Why Fast Casual Kicks Butt

Megan Rowe

HIPPER: Ruby Tuesday took a cue from fast-casual upstarts and modernized its interiors.

Fast-Casual Operators continue to be the darlings of the restaurant business, with good reason: Compared to their casual full-service rivals, they are the young, buff hunk versus the middle-aged guy with the beer belly and bum knee.

The better fast-casual chains have cannily positioned themselves to pull customers away from both ends of the market — the quick-service customer who wants a better quality product and experience, and the full-service guest seeking out something a little hipper, quicker and cheaper than the table-service model. They appeal to men and women, old and young, noshers and three-squares types. If you want to survive, you might think about imitating some of the things they do right — and there are plenty.

They have some maneuverability.

Let's start with one of the most important qualities of the typical fast casual restaurant: adaptability. Typically, they are smaller than an average full-service operation, and that size means they can fit into spaces that others can't use. “It's a much smaller footprint, 3,000 square feet versus 5,000, with a much smaller kitchen. So there is a lower capital cost to build it, and it's typically easier to find sites that work — almost always in a strip center, versus freestanding, where you have to find an acre and a half of land,” says Dennis Lombardi, executive v.p. of foodservice strategies for WD Partners.

FRESH LOOK: Ruby Tuesday reinvented itself from the inside out.

Smashburger, a growing burger chain, operates within a very small (1,600-2,200-square-foot) footprint to keep development and overhead costs down. Smaller spaces also translate into downsized real estate bills, utility costs, cleaning labor and so on. “It's like empty nesters moving from a four- to five-bedroom honker into a nice little condo unit,” Lombardi observes.

The takeaway for budding developers, regardless of the service style, is clear: Smaller is better. Obviously an established operation can't do much to change an existing shell, but operators like Denny's and Baker's Square are testing ways to carve their larger spaces into two, one with table service and the other with a vibe more like fast casual.

Another plus for fast-casual operations is they tend to open in markets with better demographics, “so they'll have a higher profile with people who are spending money,” says Darren Tristano, executive v.p. with Technomic. The lesson here is an old one: location, location, location.

The design is more appealing to a younger crowd.

At Chipotle, the ordering line reinforces the freshness message.

As a rule, fast-casual operations are “more authentic and genuine and less contrived,” says Aaron Allen, c.e.o. of Quantified Marketing Group. The layout — often with comfy sofas and chairs, fireplaces, free wi-fi and sometimes televisions — promotes lingering and makes these restaurants more of a third place to hang out than their full-service counterparts. “People are much more likely to say, ‘I'll meet you at a Starbucks or a Panera’ than at a casual dining location,” Allen says.

Does the style of your restaurant interior match your customers' tastes? Is it tired and dated, or have you kept up with the times?

At least one chain has retooled itself to look more relevant. Last year, 600 Ruby Tuesday company-owned stores ditched the Tiffany-style swag lamps, polished brass, striped awnings and antiques and curios in favor a sleek, new look, including a new logo. In publicizing the makeover, the company itself pointed out that “all casual dining restaurants have come to look alike.”

They follow a more compelling business model.

That fast-casual restaurants are cheaper to build has been well-established. But other characteristics make them even more attractive as investments: Fast casual menus require much less variety in the way of ingredients — Tristano says Chipotle relies on about 145 SKUs versus the typical full-service operation, which uses 500-800 — thus allowing managers to control food costs and spoilage better. They employ a smaller team of people to produce larger quantities of food, and while the wages of those people are higher than servers', they are more productive. “I'm not sure I've ever been in a fast-casual restaurant where people are not hustling, as opposed to a full-service restaurant, where bussers and waiters typically are standing around, waiting,” Tristano says.

Plus, “It's easier to manage because it's smaller, there is less labor and alcohol often is not being served, so there should be a more consistent experience,” says Lombardi.

They focus on fresh, made-for-me offerings.

Virtually every fast-casual concept sports an open kitchen or an in-your-face assembly line where guests can see exactly what is going into their food and how fresh the components are. “Often you're seeing it put together and you can say, ‘no, I don't want that,’” if someone starts to put onions on your burger or jalapeños on your burrito, Tristano says.

Besides the usual fountain drinks, they'll find smoothies, specialty coffees and other customized beverages. Instead of a vague smell of frying oil, the aroma of fresh-baked bread might fill the air. Ingredients that hint at higher quality — red onions versus white, organic versus mass-produced chicken, designer pork — further distinguish their menus from the ho-hum mass fare churned out by the established full-service chains. And places like Five Guys, by taking a simple item like a burger and providing a multitude of topping choices, customize the meal in a meaningful way. “Getting it the way I want it is huge on my experience meter,” Tristano says.

They have an edge in marketing.

Noodles and Co. teams bold flavors and a fun atmosphere to attract younger demographics.

Fast-casual restaurants may not have the war chest of a McDonald's, but their newness gives them an advantage: It generates buzz. Many fast-casual stores are opening in communities that aren't already overrun with chain restaurants, so they get noticed just by popping up on the landscape. And many have created compelling logos and exterior designs, which raise the public's curiosity about what's inside.

With their streamlined menus, the message is easier to convey, since there is rarely any confusion about what they offer. When a customer enters a Qdoba, Mexican is the mission; an Appleby's, in contrast, sends a mixed message.

As for the marketing message, typically it's edgier, fun and more humorous than the average promo for a restaurant. And it's aimed directly at millennials, who are now the single most important demographic for restaurants.

They are seen as good value for the money.

For a little more than quick service, and a bit less than a full-service check with tip, customers are getting freshly prepared food, quickly, in a contemporary setting. “Consumers are saying “Why should we spend $17 at a Friday's to get a dated experience and food when I can spend $9 at a Chipotle to get a relevant experience and better quality food?'” Allen says.

They have broad appeal for a variety of reasons.

Fast-casual is not a passing fad; it's the new cool thing. Teens use these restaurants as hangouts, adults like them because they're just hip enough, professionals and college students like the wi-fi; kids like the food. “Kids today are getting used to eating at these restaurants. Panera is like the new McDonald's,” Tristano says. “Kids love the soup, the peanut butter and jelly, the bagels. Kids are growing up loyal to it the way older generations were loyal to McDonald's.”

Because they are newer brands, a distinctive advantage for fast-casual operators is that they are more in tune to what consumers are seeking now, as opposed to older brands that may be in a rut.

“People buy brands that reflect how they see themselves, and more people see themselves as a Panera, Chipotle and Starbucks than as a TGI Friday's, Bennigan's or Chili's,” Allen says.

But despite their popularity, fast-casual restaurants have not totally stolen the show. “You have to think about where they fit for the meal occasion or need state,” Lombardi explains. “How much time do I want to invest in the meal, and how many people are in my group, what's the composition and how much do we want to pay? If I just want to sit and relax and talk with someone over a drink, fast casual doesn't do it for me, and there's not much they can do to entice me.”

Allen says the better full-service players — the Olive Gardens, Ruby Tuesdays and Red Lobsters — are excelling because they continue to up the ante, keeping the design relevant and improving the menu offerings to set themselves apart from the pack. “People are looking for bolder flavors and more upscale offerings” from casual restaurants, he observes.

For Lombardi, the single most important strength of fast-casual that full-service operators would be wise to imitate is this: What you do, you must do well.