Fast casuals have long been viewed as the sweet spot for current consumer dining habits, with 93% of US consumers saying they have visited a fast casual restaurant, according to Mintel’s report on fast casual restaurants. They hit on a variety of trends from international cuisine to customization, while still offering the convenience that diners crave. However, with a variety of sources reporting that fast casual sales are slowing down, this segment of dining is facing a crucial turning point to remain a competitive segment.
Too much, too soon?
The fast casual segment disrupted dining out patterns when early leaders, such as Chipotle and Panera Bread, redefined what it meant to have quality food in an affordable and convenient setting. The success of this segment has led to overwhelming competition from established chains and emerging independents all attempting to put their own spin on the fast casual landscape.
With the variety of options, fast casual chains can’t rely on loyal customers like they once did.
However, the fast-paced expansion of legacy chains and increased competition from independents has led to an overwhelming amount of options for diners. With consumers having a variety of options, fast casual chains can’t rely on loyal customers like they once did. According to an article from Nation’s Restaurant News in May 2017, publicly traded fast casual chains averaged a same-store sales decline of 1.6 percent. In addition, Bloomberg’s Fast Casual Restaurant Index noted fast casual restaurant stocks fell 14% last year.
This is not to say that the fast casual landscape is completely losing its edge, but rather that the increased competition, from both a foodservice and retail perspective, is impacting every segment. Chains like Panera Bread that are consistently innovating with new menu concepts and adapting to delivery and mobile orders are noting the benefits. In April 2017, Panera Bread reported that same sale stores were up 2.6% in the most recent quarter.
What we think
The fast casual segment is certainly not doomed; this shift in sales simply demonstrates that fast casuals are not immune to evolving dining preferences. With retail bringing a stronger focus to freshly prepared meal items and consumers having an overwhelming amount of dining out options to choose from compared to ten years ago, the fast casual segment has to move beyond their core selling points and continue to be innovators in the dining out space. QSRs are also leaning on more premium food items to compete with the fast casual space.
Sweetgreen, the fast casual salad chain, announced that it would be fully cashless in 2017, meaning people can only pay via the Sweetgreen app or credit/debit card. As part of its Spring 2017 menu, the chain also created regional focused salad offerings for key locations. For example, a salad exclusive to Philadelphia called the Zahav Bowl features shredded kale, hot chickpeas, turmeric roasted cauliflower, roasted chicken, organic carrots, toasted almonds, dill + mint, Sweetgreen hot sauce and a lemon-dill tahini dressing. Innovation from both a menu and operation standpoint is essential in order for fast casuals to stay relevant.
