Competition | May 2013 | By Daniel P. Smith

The Great Migration

Fine-dining veterans are taking their talents to the fast-casual space.

Fine dining brand Shula's opened fast casual sister restaurant Shula Burger.
The Shula’s brand, founded by legendary NFL coach Don Shula, is banking on its new fast-casual concept Shula Burger for future growth. Shula Burger
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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
approaching $100.

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.

Of course, once in the fast-casual environment, the fine-dining stalwarts welcome the opportunity to leverage their upscale reputation with a new group of customers.

“With burger in the name, people see Shula Burger as a more casual experience, but recognize that it comes with the same quality Shula’s is known for,” says Dave Shula, who oversees the entire Shula’s dining portfolio.

Fine dining’s customer-service principles also frequently outpace the expectations of fast-casual customers. At Shula Burger, draft beers are served in chilled wine glasses, burgers are branded with the Shula name, kitchen workers sport chef’s coats, and the menu carries sommelier-selected wine pairings. Though customers order at a counter, crewmembers deliver food to customers, provide condiments, and serve refills.

“Once you sit down at Shula Burger, you never need to get up again,” Nietschmann says. “We’ve taken the philosophies of our higher-end brands and applied them to a fast-casual setting.”

The fast-casual setting especially stands to benefit from fine dining’s unapologetic romanticism of cuisine. One day in early January, for example, Salamunovich and his culinary director at Larkburger worked for 12 hours on a slight change to the burger recipe, eventually finding the solution in a splash of vinegar at the end.

“When you can bring this type of attention to the food, and do so at a more economical price point, customers can celebrate the level of refinement,” Salamunovich says.

The idea of bringing fine-dining finesse to a wider audience is part of what lured Bradford Kent into fast casual. A graduate of the Culinary Institute of America who made a name for himself at Olio Pizzeria and Café in Los Angeles, Kent teamed up with Wetzel’s Pretzel’s cofounders Elise and Rick Wetzel in 2010 to create Blaze Pizza. At first a consultant, Kent grew increasingly hands-on with Blaze Pizza, eventually becoming the concept’s executive chef.

“With Blaze Pizza, we can feed 1,000 diners a day rather than 100,” Kent says. “For those who love pleasing people with food, that’s quite attractive.” Alluring as the fast-casual segment might be to movers and shakers like Kent, relocation into the fast-casual world isn’t an adventure taken without some reservation and unique challenges. Some fine-dining operators fear they might dilute their upscale brands by jumping into fast food; others express concern about the standardization necessary to succeed in the quick-service environment. While fine dining’s higher prices allow an operator to cover the extra investments in staff and time-consuming techniques, the fast-casual category has no such safety net.

“You have to pay close attention to every single detail and make sure it’s all as streamlined and efficient as possible,” Salamunovich says.

Fine-dining lifer George Frangos, who has managed and owned upscale spots on the East Coast for the last two decades, was afraid of the uncertainties of fast casual when he opened Farm Burger in Atlanta.

“I had no reservations that our concept would work, but I was concerned about the day-to-day operational skills I would need, even something as simple as running a cash drawer. There’s a learning curve here,” says Frangos, who launched Farm Burger in 2010 with business partner Jason Mann.

Frangos acknowledges he would often grow anxious when he saw a line form, fearful customers would leave rather than wait. “I had to mentally acknowledge that customers were choosing to wait,” he says.

The move to fast casual also demands a more intense focus on throughput and the ability to get a product into customers’ hands quickly while retaining its integrity. Salamunovich says he’s tested 12 different grills at Larkburger, a trial-and-error process necessary to isolate the right combination of speed and quality.

Stowell says he was caught off guard by how many more customers he had to serve at Ballard Pizza Company because of the eatery’s lower check averages.

“It was surprising to go to the register and see that we served 400 people, but had the same sales numbers as the 40-seat restaurant,” he says.

Whereas fine-dining operators prepare for defined dining periods, fast casual becomes a numbers game that forces operators to assess how they can maximize traffic throughout the day.

“Once you’re open, you’re open, and you need to be moving people through the lines,” Salamunovich says.

Staffing is another issue fine-dining operators are forced to adapt to in the fast-casual world. While most are excited to puzzle together the necessary operational changes and menu shifts that can deliver a more economical price point, few want to mess with the customer-service components they know and champion. This, of course, is complicated by quick serve’s industry-high turnover rates and entry-level workforce.

“It can be a challenge to find staff who will drink the Kool-Aid that is our attention to detail,” Salamunovich says.

To hammer home the staffing expectations at Shula Burger, employees at the concept’s first location trained at the upscale Shula’s on the Beach, while staff at the second Shula Burger location trained at Shula 347.

“This gave staff at our first Shula Burger restaurants an immediate feeling of what we’re looking for,” Nietschmann says of the upscale training environment. “We may not be wearing tuxes at Shula Burger, but we’re still looking to provide high-quality service.”

If fine diners like Shula’s find success in the fast-casual world, many believe the fine-dining-to-fast-casual trend will only quicken, particularly given the benefits of lower start-up costs, operational ease, and diversification.

“We’re at a real moment now where people in fine dining are looking at new ways to get their product and passion out there … and this move to the fast-casual environment is enticing,” Salamunovich says.

Schaefer also predicts an acceleration of the movement throughout the nation.

“We’ve only scratched the surface here in the U.S.,” he says. “There’s an understanding that the right décor and innovative food doesn’t have to come with a lofty price tag.”

With opportunity and optimism on its mind, Shula’s leaders look to build 15–20 Shula Burger units each year, first in Florida and then expanding out from the Sunshine State.

“We believe in the Shula Burger concept and its potential to drive our company forward,” Shula says.

And, perhaps, to finally enter those lofty ranks of fast-casual royalty.