Eleven years ago, Matthew Corrin could be found ducking into GNC stores to order smoothies on a regular basis. Even in a city as metropolitan as New York City, it was the only place he could find a healthy snack.
A lot has changed in the past decade.
In 2005, the then-23-year-old Corrin founded the healthy fast-casual concept Freshii, which celebrates its 10th anniversary this year. Based in Toronto but with half of its business in the U.S., Freshii not only weathered a shaky economic climate in the last decade, but it also managed to grow.
Amid the plethora of health-focused brands that have launched in recent years, the concept has been able to scale aggressively, especially recently; Freshii started 2015 with more than 100 locations worldwide, and Corrin expects it to break the 200 mark before year’s end. It’s an impressive and somewhat surprising feat given that the menu centers on premium ingredients, including fresh produce and antibiotic- and hormone-free animal proteins.
But Freshii’s offerings are in step with today’s consumers. According to the National Restaurant Association (NRA), three out of four consumers report that they are more likely to visit a restaurant that offers healthy options. The research also
indicates that eight out of 10 have noticed that restaurants are offering more of these options than they did only two years ago.
“Salads were largely what healthy was defined as 10 years ago,” Corrin says. “What’s happened over the last decade is the definition has totally evolved on what healthy is and what it can be.” He adds that the customization associated with salads is still very much top of mind in making meals more nutritious, but now customization has extended to other foods, such as wraps, bowls, and soups.
Entrées at Freshii can be made with tofu, falafel, chicken, steak, or gourmet tuna. Customers can also swap in kale or quinoa for other bases like brown rice, or they can order a burrito or wrap made with a “green wrap” instead of the standard tortilla. Even the dressings capitalize on healthier ingredients; the Asian sesame dressing uses real ginger and the ranch dressing uses Greek yogurt instead of mayonnaise.
Corrin says that one of the most significant changes in restaurant menu innovation has been the shift toward spices instead of fat, butters, and cream. This shift is due at least in part to people becoming significantly more open to exotic flavors and nutritious foods.
“A decade or longer ago, if you marked something as ‘healthy’ on the menu, or ‘healthful’ or anything like that, it was not always received very well. It was expected to be boring and bland. But that really has changed,” says Annika Stensson, director of research communications for the NRA. “Chefs and restaurant operators have really stepped up to the plate.”
With more adventurous palates than years past, consumers have also come to expect that they will not have to go to specialty restaurants to find nutritious options, Stensson adds.
Chris Muller, a professor at Boston University’s School of Hospitality Administration, thinks Freshii’s success rests not in its innovation, but rather in its alignment with bigger trends. Muller has studied the restaurant and hospitality industry for more than 30 years, and he says that the healthy niche, which remained elusive to quick service for so long, is finally catching on.
“What’s novel here is that [Corrin] is selling it as a generational change. He’s certainly leveraging the green idea and leveraging this idea that all of these things are very healthy,” Muller says. “It’s a perfectly genius marketing campaign. He’s positioned himself in a space that McDonald’s, Burger King, [and] Wendy’s could not ever enter.”
Anita Jones-Mueller, president and founder of Healthy Dining Finder, a restaurant nutrition consultancy, also sees the healthy niche gaining momentum. Whether tracking calories, avoiding gluten, or adhering to a vegan diet, consumers are more vigilant with their personal needs, she says. First Lady Michelle Obama brought children and family health into the spotlight with her Let’s Move! initiative, which encouraged wellness programs among schools, healthcare providers, and employers. Jones-Mueller says technology has also fostered greater awareness, since mobile devices put nutritional information at consumers’ fingertips.
Although consumers are seeking fresher, more natural foods when dining out, they still crave variety.
“A person can only eat a salad for lunch so many days in a row before you really want something different texture-wise or flavor-wise,” Stensson says.
Freshii was originally named Lettuce Eatery before Corrin realized the moniker would suggest the brand specialized in salads and was not an authority on quinoa bowls, oatmeal, frozen yogurt, or fresh-pressed juice. Freshii is highly diversified, with no single category comprising more than 20 percent of the company’s sales.
“Not only are there healthy trends, but there are also healthy fads,” Corrin says. Foodservice might be moving toward healthier options overall, but specific crazes will still fade over time. “We’re not going to be sitting there with fro-yo when nobody wants fro-yo anymore, just like Zara is not going to be sitting there with overalls when nobody wears overalls anymore.”
Corrin, who worked for fashion designer Oscar de la Renta before starting Freshii, compares his brand to the affordable fashion retailer. Like Zara, he says, Freshii searches the world for trends and inspiration before curating the best selection at an affordable price.
But sourcing fresh foods and antibiotic-free meats at a high volume can present challenges that traditional fast-food brands haven’t historically faced. For example, Muller warns that changes in climate could affect the supply of organic produce and premium meats in the future. “It’s a high-margin opportunity until the cost of organic goods goes through the roof,” he says.
Stensson also says that a concept that focuses on fresh, unprocessed ingredients would require more deliveries than a brand that uses pre-chopped salads or greens.
To ensure quality and consistency, Freshii establishes a unique supply chain within each of the 13 countries where it operates. The company works with different distribution centers, and, depending on the season, sources locally whenever possible. Corrin says that within each market, Freshii is available to source local produce at least half the year.
Improving the supply line is a constantly evolving process for Freshii, and Corrin points to its sauces and dressings as an example. When the franchise began to grow, the brand outsourced its sauces and dressings, which were originally made in-house. Corrin says he wasn’t particularly proud of those renditions, especially since not all of the ingredients listed were recognizable. As the health trend accelerated, Freshii was able to source higher-quality (and pricier) premade dressings, but they were still made out of house. The final transition occurred last year when Freshii hired in-house chef and nutritionist Andie Shapira. Now all the dressings are made daily in the stores, with only about three to four ingredients in each.
What helps offset commodity prices is the low overhead and operational cost. With a menu largely composed of raw foods, Freshii does not require much equipment or culinary skill to execute.
“It’s a relatively simple operation. There’s no grease, there’s no hood, there are no fryers, there’s no flame, there are no real recipes,” says Freshii master franchise partner David Grossman. “We don’t hire chefs, and it’s a relatively inexpensive startup cost.” It costs about $250,000 to start a Freshii, compared with roughly $1 million or more to start a Panera, he says.
A former Subway franchisee, Grossman recognized Freshii’s potential when he first met with Corrin in 2007 to discuss Chicago real estate options for the brand. At the time, Grossman was leading the restaurant leasing division of a retail developer, and Corrin wasn’t looking to franchise. After a period of protracted negotiations, during which Freshii opened a single company-owned store in the area, Corrin decided that Grossman would be a valuable advocate for the brand and sold him the rights for the entire market.
“I’ve got a good relationship with the real estate brokers and a number of other business leaders. I think Matthew recognized that, and he agreed to sell me the rights,” Grossman says. “It’s been a great partnership for me and for Matthew.”
At press time, the Chicago area boasted 19 Freshii locations—second in size only to its home base of Toronto—and had five additional units in the works. Grossman owns four, while the rest are owned by franchisees he manages.
Corrin’s initial reluctance to franchise mirrors a broader sentiment among emerging concepts. Fast casuals including Chipotle, Sweetgreen, Modmarket, and Luke’s Lobster have chosen not to franchise, possibly at the expense of growth, in order to protect the quality of their products.
But franchising has become a key component of Freshii’s explosive growth across 13 countries. Other popular health-focused concepts like Fresh to Order, LYFE Kitchen, b.good, and Native Foods Café lag behind in growth, and Corrin cites higher price points as being responsible.
“There’s a lot of great brands in our segment who I actually have a tremendous amount of respect for and I think do a phenomenal job, but there’s no way the concepts will ever be able to scale or transport into Minneapolis or into Grand Rapids, Michigan, or small towns in Ontario where we operate,” Corrin says. “The average check and the business model would never line up with that type of scale affordability.”
Although Grossman says it’s easy to spend $20 at Freshii—just pair an entrée bowl with a 20-ounce smoothie—Corrin says the average check is $8.20, placing it on the more affordable end of the health-food spectrum.
Given the low cost barrier and the increasing interest in healthy lifestyles, Corrin believes Freshii can corner smaller cities much the same way Applebee’s built its model around small-town America.
“Even though there are less people, there’s also less competition in these small towns,” Corrin says. “If there’s a yoga studio and a spin studio, there’s a big group of folks who want to eat healthy, and before we show up, there’s no option besides eating in their own kitchen.”
Another factor driving Freshii’s expansion is its real estate strategy. The company does not become stuck in exclusive-use clauses with its landlords. The varied menu allows Freshii to defy categorization and enter areas where the neighboring vendors are category-specific, such as smoothie bars, burrito concepts, and frozen-yogurt shops. As Corrin explains, the brand cannot be blocked by competitors.
While Freshii has a proven track record of partnering with market experts like Grossman (and now established retailers like Target; see sidebar), Corrin acknowledges that when entering new markets, he’s not always certain of success.
“We have no idea when we enter a new market whether it’s going to be portable, and quite frankly, I take comfort in the fact that Subway entered and exited the U.K. three times and now they’ve got 1,000 locations. I take comfort in the fact that Dunkin’ Brands failed in California, and now they’re going in to build several thousand,” Corrin says. “Those are the things that are comforting to a young retailer.”
Freshii has also opened locations in nontraditional spaces such as university campuses, and the brand is poised to continue exploring new opportunities. Its recent partnership with Target grants the brand access to unexplored markets and could help with word of mouth—something that Grossman says is a challenge for the brand.
“We don’t have a big advertising budget; we don’t have this huge marketing fund that we can go out and tell the world, ‘Hey, come to Freshii,’” Grossman says. “Getting our food in people’s mouths is the challenge because some people don’t even know what we are, who we are, [or] what we sell, because we just don’t have that marketing budget. But if we can get people to try us, I know that they would love us.”
Muller considers Freshii’s marketing strategy—small as it may be—to be smart and calculated because it aligns the brand with the greater healthy-food movement through its charismatic founder and CEO. However, Muller is less certain of its “growth for growth’s sake” approach to expansion, which can lead a brand down a path of thorns. It’s easy to open 200 units, he says, but far more difficult to standardize a successful service model.
“This is clearly an in-your-face strategy. His whole open letter to McDonald’s is about as brash as you can get,” Muller says, referring to Corrin’s May note to Steve Easterbrook in which he proposed opening a Freshii within an existing McDonald’s store. “You’ve got a guy here who’s clearly an inspirational, iconic leader. It’s everything about him: There’s his big blue-eyed picture, and they’ve got him going out to be a speaker, and he’s already been on ‘Undercover Boss.’”
Whether Corrin is regarded as a visionary (a “Messiah of Fast Food,” as one franchisee dubbed him) or simply a smart salesman, there is no mistaking his integral position at the heart of Freshii—past, present, and most likely future, too.
He says he never wrote a business plan for the company but was able to persuade a dentist and nurse (his parents) to give him enough money to open the very first restaurant. He’s also proud that the company has been able to do so much with less than $5 million in equity invested.
Corrin’s enthusiasm for Freshii spills into the greater trend toward healthy foods. He sees the brand as a member of a much larger reformation effort within foodservice—and one in which he plans to participate.
“This is the only thing I’m ever going to do in my career,” Corrin says. “It’s actually a great feeling. I think that’s a great feeling for our franchise partners, because they’re in this for the long run, too. They know that like Fred DeLuca and like Howard Schultz, who’ve been in their companies since the start, I’m not going anywhere.”
right on target
Adding to a year of rapid growth, Freshii put another feather in its cap in the form of a new partnership with retail giant Target. Beginning in October, Freshii will supplant the standard Target Café models in 10 stores between Target’s hometown of Minneapolis and Chicago, which is Freshii’s U.S. headquarters.
Earlier this year, Target CEO and chairman Brian Cornell told analysts that food would be “a critically important area of opportunity” for the company. Freshii founder Matthew Corrin says this statement was especially encouraging to his team.
“When the CEO goes on the record and says, ‘Bringing better-for-you food, better ingredients, [and] healthier brands into our box is our future,’ I think that’s incredibly progressive thinking,” Corrin says. “One, I applaud him, and two, we’re thrilled to be partnering with them.”
Because Freshii can operate within a 150-square-foot space, customers will have access to the entire menu and the “full Freshii experience,” Corrin says. In many cases, the units will find a familiar face in the form of preexisting Starbucks stores, which Corrin says are often neighbors to the standalone units.
While these nontraditional stores have the potential to capture new customers, Corrin says, they also further Freshii’s mission to be a convenient yet healthy fast-food restaurant.
“This goes back to the concept that people eat healthy when it’s very convenient,” Corrin says. “When the path of least resistance is a slice of pizza or a hot dog, you might grab for that. When it’s a fresh-pressed juice or a quinoa bowl or a salad, there’s a better chance you’re going to grab for that.”
Although Corrin is reluctant to discuss future plans for additional stores within Target, he acknowledges that neither party entered the agreement to open only a dozen stores.
“We look forward to a long-term relationship and hopefully the rollout of several hundred locations,” he says.