Consumer Trends | July 2017 | By Bruce Horovitz

Restaurant-Market Hybrids Rise in Foodservice

Counter-service restaurants add gourmet retail experiences in a bid to be more things to more people.
While Friends & Family in Los Angeles offers a range of prepared foods, it also serves fresh menu items like the Lamb Merguez Baguette. Friends & Family
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There was a time when restaurants were restaurants and stores were stores. That time, though, may be screeching to a halt.

In an age when food-infatuated millennials want exactly what they want precisely when they want it, the restaurant world is adjusting with brands that are part gourmet restaurant and another part retail marketplace.

This retail mix—typically dotted with an assortment of higher- and lower-end offerings, including both pre-packaged foods and other goods—is widening the focus of the restaurant business from a place where folks sit down to eat to a place where folks seek out all things food.

Various versions of this restaurant and retail mix have been done for years, from the local deli to Dean & DeLuca. In each case, the store will sell freshly prepared food to eat there or to go, while also weaving in a retail shopping experience that includes a wide variety of food-related merchandise.

The key question is: Just how tough is this to pull off? How difficult is it to excel at two very different retail specialties at the same time?

Kris Furniss, cofounder of the five-unit, Charleston, South Carolina–based Caviar & Bananas, and Daniel Mattern, chef and co-owner of Los Angeles–based Friends & Family, both say the gourmet restaurant and marketplace model isn’t easy.

“One of the biggest challenges we face when we go into a new retail market is training customers how to use this concept,” says Furniss, who left the financial world to open his first Caviar & Bananas restaurant nearly a decade ago. “When some customers walk in for the first time, they look like a deer caught in the headlights.”

That’s because the choices are so many—and the stimuli are coming from all directions. As its name implies, Caviar & Bananas sells everything from the exotic to the mundane.

“I wanted to create a shopping environment where you could get anything, from the extraordinary to the ordinary,” Furniss says.

Furniss says his experience working as a Dean & DeLuca general manager influenced him, and that he wanted to take what he learned there and turn it into his own concept. Unlike Dean & DeLuca, however, sales at Caviar & Bananas are more focused on the foodservice side, Furniss says. There is no table service except during happy hour, when the bartender might bring customers their meal along with a glass of wine.

“We’re a hybrid between a restaurant and a grocery store,” he says.

Because it’s essentially two stores in one, Caviar & Bananas has many moving parts. “You have to categorize all of those moving parts and manage them,” he says. This kind of operation is not for the person who simply wants to own piece of a restaurant, Furniss adds.

The part Furniss thought was going to be easiest—the retail part—has actually evolved into the most difficult.

“You are adding another whole piece of inventory,” he says. There is suddenly a new world of stuff to worry about, from expiration dates to aesthetics, such as dusting the products on the shelves and arranging them in a good light.

Caviar & Bananas’ fifth location opened in Nashville, and Furniss hopes to eventually open more. But not everything has worked perfectly. At one point, the chain tried to offer full-service catering, too. “That diluted what was true to our concept,” he says, noting that his team cut back on catering “and got back to our core.”

Across the country, chef Daniel Mattern of the newly opened Friends & Family is learning a similar lesson about the challenges of running a restaurant that’s also a retail store.

The restaurant and bakery is an attempt to combine his talents as a chef with that of his long-time partner, Roxana Jullapat, who is a baker. Baking lends itself to a whole new menu, he says, which includes everything from fresh-baked bread to a wide array of pastries.

The restaurant, which seats about 50 people, accounts for about 75 percent of the sales, Mattern estimates. The big challenge, he says, is figuring out what to sell in the restaurant and what to sell in the grab-and-go retail section.

“If we sell them our homemade granola to go, does that mean they don’t come in and eat it here anymore?” he asks as a hypothetical. “We’re still trying to figure that out.”

At the same time, there’s sometimes a dichotomy between the retail items that he thought folks would want versus the things that customers actually purchase. For example, the shelves are stocked with the same cooking oils and vanilla beans that the restaurant uses for cooking, but neither has sold very well, he says.

The retail items that sell best, he says, are the pre-made specialty items—particularly Friends & Family’s chicken meatballs.

But Mattern and Jullapat are still learning. As Mattern enlarges the grab-and-go section with a greater number of sandwiches and other items, Mattern says, he keeps wondering if it’s eating away at his own lunch business.

“Do we shoot ourselves in the foot if we have too much in the grab-and-go case?” he asks. “Or is money in always a good thing?”

He intrinsically knows the answer to that question. That’s why he’s in the midst of enlarging his grab-and-go section. Money in wins every time.

This story originally appeared in QSR's July 2017 issue with the title "Off to the Market."