Before we can speculate about the future of the fast-casual segment, we should examine its past. The entire industry moves along a continuum, and no matter the segment we are discussing, understanding what led up to the present is the foundation for predicting the future.
A healthy debate could be had regarding the genesis of the fast-casual segment. Two fundamental questions come to mind: When did it start? And who started it?
As far as the question of when the category began, the early 1990s is likely the consensus answer. If you picked the brains of industry veterans who earned their stripes at an earlier time, they might cite brands that existed as far back as the Reagan era. But the winner of the debate would likely be the one who pegged the early 90s as the time that gave birth to the fast-casual category.
Is there a clear pick for the first fast-casual brand? In the early 90s, there was one new, fledgling brand that exemplified fast casual more than any other. That brand was Chipotle, which opened its doors in 1993. Other brands with fast-casual attributes preceded Chipotle. But it is hard to argue that Chipotle, in virtually every respect, placed checkmarks in the boxes that would become defining characteristics for the classification of a brand as a fast-casual concept.
At the time Chipotle was created, there was no such categorization as fast casual. The stratification of the restaurant industry was much simpler than it is today. Using the most commonly accepted terms from those days, there was fast food, casual dining, and fine dining. Subsets of these categories existed, but they were just that: subsets.
By the turn of the century, there was broad recognition that a fourth category of restaurants had emerged. Several different names were applied by writers and analysts. Eventually, the title fast casual (which is often credited to Paul Barron) became the generally accepted parlance, so much so that if an alternative moniker is spoken or written today, its use may be rewarded with a raised eyebrow at the very least, if not an outright look of puzzlement.
The population of fast-casual restaurants grew considerably during the first decade of the new century. The real estate market and unit economics were driving forces behind the birth of fast-casual, and these factors remained catalysts for growth during the first decade of the 21st century.
Chipotle serves as an example of the trajectory of the category. Spurred by McDonald’s majority interest in the company in 1999 (they had acquired a minority interest the year prior), the brand grew to 37 units by the end of that year. By the end of 2003, they reached 300 units, and 489 by the close of 2005.
During the span between 1993 and 2005, more brands joined the fast-casual club. Many fast-casual concepts that are familiar names today were born after Chipotle, while others predated them. While Chipotle was considered the preeminent fast-casual brand, they were not the largest; Panera had grown to 877 locations and Panda Express to 787. Several of today’s top-100 fast-casual brands were born in 2005 (Shake Shack perhaps being the most noteworthy), and a sizable chunk (23) of today’s top-100 fast-casual brands didn’t exist in 2005.
Yet in the past 16 years, not every fast casual has thrived. Some have stalled, while others peaked and are on the decline (for some, a trajectory accelerated by the pandemic).
As we look at the future of fast casual, there are several themes that stand out. For starters, the largest fast-casual concepts of today look increasingly like traditional quick-serves, with drive-thrus and free-standing buildings becoming more common. Increases in average unit volumes and expansion into new channels of trade have led to several brands breaking out of their historic real estate models. In some cases, this has led to larger footprints needed to handle the addition of service channels and the sheer volume of traffic being added to the business, while other brands have been able to downsize (primarily due to the smaller dining room space needed in today’s world … a trend that began long before the pandemic).
Cuisine has emerged as an important factor for brands aspiring to join the ranks of the largest fast-casual brands, which are primarily focused on mainstream fare. Mexican, sub sandwiches, burgers, and chicken rule the roost, accounting for eight of the top-ten fast-casual brands (only Panda Express and Panera fall outside of those categories). A little more diversity creeps into the 11–20 spots, with bagels, barbecue, pizza, and pasta making appearances. As you drill deeper into the top-100, more unique cuisine can be found. But as appealing as a more eclectic menu may be to some, the appeal to the broadest spectrum of consumers appears limited. This isn’t to say that there isn’t room for brands serving a niche product. But I would submit that, over the history of fast-casual, many brands built around specialty cuisines have expressed aspirations for growth that are not aligned with the marketplace.
Perhaps the most interesting aspect of the segment’s future is how we will define it a few years from now. Once upon a time, the hallmarks of a fast-casual restaurant were higher-quality ingredients, bolder flavors and differentiated recipes that could (and often did) exceed casual dining offerings; a décor, atmosphere, and quality of service that was a cut-above quick-serves and did not encourage tips for employees (part of the formula for keeping the average check below comparable fare from a casual dining concept); speed of service that was not as fast as quick service, but faster than a casual dining experience; a drive-thru disqualified a brand from being in the fast-casual club.
Applying such a litmus test to today’s fast-casual restaurants would result in many brands being ejected and recategorized as quick-service restaurants. What brand has moved closer toward being a casual dining restaurant? I cannot think of one. If the category keeps moving in this direction, the relevance of being crowned a fast casual may evaporate and being thought of as a superior quick-serve may be the most coveted position of all.
Don Fox is Chief Executive Officer of Firehouse of America, LLC, in which he leads the strategic growth of Firehouse Subs, one of America’s leading fast casual restaurant brands. Under his leadership, the brand has grown to more than 1,190 restaurants in 46 states, Puerto Rico, Canada, and non-traditional locations. Don sits on various boards of influence in the business and non-profit communities, and is a respected speaker, commentator and published author. In 2013, he received the prestigious Silver Plate Award from the International Food Manufacturers Association (IFMA).