FER EXCLUSIVE: Quick, Comfortable And Customized

Used to be your choices in restaurant foodservice were cooked-to-order, sit-down restaurants, counter or drive-through service at QSRs or—somewhere in the middle—cafeteria and buffet concepts. Then, in the 1990s, so-called fast-casual restaurants emerged.

Fast casual combines the ambiance and made-to-order quality perception of a sit-down restaurant with the speed of counter service. Chains like Chipotle and Panera Bread opened and flourished. A lot has changed during the intervening years—the evolution of the Internet, the creation and rabid adoption of social media and the development of the smartphone. 

Category Explodes

What’s brought all these elements together are the apps that allow consumers to access Internet content from their phones. The power of that information has literally changed consumer behavior and shaped experience expectations. Customers are more mobile, exposed to more options and are less patient. Our fast-paced lifestyle has gotten even faster, which makes fast-casual dining more attractive. And through social media and mapping apps, consumers have instant access to restaurant locations, hours, menus and reviews, all of which influence their choices. 

Industry consultant Paul Barron called it “The Chipotle Effect” in his book of the same name, released last May. In the book, Barron says small organizations that target what he calls “social consumers” with a clear product vision are the ones that will grow in the foodservice business. He likens it not only to what Chipotle has accomplished, but to what Apple did in personal computing, entertainment and mobile communications (and may be about to do in television).

“Today’s consumers, especially younger customers, like to have things fast, but they want to be in a nice environment that gives them the perception that the food is fresh and healthier, fresher food than in a QSR,” says Bob Lin, president’s of Abuelo’s, Lubbock, Texas. “They want a fast, relatively inexpensive meal outside the home, and they’re less concerned about sitting down and being waited on.” 

Fast casual offers that, and operators have taken notice. Chains that have been around a while, like Five Guys, are beginning to expand more rapidly. Entrepreneurial ventures are sprouting up across the landscape like mushrooms, and a number of operators are building stables of brands that they’re rolling out through franchising or with their own stores.

Winning Strategies

As with anything, no one size fits all in the foodservice business, but successful fast-casual chains have many elements in common. 

Save consumers time. “Time is really important to customers, and they’ve figured out what vehicle works for them,” says Mike Stack, chairman of Eat Here Brands, LLC, Jackson, Miss. “Fast-casual restaurants have really cut into the lunch business of casual dining restaurants.”

Like QSRs, fast-casual restaurants typically feature counter service. In the Chipotle or Piada model, customers watch their meal being prepared/assembled their way as they move down the counter toward the register. Then they can either dine in or take out.

Chipotle and other recent fast-casuals were hardly the first restaurant concepts to employ this build-to-order model. Subway and other sub sandwich concepts that emerged in the ’70s pioneered customization techniques. And they, of course, were playing the tune of the classic deli. 

A variation on the theme combines counter service with table service. Guests order and pay at the counter and find an empty table. In the Panera model, they take a guest pager to the table; when it signals their order is ready, they pick it up at the counter. At Pei Wei and Tokyo Joe’s—a closely held chain of Asian fusion restaurants in Denver—guests take a numbered table card or table tent. When orders are ready, runners bring them out to the table. Culver’s also uses this approach.

Keep it simple. “A key driver to ROI for these concepts is to simplify the menu,” says Brian Sill, FFCSI, president of Deterministics, Bellevue, Wash. “That has the advantage of shrinking the equipment package needed, the restaurant’s footprint and skillset needed from employees. From a competitive standpoint, keeping it simple allows a concept to do one thing extremely well.” 

Too many menu items make preparation and cooking more complicated and error-prone for employees. Too many menu choices also cause customer confusion and bottlenecks at the counter. Fast-casual restaurants have learned a lesson from QSRs that focusing on doing a few things well sets them apart and speeds service.

Make it special. Rather than expand a menu to offer more choices as many QSRs have done, fast-casual restaurants have learned that what consumers want is something they often can’t even get in full-service restaurants—a meal not just cooked to order, but made very precisely to their specific tastes. 

Many of the fast-casual chains let customers mix and match a limited number of “foundation” ingredients (a protein, a starch, a vegetable, a sauce) in infinite combinations that are customized to them uniquely, every time.

“Service businesses customize,” says Joe Pine, co-founder of Strategic Horizons, Aurora, Ohio, “which is what most restaurants do. Traditonal fast-food concepts, on the other hand, inventory goods. What fast-casual restaurants are able to do is mass customize, which is to make items on demand quickly, but that are completely customized for each individual customer. It makes the customer feel special and satisfied.” 

Offer quality and value. “The segment offers customers high perceived price/value,” Stack says. “The customer also controls when they leave, and they don’t have to leave a tip.”

“What’s important to succeed,” Lin says, “is you have to hit consumer needs. You have to offer a product that is clearly better, fresher and—even more—perceived as healthier, and still provide that speed of service.” 

Part of that perception comes from displaying ingredients in front of the customer. Though those ingredients might have been prepped and/or cooked well before service, customers perceive their meals to be fresher because they’re assembled right in front of them with those ingredients. Some fast-casual hamburger chains like Mighty Fine in Austin, Texas, for example, grind their own meat and hand-form burger patties in view of customers.

The concept of mass customization also plays into consumers’ perception of quality and value, too. “It’s a bit of an illusion that creates more comfort for the customer,” says Hal Schroeder, president, Concept Services, Austin, Texas. “Chipotle, for example—customers feel like they can control the quantity of the ingredients used to assemble their meal—it’s expected—but in a full-service concept, they might not feel as comfortable asking for a little more of this or a little less of that.” 

Create a comfortable, but eclectic environment. The spare, urban-industrial décor that Chipotle uses is just one of the looks that fast-casual restaurants have adopted, but design has to be fresh, unique, clean and light to appeal to these new “social consumers.” Design and décor don’t have to be edgy, but they do have to be current, along with music and lighting to set the right ambiance.

A key focus is the food prep itself. “Equipment selection, of course, is menu driven,” Schroeder says, “but now it’s being moved more to the front of the house so customers can see food being prepared. Food shields are very important now and have been modernized so operations don’t look like a cafeteria.” 

The food itself in fast casual becomes almost like theater. “Our serving line is where the show starts,” says Stephan Harman, one of the founders of Fusian, Cincinnati. The fast-casual sushi chain uses a proprietary piece of equipment that rolls and slices sushi rolls that are assembled to order.

“It’s not about theatrics as much as it is showcasing the food,” Harman says. “It’s about transparency. We want customers to know everything about our food, from where it comes in to when it goes in their mouths, so we just moved the kitchen up front.” 

Tell a food story. Another hallmark of successful chains in the segment, in fact, is telling consumers the story of where their food comes from. Chipotle makes a point of trying to source ingredients from sustainable suppliers.

“Nearly 99% of the journey of food is from where it originates to the store,” says Michael Keck, v.p. at Concept Services. “Fast-casual operators need to tell that story in the last 1% of the journey.” They do that through communication through social media, at point-of-sale and by preparing, cooking and assembling ingredients in front of customers. 

“Respect the food,” Harman says. “We want customers to appreciate what they’re eating, and we want an honest message to drive customer perception. We’re changing consumer perception of what sushi is and making it more accessible by doing it in an approachable way.”

Benefits To Operators

Operators are attracted to the category for three key reasons: 

Less capital risk. Because fast-casual unit sizes are typically smaller than casual dining restaurants, costs to open including real estate, build-out and equipment package are lower, making them less risky in terms of capital investment.

“Real-estate opportunities are much easier to find in fast casual, though there is more competition for space now,” says J. Michael Bodnar, partner, Fresh Hospitality, Nashville, Tenn. “It’s not an acre-and-a-half for a free-standing pad, but an end-cap on a shopping mall. You can open a fast-casual unit for a third of what it costs to open a 3,500-sq.-ft. casual restaurant.” 

“End-caps with patios are usually the preferred spot,” Stack agrees. “You can easily get into the business with build-out and pre-opening costs for less than $1 million. To open a Five Guys, for example, costs less than $600,000 and a store can generate $1 million a year.”

Equipment packages, too, are typically smaller, and in many cases less specialized than those for QSRs, adding to initial investment savings. “Mass producers often need customized equipment to produce their menus,” Pine says, “but mass customizers can use more general pieces of equipment to prepare food for productions modules.” 

“The more limited the menu,” Sill says, “often the more limited the equipment needs, especially if there’s only one cooking method, like the wood burning oven in MOD Pizza, a Seattle chain.”

That may not always be the case, though. A concept that cuts fresh French fries, for example, may need more storage area for potatoes than some other concepts, and may incur slightly higher labor costs. “Labor intensity makes achieving profit goals tougher,” Sill says, “so concepts should identify items that are more labor-intensive but less popular and take them off the menu and take labor out of more popular items if possible.” 

Lower operating costs. A smaller footprint typically means lower operating costs, too, in a couple of areas. Utilities are one. Rents also may be lower because of the smaller footprint, though as competition for locations grows, the savings may not be as great.

Labor is a third area where operating costs usually are lower. “Chef-driven food in our concepts is as good or better than in casual dining,” Bodnar says, “but we have a lower labor cost due to counter service. In Taziki’s, for example, we operate a pretty small kitchen that’s pretty tight. The kitchen labor is not significantly less, but there are savings in the service element.” 

That labor is unskilled in most cases—no chef or sous chef required—so it’s also less expensive than labor in a more traditional setting. Even labor costs for management will more closely resemble those for a QSR than a casual dining restaurant.

Higher volume and profit margin. Fast-casual concepts typically end up being more profitable than casual dining. Faster counter service means higher volume, and lower operating costs mean better margins. Operators with fresh ways to make good food faster and special for customers have found the app for that.