Diners go for Fast-Casual

Report Consumers

Diners go for Fast-Casual

BY TIFFANY HSU – Los Angeles Times

LOS ANGELES — Fast-food eateries are in the throes of drive-thru Darwinism as more upscale upstarts, such as Chipotle Mexican Grill and Panera Bread Co., grab market share from the likes of Taco Bell, Subway and Wendy’s.

Chains that are fancier than fast-food options but cheaper than sit-down alternatives are part of a hybrid sector known as fast-casual that is maturing into one of the food industry’s strongest.

That category is tapping into growing demand for more healthful, specialty foods that are still speedily served and moderately priced. Fast-casual is steadily poaching fast-food customers looking for better quality and sit-down diners seeking cheaper prices, NPD analyst Bonnie Riggs said.

“There’s no end in sight to their growth,” Riggs said. “They’ve delivered on consumers’ value expectations far more than most fast-food places.”

The evolution is happening as the rest of the restaurant industry fights for a shrinking customer base amid a slow economic recovery and high food prices.

Fast-casual is still only a small segment of the industry. But it tripled its market share in roughly the past decade to about 6 percent of restaurants, analysts said, and it is the industry’s only segment to grow in the past five years. In 2010, major fast-casual chains pulled in $18.9 billion – a 6 percent increase, according to research group Technomic.

“This category has essentially blown through the recession without skipping a beat,” Technomic Executive Vice President Darren Tristano said in a statement.

Formerly known as adult fast food, fast-casual includes restaurants with limited table service and no drive-thrus. They are often perceived to have higher-end décor, food quality and prices.
‘More fuzziness’

But the boundaries are blurring. Eateries such as Carl’s Jr., with its Six Dollar Burger, and foodie favorite In-N-Out straddle the line between fast-casual and fast food. Drive-thrus are appearing at Panera locations, and some fast-casual chains are experimenting with delivery – usually an option sit-down restaurants provide.

“We’re going to continue to see more fuzziness in how to define these restaurants,” said Robert L. Sandelman, chief executive of food service research group Sandelman & Associates.

Panera, which has about 1,500 outlets nationwide, is turning in especially impressive numbers. In the third quarter, its profit was $28.8 million – up 27 percent compared with the same period in 2010. In late November, the company’s stock price hit a 52-week high of $143.38.
Bakery-cafe restaurants, such as Corner Bakery Cafe, are leading the fast-casual charge, analysts said, followed by so-called better-burger chains such as Five Guys, the Counter and the Shake Shack. Other fast growers include Asian restaurants, noodle shops and Mexican eateries.
Perceived food quality is key to fast-casual’s rise, according to a survey measuring meal quality by the MarketForce research firm. Customers ranked Panera, Chipotle and Five Guys high while pushing fast-food companies Burger King, McDonald’s and Taco Bell to the bottom.

In the same study, fast-casual restaurants also scored among the best for atmosphere, healthful options and eco-friendly business practices.

Fast-casual chains also tend to have distinctive décor, such as the international-cafe feel of the Cosi sandwich chain and Pei Wei Asian Diner’s glossy vibe.

“These restaurants offer a more pleasant experience – unlike a fast-food place that’s less clean than you’d like it to be, smelling like grease, and small, too,” said Jason Moser, a restaurant analyst for Motley Fool. “It’s just the evolution of eating out in general.”

View the full article on News Observer

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