Growth, but not for the sake of growth anymore
As always, this past year didn’t lack for intrigue in the restaurant world. One of the more interesting developments is how quickly the fast-casual space is shifting. Once the darling of restaurant growth, the industry has bounced along a rocky path. Many of those buzzy, hip, industry-shaping brands have reined in growth. Some are gone altogether. There are many reasons for this. Perhaps No. 1 is the simple reality that the segment boomed too quickly. It was like a popular nightclub that had to eject guests when the occupancy overflowed. While this was all happening, quick-serves started to improve not just their menus and ingredient statements—they were also using scale and leverage to push more efficiently into channels that upstarts couldn’t.
Delivery, for example. The up-and-coming concept could never buy a $200 million stake into GrubHub like YUM! Brands did last year. So they holster the cost burden more painfully, and, generally speaking, don’t have the digital tools to capture as much business without taking a huge margin impact. And then there’s the problem of real estate. Most of these brands work best in densely urban areas, where rent is borderline (understating) outrageous and the idea of actually owning a building is nearly impossible. So what happens when you’re successful and those leases start turning? All in all, the future of fast casual is an evolving target. It’s very possible you’ll see less disruptors and more of those brands that have the growth and customer-centric game figured out. The cream will rise to the top in other terms. It wouldn’t be surprising to see more brands file for bankruptcy in 2019. It’s also true that plenty will skyrocket. That line in the fast-casual sand might just be more defined than it once was thanks to saturation and the overall—and always progressing—difficulty of making it in this business.
With all of that said, here’s a look at 12 chains ready for lift-off this coming calendar and beyond.
Now eight years in, talk of the 36-unit gourmet hot-dog concept’s growth has swirled for some time. They’ve taken an infrastructure-first approach to expansion and appear ready to blow the doors off this thing. Dog Haus announced in November that it plans to double in size by the end of 2019. New and longstanding franchisees committed to open locations throughout Arizona, California, Colorado, Illinois, Maryland, and Texas. Additionally, the first Kentucky, Louisiana, and New York outposts are on deck.
In Texas alone, father-son franchisees Sandy and Jason Rappaport are set to open 30 Dog Haus locations throughout San Antonio and Houston over the next five years. Jason’s father, Sandy, owned and ran all of the Outback Steakhouses in South Florida and later became the main investor and first franchisee for Boston Market and Einstein Bagel Company. Jason was also the first franchisee for World of Beer. Also in Texas, franchisee Ron Ryan and partner Kirk Hermansen, who are on track to open a total of 20 Dog Haus locations in Dallas-Fort Worth over the next four years, will open four more restaurants in 2019, the company said.
Then, in its home base of California, franchisee Dan Markel plans to open a total of 11 locations, with five in 2019. In San Diego County, three more locations are expected in 2019 by franchisees Scott and Henry Lee, who recently opened Dog Haus Biergarten Vista, and who plan to open a total of 13 San Diego County locations.
Arizona, Colorado, Illinois, and Maryland are four states with current locations that are set to add more, Dog Haus said.
“Doubling our locations in one year represents a huge moment of growth for our brand,” said André Vener, Dog Haus partner, in a release. “We’re looking forward to introducing our lively atmosphere, chef-driven menu and craft beer program to customers around the country, as we’re true believers that anyone who walks through our doors falls in love with the Dog Haus experience.”
Sub Zero Nitrogen Ice Cream
Failing to get a deal on “Shark Tank” hardly derailed the expanding dessert franchise. The 58-unit chain, which uses a patented process of freezing ice cream with liquid nitrogen to create customized products, opened seven new stores and signed eight agreements in 2018. It’s positioned, the company said, to add 15 new targeted markets in 2019 in what would be its biggest franchising run so far. Since the initiative began in 2008, Sub Zero, founded in 2004 by Jerry and Naomi Hancock, the brand has grown to nearly 60 locations, including three international storefronts. The goal is to sign 25 agreements per year over the next five, the company said.
In that path, Sub Zero is prioritizing several markets for growth, including targeted Texas markets such as Houston, Dallas, and San Antonio; Orlando and Tampa Bay, Florida; Atlanta; and across the states of Indiana, California, Arizona, and Colorado. n order to be eligible to open a Sub Zero Nitrogen Ice Cream franchise, candidates must have at least $100,000 in liquid capital and net worth of $300,000. The total development expense to open a new franchise location ranges between $176,000$293,000, which includes the franchisee fee of $35,000.
“With our expansion strategy in place, people in new markets across the United States and around the globe will have the chance to become hooked on our made-to-order delicious treat for the first time,” founder and CEO Jerry Hancock said in a statement.
“Our franchisees are drawn to Sub Zero for the chance to geek out over the amazing science that allows us to serve incredible desserts to customers using visually exciting chemistry, through profitable, cost-effective business model,” he added. “With our sights set on 2019, we’re seeking out experienced multi-unit entrepreneurs who have what it takes to make Sub Zero the new favorite ice cream shop in town.”
Main Squeeze Juice Co.
Main Squeeze is still a relative newcomer to the juice space. Founded in 2016 and franchising since August 2017, the New Orleans-based brand has four locations currently open and operating. However, there are close to 40 franchisee- and corporate-run stores in various stages of development with plans for several to debut before the calendar turns.
Just last week, Main Squeeze signed a development deal to bring as many as three restaurants to the Metairie and greater New Orleans area, with the first expected in time for the Mardi Gras rush. In November, it announced a 10-store deal for Houston, Austin, and Dallas, Texas. The brand even showcased its first food truck over the summer and counts former New Orleans Saints wide receiver Marques Colston as an investor.
The company, which signed nine development deals in 2018, said it plans to more than double its footprint in 2019 with 15 openings, 11 of which are slated for the first half of the year. New markets will include Florida, Alabama, Mississippi, and Arkansas.
Main Squeeze features a proprietary menu of cold-pressed juices and superfood smoothies, along with one-, two-, and three-day juice cleanse programs, wellness shots, and acai bowls. “Health begins and ends with how you choose to fuel your body,” said Thomas Nieto, CEO of Main Squeeze, in a release. “We strongly believe in crafting a menu with something for everyone, and we pride ourselves in knowing that every menu item is specifically chosen to help fuel and build a healthier lifestyle.”
The health-forward concept was represented on the 37th annual Inc. 500/5000 this past year, which honors the nation’s fastest-growing private companies. The inclusion was a first for Vitality Bowls, and the brand ranked No. 682. In September, Vitality Bowls said it sold its 3.5 millionth açaí bowl. It also said it broke a company record by selling 1 million by August. To that point, Vitality Bowls added 10 cafes in 2018 and said another 10 could open by year’s end. It has more than quadrupled in size since launching its franchise effort in 2014, with more than 100 open or in development today.
“I am still blown away by the continuous support from our loyal customers” said Tara Gilad, founder and owner of Vitality Bowls, in a release. “People are realizing that healthy doesn’t have to mean boring, and dining out doesn’t have to be unhealthy. As a brand that values wellness, we are overjoyed to see so many people choosing to enjoy healthy, nutritious food options.”
Vitality Bowls, according to Inc., recorded $21.3 million in revenue. The Northern California-born chain features a made-to-order menu prepared in a kitchen specifically designed to avoid cross contamination for customers with food allergies. The bowls and smoothies are free of ingredient fillers such as ice, frozen yogurt, added sugar or artificial preservatives. The menu features a wide variety of superfoods, including graviola, acerola, mangosteen, camu camu, spirulina, aronia, moringa, maca, bee pollen, and more.
Capriotti’s Sandwich Shop
Unlike some of the previous brands, Capriotti’s has a long-standing footprint in the industry. Founded in 1976 in Delaware, the brand is famous for its 40-year, nightly tradition of slow-roasting whole, all-natural turkeys in-house and hand-shredding them each morning. But a lot is changing for Capriotti’s. On December 10, the company unveiled its new customer rewards app, CAPAddicts. The points-based system allows users to earn one point per dollar spent in-app, online, or in-shop. Once a user reaches 100 points, they will unlock a $10 reward. It also features Double Point Days, points instead of visits, and several upgrades, like improved navigation, readability, and functionality.
This builds off a transformative year. Capriotti’s debuted a new interior restaurant prototype, and rolled out online ordering conveniences such as a mobile order pick-up window and in-store cubbies. The new prototype also allows franchise partners more real estate options, the company said, as the footprint can flex to fit into a variety of layouts to fit the needs of the area. Capriotti’s is moving toward a smaller footprint of about 1,400 square feet versus the previous 1,800 square foot layout. This smaller option, created to accommodate more delivery and pick-up orders and less dine-in customers, allows franchise partners to have lower rents and maximize return on their investments.
Growth wise, Capriotti’s opened new units in Chicago, Minneapolis, Salt Lake City, and Las Vegas in 2018. It signed an additional 50 franchise agreements and plans to expand to 500 locations by 2025 through franchising. There are currently about 100 stores.
“Something I love most about Capriotti’s is our brand’s loyal fandom. We have CAPAddicts who travel hours to get a Bobbie, fans who get Capriotti’s turkey tattoos, and people who come in every single day on their lunch break,” Ashley Morris, CEO of Capriotti’s said about the rewards refresh. “We are excited to launch the new CAPAddicts Rewards app and reward these fans for their continued dedication, along with welcoming new Capriotti’s fans to the brand.”
Nékter Juice Bar
Another member of Inc.’s rankings (No. 1,219), Nékter has been on a meteoric rise. Founded in 2010, the Southern California-based franchise has more than 125 U.S. units and another 175 in development, the company said. The goal is an ambitious one, although past development would suggest it’s a reachable target: 425 restaurants by 2020. If that’s true, Nékter Juice Bar is about to blow up.
This past September, the brand inked a 30-store deal with 2ndHarvest LLC to bring locations to existing markets of Florida and Tennessee and two fresh ones—Maryland and Washington, D.C. There are currently stores across 13 states and 75 are scheduled to open just in 2019. Nékter practices the cluster approach with expansion, entering contiguous markets with three to five locations at a time, typically spread 3 to 5 miles apart.
“This record franchise agreement with 2ndHarvest LLC is a testament to Nékter Juice Bar’s growing leadership position within the juice bar category,” Steve Schulze, co-founder and CEO, Nékter Juice Bar, said in a release. “The partnership brings together two organizations that seek to make health and wellness accessible and affordable, with like-minded cultures that always put the consumer first. We look forward to working with the 2ndHarvest team to bring the Nékter Life to more communities across the country.”
Nékter offers a proprietary selection of freshly made, clean and nutritious juices, Superfood smoothies, acai bowls, and Skoop, a 100 percent vegan frozen treat.
In late November, The Madera Group, LLC announced the completion of a round of equity funding with a $20.85 million capital raise. From Breakwater Management LP, the investment, the company said, would fund the continued geographic expansion of Tocaya Organica, a “fresh casual” modern organic Mexican concept with 10 locations across Southern California and Arizona. The deal would also be used to scale fine-dining concepts Toca Madera and Casa Madera. Madera said the deal would help it more than double in size by adding 13 locations by the end of next year.
Tocaya Organica was founded in 2016 and opened its first out-of-state location in Scottsdale, Arizona, on November 17. It’s a sizable 5,701-square-foot location with an open floor plan and kitchen that boasts bright, airy design elements with vibrant-colored mosaic tiles alongside white marble table tops, reclaimed wood panels, and brass accents. The chain uses locally sourced, organic ingredients and accommodates a variety of eating preferences with vegan, vegetarian, and gluten-free alternatives.
“This transaction provides us with capital to continue our rapid growth and further our goal of delivering elevated dining experiences that make eating well effortless,” said Amrou Manaseer, co-founder of TMG, of the investment. Co-founder Tosh Berman added, “We are thrilled to be partnering with Breakwater as we continue to open more Tocaya Organica units domestically, and selectively expand Toca Madera and Casa Madera both in the U.S. and abroad.”
Another health-driven concept, Rush Bowls had a stellar 2018 in regards to expansion. The brand made planned progress into fresh markets in Connecticut, Indiana, Michigan, North Carolina, and Ohio. Started 14 years ago by Andrew Pudalov, a former Wall Street executive, in Boulder, Colorado, Rush Bowls started franchising at the end of 2016. Since, it’s expanded to a footprint of more than 80 locations in various stages of development across 14 states (Arizona, California, Connecticut, Colorado, Georgia, Indiana, Michigan, Missouri, North Carolina, Ohio, Oregon, Tennessee, Texas, and Washington) and Canada. Fourteen are currently operating with coming soon tags for spots in Tempe and Tucson, Arizona; Los Angeles, Oakland and Palo Alto, California; and Portland, Oregon. In early December, Rush Bowls announced a five-store deal with Elizabeth Lehman, president, BLUSH Enterprises, Inc., to grow in Michigan. The deal eyes Detroit, Ann Arbor, and East Lansing for expansion, with a focus on storefronts surrounding college and university campuses in addition to high foot-traffic areas within a professional building landscape.
“Our number one priority is 100 percent all-natural nutrition, which makes Rush Bowls different from other grab-and-go concepts,” Pudalov said. “Rush Bowls’ meals are crafted from the finest fruits and vegetables, with fresh toppings like organic granola, hand-grinded peanut butter and jam made in-house to ensure the highest quality and taste for our customers.” Customers can choose from over 40 signature bowls or all-natural smoothies made with fruit and vegetable bases, including acai, kale, and avocado.
MUTTS Canine Cantina
There are currently just two locations of the Texas-based hybrid concept. That could change in a hurry as the company just started selling franchises earlier in the year, qualifying around 25 operators initially. Targeting the sunbelt U.S., additional MUTTS could start popping up in the next few months. But forget growth for a minute. What stands about MUTTS is really its model—something many have talked about but few have ever executed at this scale, especially when it comes to franchising. Started by the co-CEOs and founders of FreeRange Concepts in Texas, MUTTS Canine Cantina is the first fast-casual concept by Kyle Noonan and Joshua Sepkowitz. It’s an experiential-driven restaurant to the fullest. The brand combines a fast casual, bar, and dog park into one dynamic setting. The company took its time making sure it got everything right, spending about five years to work out the kinks on the first Dallas location. Landing on a system that managed the dog park memberships was no easy task, either.
Given that the concept taps into customers’ everyday routines, guests come ever week, or multiple times a day even. When people come, they can stay for hours, hanging out with friends and purchasing dinner and a drink or two, perhaps a dessert, along the way.
MUTTS’ menu includes classic favorites like burgers and the new Original Chicken Sandwich that is fried and topped with a Szechuan peppercorn sauce. But a big selling point for the brand is its bar, where customers will find beer and wine, but also fresh-made drinks like a frozen margarita topped with a frozen sangria popsicle. There’s also craft beer, milkshakes, fried pickles, and more.
In addition to its repeat model, the chain has no issues going viral. In November, it selected its first “puptern,” a job opportunity that quickly attracted more than 2,300 submissions. The winner, a 20-year-old Dallas resident, won the role of making $100 per hour to hang out with dogs. “We were overwhelmed by the incredible response to our Puptern search. It was a very challenging job to sort through the more than 2,300 creative and energetic submissions, ranging from people in our backyard to applicants around the world,” Noonan said.
The 16-year-old burger chain is easily the biggest player on the list so far, with more than 300 locations across 31 states. Much of that expansion, however, has taken place in a pretty small window. In the past three years, Freddy’s has doubled its unit count with 135 percent growth. It hit $411 million in sales last year. This past year, Forbes picks Freddy’s as the No. 1 franchise to invest in (above $500,000 category) in the country. It credited the chain’s five-year growth rate of 31.3 percent. The initial franchise fee for a single restaurant is $25,000, with ongoing royalties of 4.5 percent of gross sales, and a current charge of 0.375 percent as a contribution to the marketing and advertising fund. Excluding the cost of the real estate, the initial investment ranges between $592,810 to $1,999,117.
One thing Freddy’s has done—and to great success—is offer an indulgent experience. While healthy eating is all the rage, Freddy’s takes a different approach through embracing Midwestern comfort food as the ultimate indulgence in a balanced life. A campaign motto: “If you're gonna be bad, it better be good.” Freddy's was founded by Bill and Randy Simon, Scott Redler, and namesake Freddy Simon, a World War II veteran and Purple Heart recipient.
Freddy’s kicked off 2018 with its first international development deal. It signed a development and master franchise agreement with Younata Investment Limited to bring Freddy’s to the Middle East, with plans to develop in the United Arab Emirates, Saudi Arabia, Bahrain, Jordan, Kuwait, Lebanon, Oman and Qatar. Freddy’s also made a tech move in November, teaming up with Tillster to enhance its guest experience with digital offerings including responsive web and mobile ordering and a loyalty program. Tillster’s platform offers Freddy’s the ability to scale over time, ensuring adoption from guests coast-to-coast as the brand continues to grow, the company said.
Once one of the faster-growing brands in its space, BurgerFi slowed down in recent years. Between 2013–2015 it opened about 25-30 units per year, quickly developing into a better-burger chain with serious expansion potential. Executives then hit the pause button, BurgerFi told QSR earlier in the year. This was to figure out everything, “to work with our franchisees, and make sure they become as successful as possible. To improve our infrastructure. Human resources. Investments in technology, everything from the standpoint of our restaurant-franchisor support service system,” Charles Guzzetta, franchise development manager, said.
That arrow is pointing up again. BurgerFi had 15–20 openings on tap for the second half of 2018 and expects to add 25–30 in 2019, bringing the 100-plus unit chain back to its previous growth rate. Guzzetta said an additional 125 units, perhaps more, draw up the framework for BurgerFi’s potential by 2023. Much of that progress needed took form in the tech space. Read more about those changes here. What’s anchored BurgerFi’s development over the years, however, is its product. In October, BurgerFi was joined only by Shake Shack as brands to receive an A rating for antibiotics policies and practices in the fourth annual Chain Reaction scorecard. Twenty-two of the 25 hamburger chains scored an F. McDonald’s and Wendy’s have since upped their policies.
“We are known for delivering the all-natural burger experience and we will continue with a commitment to quality food that ensures no steroids, antibiotics, growth hormones, chemicals or additives are ever used," BurgerFi CEO Corey Winograd said in a statement at the time.
Taziki’s Mediterranean Café
The concept is another chain to crack the Inc. 5000 at No. 4,989. Celebrating its 20th anniversary, the concept has more than tripled in size since 2011. There are more than 88 units across 17 states, with development plans calling for new markets by 2023.
Over the past three years, the company has experienced a 200-plus percent increase in the amount to of online and to-go orders as well, it said in early December. This led to Taziki’s investing in efficiency and ordering, as well as its mobile app and online ordering experience. It launched TAZ Rewards recently, which works in line and online through its app. Customers earn a Star for every $5 spent. After 25 Starts, they get a $10 off reward.
Existing Taziki's locations across the country are also being renovated and new locations are being designed with larger spaces for customers to retrieve their food from the 'To Go' counter as a part of a more convenient guest experience. "Expanding Taziki's technology capabilities for our customers including our app offerings, accessibility to ordering online as well as our recently-launched new website has been a big focus for our team," Dan Simpson, Taziki's CEO, said in a release. "We are working to anticipate consumer trends and implementing innovations that enhance guest experiences."