The future of fast casual awaits
For a lot of fast casuals, 2020 proved to be tale of two halves. The first half, and in particular Q2, was brutally tough on sales. Once COVID arrived, a variety of factors became disadvantages to the category, from a reliance on lunchtime walking traffic in downtown business districts to big dining rooms prioritizing on-site experiences and customizable menus that didn’t translate well to off-premises sales.
The virus could have spelled doom for fast casual. After all, the category was already facing stiff headwinds between the tight labor market and over-saturation. But the sound of the death knell faded as fast casuals quickly tweaked their service and operations. In fact, many were able to return to positive sales comps by the end of 2020, and a recent report from Datassential showed that fast casual accounted for a bigger share of newly opened restaurants—21.5 percent—than any other category between last March and October, even though it only makes up 11.4 percent of the industry overall.
These days, experts are quick to point out the silver linings of the pandemic that fast-casual brands can tap into in a post-pandemic world, from less competition to pent-up consumer demand to trade-down from casual dining to more capital available for growth. But how should brands position themselves to realize their full potential? Here are 15 tips that those experts have for fast-casual operators looking to step on the accelerator.
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1. Develop an omni-channel strategy
Fast casuals of yore were all about dine-in service, maybe some takeaway. Then came third-party delivery. And now, with the explosion in digital convenience and the virtual marketplace, operators have to consider all those plus curbside and tableside service, drive-thru pickup, first-party delivery, and more.
Jeff Hall, founder and president of brand experience and customer satisfaction firm Second to None, says consumers will still prefer takeout, delivery, and other off-premises channels even when they’re able to dine in again. “You need to execute and operate as the best-in-class omni-channel brands do even outside of your industry,” he says. “That includes reducing customer effort and customer friction, meeting customers where, how, and when they choose to interact with you. You are an omni-channel brand, whether you want to be or not.”
Field Failing is founder of New York–based chicken fast casual Fields Good Chicken, which had grown to six locations prior to COVID-19. He likens the future of fast casual to e-commerce platforms like Amazon, where the emphasis is on convenience but brick-and-mortars remain to facilitate an experience.
“[Physical restaurants] are a way to introduce someone to the brand, a way to have a human connection with people that wanted a place to go and hang out,” he says. “And then for the convenience-oriented customer, it’s delivery from ghost kitchens, which gets food to a lot more people more quickly, or it’s drive thrus because it’s convenient and someone just wants to pick up food on the way home from work to bring to their family.”
LISTEN: For more from Failing on Fields Good Chicken's evolution, stream the interview here.
2. Embrace digital everything
That digital tools will continue to drive business is no big surprise. But fast casuals should remember that a digital strategy can’t just be some value-add or nice-to-have. Rather, digital tools are increasingly the foundation to the entire restaurant operation, says analyst Lauren Silberman of investment bank Credit Suisse.
She says fast casuals should push for digital transactions, not just confine their digital strategies to one part of the business, like delivery. “How are you as an organization integrating digital technology across every aspect of the business?” she says. “This isn’t just, ‘Here are the digital initiatives that we’re doing.’ It’s more like, ‘How are we building our business around digital?’ Because that will be key going forward.”
3. Develop a loyalty program—and learn from it
With so much more business being conducted on digital platforms, fast-casual operators have an incredible opportunity to develop guest loyalty through rewards—and, in turn, to learn from the data they collect.
“The pandemic showed that owning customer relationships and building loyalty are critical,” says Kevin Ziegler, principal of digital strategy firm KAZ Strategy. “The digital space is a food court with its own dynamics for earning repeat business. The good news is, this effort will pay dividends beyond the pandemic.”
Take Mici Handcrafted Italian as an example. The six-unit fast casual that dishes pizzas and other Italian family recipes rolled out an updated loyalty program in 2019 and grew it from 13,000 members to 55,000 as of March. That’s become a huge advantage in the pandemic. CEO Elliot Schiffer says 70 percent of Mici’s revenue today is tied to a rewards account, which he credits to the ease with which guests can sign up—either with a phone number or online—and then redeem rewards. Having this foundation of loyal guests will serve as a springboard for post-pandemic growth, he says, but there’s another benefit to the program.
“We’re starting to customize offers to those guests … to expand the number of occasions that they might consider eating Mici,” he says, noting that that’s done by pointing guests toward menu items they might not have tried before. “I think that we’re getting incremental sales growth just from our current base of guests, and that’s contributed a lot to the overall growth picture.”
4. Lean into the value proposition
Now that most restaurant companies are making their menus accessible through online ordering, it’s evened the playing field across quick and full service. As such, fast casuals will have to design a value proposition around the intersection of price, accessibility, and quality.
Patrick Sugrue is a partner at New-Spring Capital and former CEO of the fast casual Saladworks. He says that despite the thinning of the competitive field, operators can’t let their guard down.
“The reality is we’re going to have higher levels of expectation of the quality of the food and the service methodology,” he says. “So your value proposition to consumers is really key.”
Hall points out that fast casuals especially bring value as it relates to healthy eating, serving as the best destination for affordable nutritious foods. But with emerging competitors like grocery stores and meal-kit services, he adds that fast casuals should also consider continuing the family meals and meal kits that they rolled out early in the pandemic.
5. Make everything portable
Dine-in business will surely return once the risk of COVID-19 diminishes. But off-premises service will continue to be a critical piece to success for any restaurant, which means the portability of menu items will need to be an ongoing focus.
Mark Moeller, founder of restaurant consultancy The Recipe of Success, says operators must consider how they can protect the quality of their food both inside the restaurants and out. “If we’re going to do delivery and pickup, which has to be a part of the fast-casual concept, that means our product has to be able to travel well,” Moeller says. “So we have to test the product that we’re going to do … and the paper goods that we’re serving it in.”
6. Freshen up your concept
Innovation is seemingly moving at the speed of sound, and so are design and branding trends. Sugrue says fast casuals can’t afford to fall behind with the look and feel of their restaurants.
“It used to be you could go 10–12 years and not remodel, and now we’re seeing that cycle time in the 5–7-year range, where restaurants have to update and consumers are expecting it,” he says. “We’ve got a transformation from boomers to millennials and Gen Zs, and as you want to appeal to that next generation of consumer, you’ve got to freshen up your concept.”
7. Invest in smaller footprints
With dine-in business becoming a less significant part of sales, operators can save on real estate and operating costs by shrinking or eliminating dining rooms.
Mici’s Schiffer says the brand looked for spaces around 2,500–3,000 square feet prior to the pandemic. Now, however, it’s planning to test a delivery- and carryout-only footprint that can complement its bigger restaurants in existing markets.
“Just from a real estate perspective, I can tell you there’s a lot of availability of in-line, 1,000-square-foot spaces,” he says. “The economics are going to be great if we can be successful in that space, and we’ve got a model that makes sense moving forward.”
8. Reconsider the growth strategy
The evolution of consumer behavior—both in terms of how they’re conducting transactions and where they are geographically—has changed the notion of growth for restaurants. And for fast casuals, one of the most significant ways that’s come to fruition is in all the urban brands looking to expand into suburbs, especially with remote work likely remaining popular after COVID-19.
Fields Good Chicken is one such fast casual looking for storefronts in the ’burbs as a way to serve more residential diners. But Failing says the brand’s approach is diversifying even beyond that, considering ghost kitchens to fulfill more delivery orders and even the consumer packaged goods market to get in front of grocery customers.
“Then you end up with this halo effect where the product’s in grocery stores, there will be a direct-to-consumer component, and we have restaurants all of the same brand name,” he says. “I think it starts to become this really compelling thing that’s about more than just brick-and-mortar restaurants.”
Moeller of The Recipe of Success cautions that brands shouldn’t see all of these new opportunities as license to expand wherever and however they can. “Understand the market that you really want to be in, because you have to make sure that your concept is going to translate to the consumer, but you also want to be able to provide something that the consumer doesn’t have there right now,” he says.
9. Don’t abandon dine-in business
It was easy to think early in the pandemic that customers would never return to dining rooms, that the ease with which they could order food to consume at home would completely decimate dine-in business. But that was clearly an overreaction, and most experts now point to a pent-up demand that should lead to a surge in business once the pandemic is behind us.
As such, it’s important not to ignore innovations within the dining room. And fast casuals like Minneapolis-based Crisp & Green are doubling down on a dine-in experience going forward.
“It’s all about community, and the reality is people eat out and go to their local establishments because they love the feeling that they get when they’re there,” says Steele Smiley, founder and CEO. “It is almost impossible to create a digital experience of community. They still purchase food because it’s great, but they also want to know who else is a supporter of that community.”
Austin Samuelson, cofounder with his wife Ashton of the Arkansas-based fast casual Tacos 4 Life, says the brand has refined its drive-thru operation during the pandemic while also leaning on delivery. And while Tacos 4 Life will continue to invest in off-premises innovation going forward, Samuelson says it will also aim to go above and beyond in the dine-in experience.
“We sit in the fast-casual segment, but we take your order at the counter when you come in, we bring the food to you, we bus the table when you leave,” he says. “Our goal is, once you order, we don’t want you to have to get back up and have to do anything. We coined this mantra: We’re going to be the fastest full-service restaurant around.”
10. Design the flow of the restaurant around off-premises
With off-premises taking up a greater share of sales going forward, Sugrue says fast casuals should redesign their restaurants accordingly. “These really good brands are going to be rethinking how their store can facilitate an Uber Eats driver coming to a backdoor and a consumer coming through the front door and picking up an order that they’ve placed without having to go deep into the restaurant or call up the restaurant,” he says.
11. Always look for efficiencies
Countless fast-casual operators have discovered efficiencies during the pandemic out of necessity, whether it’s in labor deployment or kitchen systems. But Sugrue says those efficiencies shouldn’t stop with the pandemic, especially with the world of possibilities that digital tools open up.
“Do you really need someone at the checkout counter anymore?” he says. “If [guests] can sit down and, with their phone or an iPad that’s on the table, place an order … that ability to leverage technology, I think, is important.”
12. Diversify your dayparts
With working from home becoming the norm and family activities and business travel essentially ground to a halt, the pandemic gave new life to the dinner daypart. And that evening business is likely to stay strong in the future.
Moeller says one of the biggest weaknesses of fast casual that was revealed by COVID-19 was its overreliance on corporate business during the lunch daypart. “We completely forgot about the residents. It wasn’t important to us because we did 80 percent of our business during the day,” he says. “I only needed a couple of people at night. Anything that came in after, say, four o’clock, five o’clock was really just gravy on top of what we had already made.”
Failing of Fields Good Chicken says the brand was previously more of a lunch-bowl concept, but during the pandemic has seen a dramatic shift toward dinner sales—perhaps not surprising considering all of its shops are in Manhattan. Fields has handled that shift with a “Dinner to Share” menu made up of whole roasted chickens (or just breasts or thighs), with a choice of sides and sauces, that serves two to four people.
13. Focus your menu
The shift toward more dinner business proved to be a revelation for Fields Good Chicken. In the fall, the brand decided to pare the menu back by almost a third, dropping seven items—including the entire salad category. With those went 17 raw ingredients and 13 prep recipes, Failing says, and the operation became “dramatically easier to run” while the brand “started running the best food costs in the history of the company.”
Failing says the team realized that Fields could still be successful with a more simplistic menu. “This sounds kind of silly, but let’s focus on chicken,” he says. “This is an opportunity to really re-center on chicken, which is what we do best.”
Moeller says other operators should look at the analytics generated by their POS to understand what is selling and what isn’t, then have the courage to cut anything that just isn’t working.
“We want to be everywthing to everybody, but you can’t be that way if you’re going to survive because you’re going to have these little pockets of items that are just going to start to drain you,” he says. “You really have to understand your brand and stay focused on it.”
14. Develop a values-based culture
Multiple experts suggest that what helped a lot of fast casuals survive the pandemic was strong leadership willing to make tough choices at the drop of a hat, as well as tight teams that bonded around a shared mission.
Laura Bonich, executive coach and CEO of The Leaders’ Lighthouse, says culture will continue to be a differentiator, and fast casuals should take the opportunity to understand their values and build a culture that lives into those values.
“You could put whatever you want up on the wall, but if you’re not really living into that mission, they’re just words,” she says. “And then the culture is going to become a top-down culture instead of a collaborative one where everybody really wants to be there and owns it, and they feel that they’re just as much of an entrepreneur as that entrepreneur that started the fast casual in the first place.”
15. Train your people—especially future leaders
No one individual was responsible for dragging a restaurant through the pandemic. Whole teams of people were responsible for adapting to every safety protocol, government regulation, and consumer behavior adjustment.
Most of those people were learning on the fly. Bonich says COVID-19 exposed a training gap in the restaurant industry, and fast casuals would be wise to take time now to train their people both in technical and soft skills. That includes identifying potential leaders in the system and training them in self-awareness, resilience, and emotional intelligence.
“The people are what is making this all happen,” she says, “and if you are empowering them and you’re allowing them to make the decisions that need to be made, instead of waiting to be told what to do, you’re going to be able to really go so much further than anyone else.”