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Can the Rapid Growth of the Fast Casual Restaurant Segment be Sustained?

Written by Scott Satula, Vice President of Property Representation

fast casual

Can the rapid growth of the fast casual restaurant segment be sustained? In my opinion, yes. Here’s why:  Fast casual refers to a type of restaurant that does not offer full table service, but promises a higher quality of food with fewer frozen or processed ingredients than a fast food restaurant. Additionally, it is an intermediate concept between fast food and casual dining. (Thanks Wikipedia.)

There are a few prominent indicators that lead me to believe the rapid growth (over 500% sales increase since 1999) of the fast casual restaurant segment will continue for the foreseeable future:
(i) The food offerings and presentation are better. Fast casual concepts often promote locally sourced, high-quality ingredients and have an emphasis on healthy options. Additionally, smaller fast casual chains have the ability to quickly modify their menus based on consumer demand or flavor profiles in the region where the concept is located.

(ii) Perceived value. Fast casual’s price points can be up to 40% higher than value-focused fast food, but fast casual concepts excel when it comes to perceived value.  Customizable menus, gluten-free offerings, modern build outs, open kitchens, high-end finishes, well-appointed dishware and adult beverage offerings are some of the gambits used to distract consumers from their increased spending.

(iii) The flexibility of site selection. Most concepts are small (sub-2,500 square feet) and can locate in multiple genres of real estate, not limited to just pad sites or multi-tenant shopping centers. Fast casuals are found in malls, office towers, airports, sports and entertainment venues and urban food courts like the Milwaukee Public Market, which reported a 20% increase in sales in 2015 versus the preceding year. Additionally, most concepts do not require a drive-thru, lowering occupancy costs and avoiding municipal red tape.

(iv) The lower economic barriers to entry for start-up and franchise-driven concepts make the fast casual restaurant segment very enticing for new entrepreneurs and investors. Most fast casual concepts lease their real estate versus owning it, and many of the franchising concepts allow individuals to open single units. These factors increase the depth of the brand partner pool.

(v) “Time is money,” right? This is perhaps the leading factor of the sector's continued growth: the high value society places on time. American culture has embraced a fast-paced lifestyle. Everything is faster: information, business, communication, logistics and transportation-so why not our food? But there has clearly been a tipping point in the mind of the consumer, where we realized that when it comes to our food, there is a diminishing rate of return when you correlate speed with quality. However, the fast casual restaurant concept, which pairs speed with quality, has filled the void created by our fast-paced lifestyles.

I could not agree more with Barney Wolf, contributor to QSR Magazine, as to where the segment is headed. Wolf predicts an increasing emphasis on “real food,” food made with ingredients free of additives and artificial components, micro cuisines that focus on ethnic flavors versus the traditional burger/pizza/chicken offerings, mindful dining that entails reducing food waste, sustainability and the humane treatment of animals.

Watch for the aforementioned gambits next time you are seeking a quick bite to eat.

Scott Satula | Vice President of Property Representation
Mid-America Real Estate – Wisconsin, L.L.C.
648 N. Plankinton Ave., Suite 264 | Milwaukee, WI  53203
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