Outside Insights | January 2015 | By Guest Author

10 Challenges for Fast-Casual Leaders

No matter how successful the industry is, there will always be bumps in the road. These are the bumps operators face in 2015
image used with permission.

While the fast-casual category continues to be the fastest-growing industry sector, the road in 2015 will be bumpy. We will see constant change and challenges around every corner. For industry leaders, there are issues that will keep even the most seasoned executive awake at night. 

Here is my top 10 list of biggest challenges the fast-casual industry will face in the months ahead.

1. Real estate. It is getting tighter and tighter. Unfortunately, landlords are retrieving the upper hand; it is not a black-or-white scenario. Will landlords kill the golden goose by charging more than operators can bear? Aggressive negotiating skills will be an important tool in the coming year.

2. Technology arms race. It’s a constantly changing environment. In many cases, the verdict is still out if social media is triggering direct return on investment and sales. But social media must not be avoided. Fast-casual operators will have to closely watch the social media trends to be smart with allocating resources.  Facebook, Yelp, Instagram, Snapchat, Vine, Foursquare, MySpace, and others are all viable ways to connect with consumers. Who knows what new social media tools will emerge?

3.Private equity dollars. Mega dollars are chasing smaller and smaller chains. A good example is the growth in the fast-casual burger and pizza categories. How many more of these concepts can the industry handle before it bottoms out?

4. Obamacare. While the impact did not seem too strong the first year, the unanswered question is what kind of an impact it will have in 2015.

5. Fuel prices. What goes down must come up (and vice versa). We’re seeing fuel prices go down to pre-recession levels, but the reality is that they will go back up. Lower prices should boost consumer disposable income, and that is good news for our industry. At some point, though, the Organization of the Petroleum Exporting Countries (OPEC) will have to jump in to protect pricing.

6. External threats like terrorist attacks and natural disasters. These are “black swan” scenarios and are all but impossible to predict. For example, Florida skirted major disaster during hurricane season last year. Will the good luck continue in 2015?

7. Labor costs and joint employer mandates. Who would think that we might return to a tight labor market? We could easily see this challenge emerge during 2015. Will the new immigration deal make a difference? Will the regulatory environment result in a $15 minimum wage or disastrous joint employer rulings be headed your way? We’ll have to see what happens.

8. Credit card fees. Face the facts: We have evolved into a cashless society, and it eats at more and more of our profits. With technology, this is a reality that will not change. While usage continues to dramatically increase, expenses fail to drop. Can our industry find a way to bypass this draining? I wish I had the answer.

9. Commodity prices. While the price of chicken is coming down, beef is years away from returning to normal. Chocolate and olives could go up this year; what other foods will be next year’s avocados, shrimp, and limes, all of which climbed in price in the past year?

10. Shrinking margins. As an already extremely tight business model gets squeezed, which chains will not survive 2015? Industry players will have to run, not walk, to survive.

Gloom and doom is not my mission here. As the fast-casual industry continues to survive and thrive, my point is that we can never rest on our laurels. No matter how successful our concepts, there will always be stones in the road. The operators who adapt and watch for these obstacles will be the success stories in the coming year.

Nick Vojnovic is president of Little Greek Restaurant, a fast-casual, Greek-themed, multiunit concept with an American influence. Tampa, Florida–based Little Greek has 19 locations in Arkansas, Florida, and Texas.


These are some excellent points and I agree they should not be overlooked or taken for granted. I also think that fast casual has to really keep up with the changing Millennial customer base. Research shows they are ever changing. Make sure to listen to each and every review, social posts, mystery shop and embrace those who love your brand and try to use those folks to help you grow. Create brand advocates - its one the best marketing systems out there right now and the most affordable!

great points. and point 11 may be how do the smaller chains effectively market to stay relevant against the large chains which are marketing machines? Staying in the guests mental shelf space can be tough

Sorry but these are just cyclical issues we've dealt with forever (same list made every decade for the last four decades) and are second tier issues compared with those surrounding better guest and employee experiences (which is how you define relevance - not marketing) . Half of them contain enough fallacies to choke a horse including the comment that any marketing 'system' is affordable.

This article doesn't really convey anything significant. It's just an itemized list of generalities lacking in being backed by references to any peer reviewed data driven sources. In fact, may of the points seem to illustrate presupposed initial conditions without any regard for the dynamic nature of the industry itself. For example, as addressed in numerical reference to the listed points above...2) Technology Arms Race. "Technology" in this case seems to be implying the sets of solutions that are exclusive only to software; more specifically, social media platform choices. It in no way addresses optimization strategies, studies, or techniques folks in the industry have used. Furthermore, "technology" for a QSR is more than simply choosing a social media platform. Specifically, what about the dynamics of choosing a cloud software stack solution for a POS system in addition to vendor specific hardware choices? Interchange fees are derivative of these platforms. What about ensuring a solid web platform and utilizing scalable web traffic tools (such as AWS, nGenx, etc.) that integrate (or don't integrate) with said POS platforms? Historically, most of the industry players (regardless of their size, scaling growth, or economy of scale) are about 10 years behind the current tech curve, and it's a phenomena that should be addressed.3) Private Equity Dollars. The author seems to imply that a "bubble" may burst. Not at all. The industry is dynamic insofar that as more non-differentiated players enter the market, their economic profits will decrease. Rules of economics still hold.7) Labor Costs & Joint Employer Mandates. Aside from hyperbolic HR double-talk that's so ubiquitous in the industry, real wages have not been raised for the industry on parity with inflation and the cost of living for several decades. As a result, demands for higher wage pay are surfacing. In a nutshell, restauranteurs, investors, board members, and executives will need to realize the value of sacrificing higher forecasted profits and instead invest those resources into boosting employee wages. The ivory tower is being shaken, they don't like it, many in that tower act like entitled spoiled greedy brats, in the long run they lose good hiring talent. It's that simple on a macro and micro scale.9.) Commodity Prices. Who cares? Beef returning to "normal"? What sort of "normalization" are we talking about: real or nominal and relative to what parameters? Granted, it does play a role; however, savvy QSR operations will substitute ingredients and change product to accommodate such exogenous shifts. Those who don't will struggle.10.) Shrinking Margins. Your only have shrinking margins in your industry if your product isn't durable, you fail to adapt, and you don't have a product/brand of unique value that your competition can easily replicate. Never enter a market of small margins, and instead, enter the market with a product and concept that's durable that allows for high margin that consumers want because they see value in it beyond your competition.The amount of ignorance and lack of critical thinking skills in this industry is completely ridiculous. As a result, it's poisoning the ecosystem and the lives of the hardworking people in it by not providing them with capital mobility.

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