A spike in customer demand for food transparency and a greater attention to well-sourced, fresh ingredients led to fast casuals’ rising popularity over the last decade. That trend not only encouraged entrepreneurs to jump into the space, but also influenced quick-serve franchisees who are complementing their portfolios with fast-casual brands.
“Fast food is playing catch-up on trends and expectations from our guests,” says Matt Herridge, a Qdoba franchisee who also operates nine Burger King units. “They want a location and environment that is high quality, and a higher-quality level of food.”
Moving from quick service into fast casual first requires an assessment of your bandwidth and goals as a franchisee. Author and franchising coach Joel Libava says this is the key indicator of the types of brands a franchisor should pursue when looking to diversify with additional outposts.
“Do a deep dive and figure out what you’re good at,” Libava says. “Realize you’re probably going to be the one making the sandwiches for a while.”
Before diversifying, Libava says franchisees should already have solid, profitable, and proven businesses. How to tell if your business is successful? Libava says reaching a couple of million in sales per year and retaining good managers or other key employees can often mean it’s a good time to go for it.
“Do something different, but still in foodservice,” he says. “Maybe get into smaller fast-food restaurants or try to jump on board the latest thing, like Asian fast food or a food truck—something you can get in on the ground floor of, but that is not just a two-year fad.”
Guillermo Perales, the Dallas-based president and CEO of franchise group Sun Holdings, says diversifying is a wise idea, giving operators the safety net of having other holdings when one brand is in the throes of a storm, like a change in the C-suite or a risky, abrupt shift in strategy. Perales recently acquired 98 McAlister’s Deli units and says the move allowed him to gain stores while avoiding the saturated burger, Mexican, and chicken markets. While Perales operates a network of Arby’s, Burger King, Popeyes, and other quick serves (for a total of almost 1,000 stores), McAlister’s was his first venture into fast casual.
“McAlister’s was a smaller, upcoming brand that resonated,” he says. “I didn’t want to jump into just one brand to develop a few stores; I wanted scale.”
Store count stands out as a main differentiator between the fast-casual space versus a quick serve. Herridge points out that while Qdoba has 700 stores nationally, Burger King has 7,000. This unit count difference manifests in advertising approaches; Qdoba focuses much more on local marketing and building brand awareness, while Burger King invests in TV ads and other large campaigns via a massive national ad fund with access to customer data at a granular level.
“In fast casual, it’s more of an art, more about how you fit it into the community,” Herridge says, adding that it’s not as difficult to adapt to a new product or procedure with Qdoba, because there aren’t as many changes coming down the pipeline. Big brands like Burger King, however, require franchisees to be on steady alert for constant new product and equipment rollouts.
In running both a quick serve and a fast casual, Herridge says it can be easy to fall into a pattern of trying to put out fires at the expense of leadership development, where most energy should be focused. With turnover already high and getting higher, he says, paying extra attention to developing strong leaders is a plus for all of his brands, in both the quick-serve and fast-casual spaces.
“I’m hiring, promoting, and training that next group of leaders within our company,” he says. “We need well-tenured, well-managed folks, plus a bench we are preparing along with our veterans.” In the time he’s not hiring and training, Herridge turns his attention to restaurant development, franchisor relationships, and working on operations councils or franchisee association boards.
Libava says many new food franchisees fail to fully realize the myriad problems that high turnover creates, namely how gravely it can affect service and product, especially in quick service. “Fifteen years ago, you could walk into a McDonald’s and there were four or five lanes open. Now there is one,” he says. With both quick service and fast casual, he adds, it’s crucial for operators to set specific leadership in place to attentively manage staff and keep tabs on service and product.
Beyond employee retention, Herridge says a similarly vital consideration for those moving between fast casual and quick service is variation in space and location. Because a fast-casual restaurant’s typical footprint is box space, it carries different implications than a standalone quick-serve unit, especially one reliant on a drive thru.
Herridge says that, for fast casuals like Qdoba, it’s crucial to examine the store’s ingress and egress: Is there a way for guests to easily pull out of traffic and into the lot, then back out of a parking space? If you have a drive-thru lane, does the lot size allow cars to stack as they wait to place or pick up an order? He says that, in fast casual, lunch lines can be daunting, and thorough lot prep is necessary.
Herridge also considers real estate costs associated with commercial property and how these costs differ between quick service and fast casual. While nearly half of Qdoba’s restaurants are corporate-owned, Burger King is an almost entirely franchised operation. Working with landlords can be difficult, Herridge says, and it can get complicated for franchisees if their units’ real estate isn’t owned outright. “If they don’t own the ground, they lose leverage,” he says.