Anyone entering the fast casual fray should heed the words of a seasoned pro. “As far as potential goes, the breakout categories are build-your-own pizza, Mediterranean and barbecue,” says Darren Tristano, executive vice president at restaurant research firm Technomic Inc.
Notable concepts like Blaze Pizza, Zoe’s Kitchen and Dickey’s BBQ are indeed rising stars, all chasing the unprecedented payday of category leader Chipotle Mexican Grill. But what does it take to be a part of the industry experiencing the most growth and the likelihood of the highest returns? Read on.
Go Big or Go Home
If you compete within the increasingly crowded fast casual segment, think in terms of multiplying. The key to growth—often referred to by investors as “scaling”—is your management team’s ability to balance financing, site selection and capital with the need to open locations as quickly as possible to capture market share.
Privately held fast casuals can grow more slowly with so-called “patient capital.” Still, one or two site selection mistakes for either can set a small chain back.
Given the legion of young fast-casual diners, engaging customers through social media is essential. Some observers noted that premium burger concept Shake Shack, which raised $1.6 billion in its January IPO, created much of its buzz through Instagram(185,000 followers) and Twitter (43,700 followers).
Its Twitter feed features product photos, lists Shake Shack-related events, retweets admirers, and recruits and compliments employees. Instagram followers regularly send food photos for a chance to be reposted on its social feed.
The Road to Fast Casual
Like any operation, getting on the fast casual track requires some major dough. Three ways to tap funds:
Friends and family supply $350,000 to $1 million to start. Banks are unlikely partners unless it’s a Small Business Administration (SBA) loan.
Grow concept quickly to five or more locations to mark a position in the marketplace.
Go after growth capital, typically private equity firms. Must show potential for rapid expansion. Valuation is placed on the company; investors seek 30- to 50-plus percent ownership.
Fast Casual Defined
>> Food quality is on par or better than casual dining
>> Food prep of fresh ingredients is usually in plain sight of customers
>> Knowledgeable, concept-savvy employees
>> $8 to $15 check average (including beverage)
>> Authentic design materials—wood, brick, metal, glass and ceramic tiles, oftentimes recycled or repurposed
>> Environmentally conscious (LEED-certified, recyclable utensils and paper products)
>> Customizable, counter-service format
>> Limited table service
>> Single-serve beer and wine containers
Casual Culture Rules
Fast casual restaurants have their own set of cultural rules. These typically include promoting their values, stewardship of the environment and offering fresh foods. Aspiring “founders” should consider:
- Create a brand with a purpose that drives food quality, service, price and decor. Chipotle, for example, risked lowering sales by pulling carnitas from its menu at many units after suspending a large pork supplier for violating its standards for raising pigs.
- Avoid processed foods or ingredients, which can turn off customers looking for fresh, whole foods.
- Use recycled paper and plastics to reduce your carbon footprint.
- Use meaningful language. Fresh and local are now overused. Instead, list local suppliers on the menu and make sure
- employees can share that information. If you use a commissary to batch-process foods, refer to it as the “central kitchen.”
- Keep nutritional information handy. Check out Sweetgreen, a fast-casual salad concept based in Washington, D.C.
Source: Michael Mack, Garden Fresh founder and Tender Greens advisory board member