The Next Great Fast Casual

On this Thanksgiving I get a chance to reflect and review just where we are in the fast casual restaurant business.  I'm often asked what is the next Great Restaurant Brand will it be a Panera Killer, a Starbucks knock-off or the next Chipotle?  I fear we may have seen our last Chipotle but we may be something even more special in a new way to reach the masses.

Brands can and do go global.  But in the age of Facebook, Twitter and Yelp, it’s extremely difficult to turn customers into raving evangelists—which is what a Fast Casual concept needs in order to get big fast—without a local presence and a connection to a local culture.  Example: Sushirito in San Francisco, a one-unit concept restaurant, is remaking the idea of sushi as a burrito.  That’s wonderfully daring, but could it work in Oklahoma City?  Maybe, but you would need some big brand champions to help deliver that unit to profitability. It’s hard to build that kind of evangelism when you don’t have people on the ground who can rev up local enthusiasm.

There’s nothing wrong with this new dynamic, by the way.  Change is endemic to the restaurant business; the relative stability that existed with the rise of McDonald’s and fast food in general was an anomaly.  The industry must accept that, as global as we may seem, local is more powerful.  The day of the big brand is changing, though it is not coming to a close.  That’s healthy for our industry.  A brief history of the changing of the guard in the restaurant world:

Wendy’s Threatens McDonald’s

Dave Thomas founded the Wendy’s chain in 1969 in Columbus, Ohio, and for years Wendy’s trailed far behind McDonald’s and Burger King among hamburger restaurants.  But following a retooling of the stores and brand in 1986, Wendy’s began its resurgence.  In merging with Arby’s, adding a menu of healthy options and more, the chain has grown tremendously to the point that it is the fifth-largest U.S. restaurant chain, trailing only the Golden Arches, BK, Starbucks and Subway.  As of March 2010, Wendy’s Group had more than 6,500 locations around the world, and the company posted 2010 total revenues of $3.4 billion.  Perhaps most telling, as of June 2011 the chain had “out-buzzed” both McDonald’s and Burger King.  According to the YouGov BrandIndex “buzz score,” which measures the consumer perception of brands, Wendy’s rated a 28.8 buzz score, far above McDonald’s 23.1, reflecting consumers’ higher opinion of Wendy’s quality.  In 25 years, Wendy’s has become a serious threat to McDonald’s and BK’s dominance.

Burger King Slumps

On the other end of the change spectrum lies Burger King, which has suffered with the slumping economy.  Despite operating more than 12,000 stores worldwide and posting $2.5 billion in domestic 2010 sales, the chain is hurting.  The company reported a $34.5 million loss for the second half of 2010, and its income slipped $6.2 million in the first quarter of 2011.  To add to the chaos, the company sold last fall to investment group 3G Capital, while CEO John Chidsey stepped down.  The overall picture is of a number-two chain that’s reeling, but why?  Part of the problem may be BK’s slowness in moving into healthful food options; in fact, the stores became known for meals that were raging with artery-clogging trans-fats.  Whatever the reasons, the fact remains that BK now resides below Subway and Starbucks on the QSR pantheon.

Subway And Starbucks Rise

On that note, we look at the sandwich maker and the coffee brewer.  As of March 2011, Subway passed McDonald’s to become the world’s largest restaurant chain with (at that time) 33,749 locations.  Without question, Subway has leveraged the public’s greater interest in healthy fare to grow at an exponential pace.  Most impressively, the chain has hit number one while spotting the Golden Arches a 25-year head start, not opening its first location until 1965.  Then we have Starbucks, the oft-mocked symbol of rapacious capitalist expansion.  With more than 17,000 stores worldwide and 11,000 in the U.S., the Seattle-based coffee giant is now the number-three QSR brand in the nation, leaping over Wendy’s and Burger King to take that spot.  This also reflects the desire among many American consumers for healthy food purchased in a welcoming environment from a company with a social conscience.

Simply put, nothing is static in the restaurant industry.  The next big idea is already out there, gestating somewhere away from the bright media lights of New York and Los Angeles. The face of change is not only the increasingly global nature of our business, but in the challenge of distilling a global message down to a local level and turning it into something authentic and organic that really connects with consumers. 

Stay tuned next week for my 2012 predictions on the next phase of Fast Casual stars, restaurant trends, consumer trends and how tech, social, mobile and local collide. 


Posted on November 24, 2011 and filed under Fast Casual.