Much has been said about the potential fast casual sling out of the COVID-19 crater. It is a notion that draws on a few familiar examples. When the Great Recession smothered retail in 2008-2010, lowering barriers to entry was quick and easy. In 2017, industry consultant Pentallect Inc. said rapid occasional growth slowed to between 6% and 7%, down from around 8% the year before. He was a headliner at the time. Why? Because fast casual has exploded by 10 to 11% over the past five years.
It has proven several things. First, fast casual and its entrepreneurial DNA have flooded the loopholes left by the rationalization of over-leveraged brands. And then things got crowded.
In general, consumers have benefited as there is no shortage of options. The industry has experienced more than 20 years of unit growth. But the supply started to peak in 2018-19. After an 8-9% year-on-year expansion of units from 2010 to 2017, fast casual fell back, growing only 2% in spring 2019, according to consulting firm Green Circle.
This has created an extremely competitive environment which has forced returns on invested capital to decline for all but the largest brands. If we think in terms of the post-coronavirus landscape, the unfortunate closure of around 90,000 restaurants (according to the National Restaurant Association) is expected to leave a thinner supply base that will lead to better competitive dynamics for the concepts involved. come out. Fewer stores are grappling with the share of dollars consumers spend on food outside the home. In this, a more streamlined catering area that also opens up favorable real estate opportunities.
Where does fast casual fit in? Even before the crisis, an overabundance of commercial real estate in urban markets caused rents to stabilize. For example, the amount of empty commercial space in New York City reached 11 million square feet in 2017, double what it was in 2007, Green Circle noted.
The pandemic has exacerbated a precarious situation. “In addition to the myriad small retail and restaurant businesses that may be forced to leave their retail spaces for good because they can no longer afford them, a growing number of business chains are also starting to be reluctant or reluctant to do so. able to pay their rent. These store closings are sure to create a real estate inventory surplus, which will lead to lower rents for the surviving chains, ”Green Circle said.
This increase in the vacancy rate has the potential to reduce commercial rents and floor improvement packages made available by homeowners willing to occupy their spaces.
When you consider all of this, plus where the quick casuals tend to crop up and how it’s always been a real estate conversation, it paints an interesting picture. The total amount spent by millennials and millennials continues to grow relative to other age groups, especially in restaurants, Green Circle added. And so, consumers of these generations could move away from traditional concepts of quick service and move to healthier quick and casual alternatives in the years to come.
Yet is it that simple?
Here’s a point made by Firehouse Subs CEO Don Fox: “The economic fundamentals are still similar to the 1990s,” he said. “The post-pandemic regeneration of the restaurant industry may well emerge from the fertile ground that gave birth to fast casual, creating a renaissance in restaurant development for the segment. Some brands will rely on stand-alone buildings, and drive-thru will be coveted. The line will increasingly blur between fast service and fast casual. But the economy hasn’t changed much, and it’s in the realm of leased online space that the current white space is likely to be filled. “
To step back in time, the “fertile ground” Fox refers to arose out of a dilemma. Operators sought to launch innovative concepts and compete with fast service giants, and so they turned to online and rented real estate, which could be developed at a more affordable price (as opposed to basic builds and capital needs of over $ 1 million before the open house). These have become increasingly common launching pads for fast growing pizza and sandwich chains. And ultimately, the incubator who would quickly become laid back, Fox said.
But let’s focus on another point that Fox made: this idea of the line between fast service and quick, casual blurring.
Location-based technology company Bluedot recently released its latest “State of what feeds us, Report, which has kept tabs on consumer behavior and eating habits throughout the pandemic.
The latest edition offered a year of review of the changing preferences precipitated by COVID. In addition to the emergence of indoor dining, he explored the growing competition between fast food and fast food as restrictions collapsed. What he found was consistent consumer behavior across the two categories, signaling that the once sharp divisions between fast food and fast casual may evaporate.
“It remains to be seen whether the fast casual brands will win back the customers they lost to fast food restaurants last year,” Emil Davityan, co-founder and CEO of Bluedot, said in a statement.
Before getting into the nuances, Bluedot’s data, of a high level, showed that fast food has overtaken fast and casual restaurants by more than twice over the past few months. Forty-five percent of people visited fast food restaurants primarily, if not exclusively, rather than fast casual. Visits to fast food restaurants versus casual dining were slightly higher at 47 percent.
“Brands that have stepped up investments in technology and logistics to deliver faster and smoother service during the pandemic are starting to level the playing field, but now there is a race to roll out the restaurants of the future,” said Davityan said. “It’s the next evolution in personalization, speed and convenience, coupled with a unique brand experience that will best position restaurants to gain market share. ”
The state of fast food
As you go through the sections, it will become clear where fast food and fast casual intermingle, and what will separate brands as the industry reboots.
Starting with fast food, it all starts with the drive-thru. Consumer visits to drive-thru continue to be significant, contributing to higher lifetime value for the customer.
Visited drive-thru the same way or more often than before:
- May 2021: 70%
- February 2021: 68%
- August 2020: 74%
- April 2020: 52%
So we’re talking about a 36% year-over-year increase. Nine in 10 people surveyed in the Bluedot study of more than 1,800 consumers said they had visited a drive-thru in the past month.
Almost 30 percent (29) said offers and personalized offers inspired repeat business. And the # 1 reason they gave as to why they frequent one drive-thru over another was ordering accuracy, at 67%.
Next come speed and waiting times (61%), followed by the restaurant offering their favorite dish (50%).
Thirty-four percent of consumers ranked drive-thru as the most likely place they would add more menu items (or create their check).
- Drive-thru: 34%
- Restaurant app orders: 24%
- At the counter: 20 percent
- Online (online order): 18%
- SMS ordering: 4 percent
Bluedot also asked guests, based on channel and income level, where additional menu items were most likely to be added?
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