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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

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 is just 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 just limited to 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 vs. 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 vs owning, 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, transportation, 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. The fast casual restaurant concept has filled void created by our fast paced lifestyles, which pairs speed with quality.

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 vs the traditional burger/pizza/chicken offerings, mindful dining which 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.

fast casual

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