Don’t look now, but there could be a land rush taking place as fast casual restaurant chains expand across the United States. Fast casual restaurants, a blend of quick service and casual dining, are quickly growing in popularity as consumers gravitate toward higher-quality foods when grabbing a quick lunch or dinner.
The fast casual concept offers customization in menu choices and freshly prepared dishes. Fast casual restaurants usually do not include a drive-thru window or table service.
While there is no standard definition for fast casual, most in the industry agree on certain aspects of the category.
“Fast casual is typically a non drive-thru restaurant where customers order at the counter and seat themselves,” says Michael Walters, vice president of Falcon Restaurant Advisors, a Dallas-based company that represents restaurant concepts and landlords on a national basis. “Fast casual restaurants also source most of their products locally, and avoid frozen foods wherever possible.”
Walters says the restaurants are growing so fast because there is a high demand for them and, for now, a lack of supply of space for them to locate.
The combined sales of fast casual restaurants in the United States grew by 10.5 percent in 2014, compared with 6.1 percent sales growth for fast food chains, according to Mintel, a market research firm.
The cost is also higher for customers when compared to quick service restaurants, otherwise known as fast food. The average quick service customer spends between $3 and $6 per person for a meal, while at a fast casual establishment the prices ranges from $8 to $15 per meal, according to Forbes.
Success stories
Chris Cheek is the chief development officer for Newk’s Eatery, a fast casual restaurant chain based in Jackson, Miss. Cheek says the origins of fast casual restaurants date back to the late 1980s.
Newk’s Eatery is a fast casual restaurant chain based in Jackson, Miss. Newk’s operates
in a total of 78 locations across 13 states, including nine Texas locations.
He says today’s rapidly expanding brands are the second phase of fast casual. The first generation included chains like Panera Bread, McAlister’s Deli, Jason’s Deli and other bakery cafes.
He says there are a few key differences between those restaurants and today’s second-generation fast casual restaurants, which began expanding around the middle of the last decade.
“Newk’s Eatery was started in 2004, and that’s around the time that restaurants such as Chipotle and Zoe’s Kitchen started to take off,” says Cheek.
Second generation fast casual restaurants are more culinary-driven, according to Cheek, with more ingredients made from scratch inside the restaurant and more customization.
Second generation also often includes an open kitchen visible to customers.
There has also been an expansion in the types of food the restaurants focus on. Newer fast casual restaurant concepts often specialize in a certain type of food, ranging from pizza to hot dogs and bratwursts, gourmet burritos, ham and cheese sandwiches and even Mediterranean dishes.
Chipotle is one of the leaders in the fast casual restaurant business. The company’s total sales are growing at about 20 percent annually. Denver-based Chipotle, which was founded in 1993, operates more than 1,700 locations nationwide.
Newk’s is one of several competitors looking to emulate that success.
Newk’s serves salads and sandwiches in a total of 78 locations across 13 states. The company owns and operates 11 stores, with the remaining 67 franchised, and is now expanding into San Antonio and west Texas.
“We’re trying to build a foundation with great success based on a strategy that involves brand awareness,” says Cheek. “There are a lot of great markets for a Newk’s. We’re confident the model works in markets of all sizes.”
Germany, Austin and Beyond
VertsKebap is another example of a newer fast casual concept that’s rapidly expanding.
Dominik Stein cofounded the restaurant with Michael Heyne. The two studied business at the University of Texas at Austin beginning in 2008. Stein and Heyne were international students from Germany, and soon noticed one of their favorite foods from home was missing in the United States.
Döner kebap is a rotisserie meat that originated in Turkey. Over the years the food spread across Europe to become a popular street food all over the continent. Heyne and Stein decided Americans would also enjoy kebap, so they opened their first VertsKebap location in Austin in 2011.
Today there are 21 VertsKebap restaurants in Austin, Dallas and Houston. A San Antonio location opened in May, to be followed by a second location this fall. Plans call for further expansion in the future, though Stein has not decided which markets will be next.
All of the entrees served at VertsKebap are 550 calories or below, which Stein says is one of the main reasons for the restaurant’s popularity.
VertsKebap restaurants range in size from 2,000 to 2,500 square feet. Stein says he targets end caps in strip centers for new restaurant locations.
He adds that customers are looking for a high-quality product that arrives quickly.
Like many fast casual chains, VertsKebap closely studies demographics when choosing new restaurant locations. The site selection criterion includes high-income areas in nicer, newer shopping centers. Often, VertsKebap seeks out grocery-anchored shopping centers because customers tend to visit grocery stores multiple times per week. Fast casual restaurants also perform well in mixed-use developments.
It’s important for fast casual restaurants to have easy access to parking, as well as convenient ingress and egress, because customers are still looking to get in and out of the restaurant quickly.
“At Newk’s Eatery we serve some of the most unique, best tasting food in the fast casual category,” says Cheek. “But we’re still a convenience play, not a destination. People don’t typically drive 20 miles go visit a fast casual restaurant for their 15th anniversary.”
Newk’s Eatery generates 70 percent of its business during lunch and 30 percent during dinner. The restaurant is not open for breakfast.
The Salad King
Berge Simonian is the founder and president of Salata, a salad-based concept headquartered in Houston.
Simonian opened his first restaurant in 1988, which was unsuccessful because he did not have enough experience in the industry. Simonian opened another in 1994, and over the years began noticing the line for salads getting longer and longer. In 2005, the first Salata location opened in downtown Houston.
Berge Simonian founded Salata in 2005. The company operates 42 locations in Texas, California and Illinois, with plans to expand to
Phoenix in the near future. Patrons choose their own salad ingredients and the price does not change based on the number of toppings.
The company now operates 42 locations in Houston, Austin, Dallas, Los Angeles and Chicago, and plans to expand into Phoenix soon. Salata manufactures 18 products in-house, including 10 dressings, three soups and five sauces, which Simonian says is key to its success. The company’s locations in downtown areas range from 750 to 1,800 square feet, while suburban locations range from 1,800 to 4,000 square feet.
Salata is one of several fast casual concepts that offer customization of its products. Patrons choose their own salad ingredients inside the restaurant and the price does not change no matter how many toppings are chosen.
“Customers want transparency, they want to see their food,” says Simonian. “They want to create and build the dish they will eat.”
Cincinnati-based Tom+Chee is another expanding fast casual restaurant chain. The restaurant was founded in 2010 and boasts 24 locations, but the founders hope to total 55 locations by the end of this year. Its target demographic ranges from 18 to 44.
“We’re opening about one new restaurant per week right now,” says Marty Boyer, director of marketing for Tom+Chee.
Millennial Impact
Many in the restaurant industry believe Millennials, an 80 million-strong generation ranging between the ages of 18 and 34, according to the U.S. Chamber of Commerce Foundation, are a driving force behind the growing popularity of fast casual restaurants.
“Millennials will spend above what their financial income tells us they should spend on food,” says Cheek. “Millennials are more food-conscious than older generations.”
Cheek says there is also more readily accessible information about the source of foods served in fast casual restaurants compared to fast food restaurants, both online and through television food channels, which has driven customer demand for higher-quality products.
As Millennials age and their influence in the marketplace increases, fast casual restaurants are expected to continue growing rapidly during the next several years.
— Haisten Willis