A new category that takes casual to a new level has been executed brilliantly by Reel Club

On the constantly-changing stage of the $558-billion restaurant industry, it is no secret that casual dining is evolving. Most notably — and to the alarm of many — the middle of this segment is struggling, as fast casual operations capture more casual dining business at the lower end of the price point spectrum, while the more specialized “modified” and “polished” casual concepts find a sweet spot in casual dining's higher end.

Ron Paul, veteran consultant and a principal of Technomic Inc. defines “polished casual” as “a dining operation that has invested more in décor to give it a higher-end look than typical casual dining restaurants.” He adds that this orientation trickles down throughout the entire concept and results in higher food quality implications. “It's the difference,” he says, “between a Friday's and a Houston's.” The 200-unit Cheesecake Factory is another classic example, as is its even more upscale 12-unit sister concept, Grand Luxe Café. “Polished casual is a place that feels more expensive and can produce higher volumes,” Paul explains. “As consumers become more affluent, they are willing to pay more and trade up. It's the experience and total package they're looking for.”

Aaron Allen, president of Quantified Marketing Group in Heathrow, Fla., says one must look at the fast casual phenomenon to understand the emergence of modified and polished casual. Fast casual operations have succeeded not only because their lower price points, hipper concepts and better products resonated with the public, but also because these businesses were able to “shrink the size of the traditional casual restaurant box, use less labor and get higher margins” than their midscale casual competitors such as IHOP or Applebee's, says Allen.

What's more, a typical 1990s casual dining model featured a million-dollar investment in return for a million dollars in annual revenue. With a fast casual model, an operator can open two to four restaurants for that same million, and that investment might net $2.5 million in annual sales. This shift “left big boxes, with those $10 to $15 price points, with tremendous overhead, declining guest counts and, like the rest of the industry, increased costs on top of it,” Allen explains. “They've been dealt a poisoned dart and now they're scrambling to make adjustments.”

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All of this has helped to set the stage for the polished casual business. “Because of shifts in unit economic models and dining habits, successful concepts are ‘niche-ing’ themselves off to these emerging categories where everything is elevated,” says Allen. The modified casual segment takes some principles from fast casual — a smaller space than the big box restaurants, a more upscale product and design, and a greater concept focus — but unlike fast casual, offers full service. Florida's growing Times Grill chain, where burgers make up 85 percent of revenues, is a good example.

The polished casual business model generally involves a larger footprint than its modified counterpart, a $2 to $3 million dollar investment, and annual sales up to $5 million. Aaron Allen cites Darden's Red Lobster as a good example of a big box chain that successfully moved to the polished casual dining niche. “Its menu and design have gotten smarter and more sophisticated, and the profitability, guest count and satisfaction scores are at their highest levels in the company's 40-year history,” he points out. Like Ron Paul, he believes that a savvy dining public will continue to trade up and indulge in the affordable luxury these concepts deliver. “We can't all trade up to a $60,000 car, but we can trade up to a $25 entree. That's the thinking that is going to drive the polished casual segment. These changes are going to put the Applebee's model in the horse-and-buggy category.”

Another important trend is taking place in the casual dining arena and driving a better class of casual restaurants: Greater demand for chef-driven concepts. Americans are watching and reading more about food, celebrity chefs and the glamorous world of restaurants. But at the same time, their interest in a formal restaurant experience is waning. This consumer driver, plus the oppressive overhead of upscale dining, are steering some of the country's most accomplished and talented chefs into casual territory. These operators are at times offering nearly the same menu in simpler settings, or, more often, reinterpreting their fine dining offerings for more casual venues. Tom Colicchio, celebrity chef and founder of the famous Craft in New York City opened 'Wichcraft — a sandwich concept that promises the Craft experience “between two slices of bread.” Similarly, Laurent Tourondel, who made a name for himself at Manhattan's Cello, found that while fine dining can give you a reputation, casual concepts can build an empire. Tourondel launched his own line of BLT (Bistro Laurent Tourondel) Steak restaurants, and most recently, the even more casual BLT Burger and Fish Shack concepts.

Still more restaurateurs are discovering the benefits of downscaling: In Washington, D.C., Galileo/Osteria's Roberto Donna recently launched a pizza concept, and the legendary Thomas Keller (of French Laundry fame), now has a three-unit bakery/casual eatery chain, and is working on a hamburger concept.

Lee Maen of L.A.-based Innovative Dining Group (parent of Sushi Roku and Boa Steakhouse) says, “I would say polished casual is more focused on design, product, is more expensive…without the formality of fine dining; the reservations, the dress code. I think they have more of a feeling of community, that you can walk in any time; but with better ingredients, more unique design, and a less ‘stamped-out’ image. It has more personality than most of casual dining.”