CSP Magazine

Fast Casual Keeps Climbing

Competition will heat up as market fragmentation continues

Fast-casual restaurants continue to outperform the rest of the restaurant industry. But in an increasingly fragmented market in which consumers can expect a freshly prepared meal everywhere from convenience stores and hybrid “grocerants” to Uber, foodservice brands of all stripes will have to work harder than ever to stand out.

Fast-casual units were up by 5% in 2015 compared to a slight decrease in the total number of U.S. restaurants, according to the NPD Group, Port Washington, N.Y. Fast casual continues to hit the sweet spot of value, variety and quality, pulling customers away from traditional full-service and fast-food outlets, says NPD restaurant industry  analyst Bonnie Riggs.

“When I look at customer satisfaction ratings for fast casual, they’re very high,” Riggs says. “They find a lot of value in quality food made with fresh, traceable ingredients that’s freshly prepared while they wait. And there’s a lot of variety, both in menu innovation and fast-casual options—from burgers to sandwiches, pizza and healthier choices.”

As the restaurant industry continues its slow recovery, chain restaurants have fared slightly better, with a 1% gain in unit counts compared with a 2% decline among independents, mainly among full service, NPD data shows.

“Whether quick service, casual or family service, major chains are doing better than independents,” Riggs says. “They have the marketing clout, they’re able to promote and advertise, and they have economies of scale when it comes to purchasing. It’s a bigger struggle for the little guy.”

And while consumers still use fast-food restaurants for the convenience factor during the week, many are staying home on weekends rather than going out, which has hit full service especially hard.

Bigger Playing Field

Restaurants have more than their fellow restaurants to compete with now. For one, convenience stores are giving traditional quick-service restaurant (QSR) operations a run for their money, Riggs says.

“C-stores, especially those that we call ‘food forward’—like Wawa, Sheetz, Kwik Trip and RaceTrac—have decided to compete heavily with fast-food operators and improved the quality and variety of their food,” she says. “And they’re resonating with all kinds of consumers, not just the historic c-store market.”

Also upping the ante on the retail side are the so-called “grocerants”—supermarkets with restaurant-style, sit-down offerings—which are offering freshly prepared (and competitively priced) meals.

And while the traditional delivery mainstays of pizza and Asian food are declining, gourmet food delivery is on the rise.

“A number of concepts are growing quite strongly in delivery,” Riggs says. “Because of the services available today, higher-quality restaurant operations can have food delivered and not take on responsibilities associated with delivery.”

Not to be discounted is the home itself, Riggs says. Because millennials were hit particularly hard during the recession, many cut back on restaurant visits and became accustomed to cooking at home, which has been further facilitated through the growth of quality meal kit-delivery options.

“It’s going to be a challenge for restaurants,” she says. “There’s a lot more competing for [consumers’] attention.”

Fast Casual Leads the Pack

5% - Increase in fast-casual units

1.6% - Decline in full-service-restaurant units

0.4% - Increase in QSR units

Source: NPD Group, fall 2015

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