someplace that families can get in and out quick at and people can pick up food to go when they’re in a hurry, but it can also be a great date night spot, too – something that’s not typical for the average fast-casual concept.

“We invest in our culture, do a lot of training,” he says. “There are competitors and then what I call rivals.” In Smith’s mind, traditional pizza places are rivals while any other restaurants customers may consider are competitors.

Fast-casual isn’t just burritos, burgers and pizza. “‘Fast-fine’ is the category we developed in 2006,” says Pierre Panos, founder and CEO of Fresh To Order. “We take fine-dining preparation and cooking methods and bring it down to a fast-casual price point and space.”

With the mission to serve “incredible food” in under 10 minutes for around $10, Fresh To Order’s menu is chef-inspired yet line-cook executable with recognizable favorites like grilled salmon, fire-grilled chicken, seared tuna, Asian salad and more. “‘Fresh’ and ‘fine’ permeate everything we do,” says Panos.

The menu alone cannot drive the dining experience. Tijuana Flats takes an “‘anything goes’ approach to food, service, art, hot sauce and life in general,” says CEO Larry Ryback. The Florida-based Tex-Mex concept has two locations in Georgia. “Our community hand-made ceiling tiles and mural art are throughout the restaurant; our team members are empowered and unscripted with a mission to include multiple touch points with our guests.”

Empowering team members is one way Tijuana Flats helps “ensure guests have a ‘flat outrageous’ experience,” says Ryback. “Our guests are greeted at the door, our team might share their favorite menu item, review the menu with them, explain the order process and the hot sauce bar, refill drinks, deliver food to the table and clean up.”

Growth Drivers

The impact of fast-casual is felt throughout the industry, especially fast-food and casual dining.

“We are taking market share from casual dining restaurants,” says Fresh to Order’s Panos. “Guests want quality food quickly at a lower price point. In casual dining you eat slowly and have to leave a tip, so the average ticket is $15 and up per person plus a 20 percent tip. In fast-casual, your ticket average is $10 per person for the same food quality, and you don’t have to leave a tip.”

While fast-casual concepts tend to average less than 20 percent of sales from dinner, at Fresh To Order dinner accounts for close to 40 percent of sales. Panos credits entrées on the menu and locations near a high density of both office workers (potential lunchtime customers) and residents (for dinner) for the numbers.

Millennials are big fans of fast-casual. “They eat out more frequently,” says Smith. “And they want better food but at the same time don’t want to spend two hours in a restaurant. Fast-casual is the intersection of better food and a better dining experience with a timely service cycle time and lower cost.”

Fast-casual alcohol sales are typically five percent, but Rize is “approaching 20 percent, which is unheard of,” says Smith. “And we don’t have a bar or bartender – we have beer, wine, sangria. Twenty percent is what casual restaurants with a bar and sell spirits get.” He credits the menu and atmosphere for the numbers, favoring locations with rooftops and/or patios to encourage lingering.                                                                 

What the Future Holds

Fast-casual will continue to evolve, especially as fast-food outlets up their game to gain back some market share. Expect to see an ongoing rollout of new menu items and different flavor profiles, as well as additional serving size options and expanding fresh, vegetarian and locally sourced options.

Also look for new technology and tech applications. “Technology and convenience will continue to play a significant role in the restaurant industry,” says Tijuana Flats’s Ryback. “As consumers become busier and the world continues to evolve, restaurants must also become fast paced in order to serve those growing needs.”

Adapting to customers’ demands helps keep them. “Online ordering and delivery services are changing the landscape,” says Andrew. “We have to be at the forefront of embracing technology and how that plays into our dining room and kitchen. There may be a shifting downward in the size of dining rooms as people use more third-party delivery services to take food home.”

Rize employs smart digital technology – via team member’s individual tablets for tableside service, mobile app ordering and Bluetooth technology – for expedited food delivery and bill pay. “You can’t do cool stuff with an old closed-system POS,” says Smith. “We use a cloud with open architecture and are giving control back to the consumer in terms of when they order, how they order, when they pay and how they pay.” The goal is to give diners more control while allowing for increased interaction between team leaders, team members and guests.

From the moment someone enters the door, technology steers their experience at the restaurant. Team members take their order on a tablet then give the diners a disc similar to those pagers that buzz when your table is ready.

But these do much, much more. The discs are synced up with that initial order, and each table has RFID technology built in underneath that ‘talks” to those discs as soon as they’re placed on the table. So if a diner sits at one table, then decides to move to a different table or sit at the bar, for instance, team members have no trouble finding them in the restaurant. Diners can also download the Rize app and pay via their smartphones when they’re finished eating and ready to leave.

If they’re in a hurry, they can also place an order before they arrive. The system will detect when the person is arriving so the kitchen can fire the order and have it ready for pick up as soon as possible – but not so early that the food gets cold.

While more restaurants will begin to incorporate such technology, labor and food cost challenges aren’t going away. “The difference between the cost of eating at home and the cost of eating out can’t continue to grow,” says Smith. “We cannot raise our prices or consumers will say it’s more financially beneficial to eat at home.”

At the same time, quality cannot be compromised. “The biggest trend we’ll see is fast-casual will try to elevate up to fast-fine,” predicts Panos. “Fast food is starting to elevate their facilities, trying to capture some of the market they lost to fast-casual, which has been the darling for 10 years.”

Ultimately, “People will always want to eat out to escape,” says Panos.

“When people decide to leave their house and eat in a restaurant, they have a lot of options,” says Smith. “When they choose a restaurant they’re saying ‘I trust you.’ They want to enjoy the moment. If the food is not right or a team member has a bad attitude or the food doesn’t come out right, we destroy that moment.

“We’re trying to enhance the moment for our guests,” he says. “It’s a lofty goal for fast-casual, but we’re doing it.

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