Competition | May 2013 | By Daniel P. Smith
The Great Migration
On Fort Lauderdale, Florida’s 17th Street, tucked in the shadow of giants Chipotle and Panera Bread, an upstart burger joint dreams of someday entering the same upper ranks of the fast-casual world that those two brands helped create. Though the restaurant carries a familiar name, its vibe is decidedly fresh.
Welcome to Shula Burger.
The Shula’s brand has earned credibility in the restaurant world, not only because of its world-famous namesake, former NFL coach Don Shula, but also due to the renown for its 15 Shula’s Steak Houses around the U.S. But the Florida-based company thinks its future success lies in this young fast casual that swaps white tablecloths and crystal stemware for hamburgers and hand-dipped Häagen-Dazs milkshakes.
With five Shula Burger stores in South Florida—the most recent of which opened this spring in Delray Beach—Shula’s is betting that its fine-dining know-how applied to a more casual and economical environment will make Shula Burger a national concept that can propel the parent company to new heights.
“Moving forward as a company, we know our greatest opportunity rests with Shula Burger,” says Scott Nietschmann, Shula Burger president.
Shula’s isn’t the only established brand making the trek from fine dining to fast casual. In the latest phase of fast casual’s rapid evolution, fine-dining companies like Shula’s and accomplished chefs like Spike Mendelsohn, the “Top Chef” star who owns Good Stuff Eatery in Washington, D.C., are marrying chef-driven cuisine with the simplified fast-casual model.
Michael Schaefer, head of beverages and foodservice for market research firm Euromonitor International, says chefs, restaurant companies, and consumers alike have increasingly rejected the notion that innovative nourishment is exclusive to the fine-dining category. That idea, he says, has pushed many fine-dining stalwarts into the quick-service landscape with food trucks, take-out windows, and fast-casual spots.
“There’s a growing recognition that you can have the same level of artistry and craftsmanship in a more laid-back setting,” Schaefer says.
The move isn’t entirely surprising, given fine dining’s struggles and fast casual’s recession-era surge. Though fine dining is, along with the rest of the economy, on the rebound, fast casual continues its run as the industry darling. According to the National Restaurant Association’s 2013 Industry Forecast, 47 percent of fine-dining operators termed their restaurant’s business conditions as “good” or “excellent” in 2012; by contrast, 57 percent of fast-casual operators claimed “good” or “excellent” business conditions in 2012.
The shift toward fast casual represents evolving economic conditions and consumer preferences. During the recession, price-sensitive customers traded down, prompting many restaurateurs to rethink their concepts or, at a minimum, how to play to diners’ shrinking wallets.
“If you don’t have something for the consumer to trade down to, then you lose that guest,” Nietschmann says.
With an $11 average check at Shula Burger, Shula’s knows it has a better opportunity to draw diners new and old, many of whom might have never enjoyed the high-end Shula’s Steak House. “Shula Burger brings us a new guest, a more frequent visitor, and allows us to spread out our price points so we hit on every demographic,” Nietschmann says.
Similar logic led noted Seattle chef Ethan Stowell into the fast-casual game. Though he was running six successful upscale spots around the Pacific Northwest metropolis, Stowell opened Ballard Pizza Company last year, driven by a growing recognition that fewer people were willing to spend $40 on an entrée.
“We wanted a different market of customers, and that’s what Ballard has given us,” Stowell says.
Eager to further diversify his restaurant portfolio, Stowell has other fast-casual eateries in the works, including a fried-chicken joint, a burger place, and a fish-and-chips concept. He believes his company’s expanding quick-service footprint will help build interest in his upscale restaurants.
“If we can hit at different price points, then we’ll expand our customer base as a whole and ignite interest in our full-service restaurants,” Stowell says.
While diversification is part of the fine-dining-to-fast-casual narrative, so too is plain and simple economics. In an environment where financing remains difficult, fast casuals typically demand less investment, inventory, and staffing. Instead of needing crystal stemware and table linens, fast-casual operators can use plastic cups and paper napkins. Rather than search for an expensive downtown spot among hotels and high-end retailers, operators can tuck their fast casual into a neighborhood or even nontraditional location, such as an airport or university.
“There’s passion involved in a lot of things, but at some point the economics of the business has to make sense,” Stowell says.
In Vail, Colorado, chef Thomas Salamunovich has been running Larkspur for more than a dozen years. The 250-seat, 11,000-square-foot restaurant stands among the largest independent fine-dining restaurants in Colorado and boasts a check average
In 2006, a chef friend visited Salamunovich from New York and told him about a hot new burger spot in the city called Shake Shack. That same day, Larkspur captured a local publication’s top honors for best burger.
“Right then, it all hit me,” Salamunovich says.
He began crafting plans for a fast-casual spot that would serve Larkspur’s award-winning burger. Seven years later, Larkburger claims 12 locations around Colorado and is exploring development outside the state, including in Texas and California.
Salamunovich is one of the many fine-dining folks who have embraced fast casual’s format innovation and stripped-down presentation. At Larkspur, for instance, Salamunovich carries more than 10,000 inventory items; at Larkburger, that number is closer to 300.
Fast-casual powerhouses like Chipotle have shown the industry that restaurants can minimize the menu and make quality food in a standardized, fast way. Shula Burger, for example, has 17 items on its menu, a tightly controlled offering that allows for heightened quality without the extended wait time.
“The economics, the operational ease of fast casual—this has all prompted interest from fine-dining people,” Schaefer says.
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