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    Foreign Exchange

  • Domestic brands are turning their attention to international markets, opening the door for foreign brands to make inroads in the U.S.

    Canada-based Freshii established roots in the U.S. with its fresh food focus.

    Now that many domestic brands are looking overseas for growth opportunities—and with Americans’ taste for ethnic flavors continuing to grow—international quick-service and fast-casual chains are expanding their presence in the U.S. The many up-and-coming operators offer stiff competition to myriad U.S. chains, including those in the chicken, Asian, baked goods, and sandwich categories.

    International chains that have made inroads into the U.S. market include YO! Sushi, Wegamama, Soho House, Pret A Manger, Nando’s Peri Peri, Pollo Campero, La Tasca, Little Sheep Mongolian Hot Pot, Pie Face, Giraffas, and Freshii.

    “What [international chain operators] see when they examine the U.S. market is a consumer who spends almost half of their food budget at restaurants, and one who is eager to try new ethnic flavors. U.S. operators ignore these international imports at their peril,” says Darren Tristano, executive vice president of Chicago-based foodservice consulting firm Technomic, which recently published a report on international chains expanding to the U.S.

    International operators tend to target affluent or middle-class customers in urban markets, Tristano says. “They are looking for markets where there is a high percentage of people dining out, such as Washington, D.C., New York City, Miami, and Chicago,” he says. “Many are looking for very hip, temporary locations that draw a big business crowd.”

    The overseas operators that have realized success in the U.S. market have some qualities in common, Tristano adds, including a focus on innovative, authentic flavors and convenient and flexible formats.

    Pollo Campero is one proven model of a stateside, internationally based restaurant chain. Based in Guatemala, with U.S. headquarters in Dallas, Pollo Campero operates around 50 stores in the U.S. and continues to grow. The company is successful because of its “Latin approach to the [quick-service] chicken experience,” says Tim Pulido, CEO of Pollo Campero. Entrees on the menu include grilled chicken flavored with Latin spices and citrus, empanadas, a salsa bar, and sides made fresh in the kitchen.

    “What international chain operators see when they examine the U.S. market is a consumer who is eager to try new ethnic flavors. U.S. operators ignore these international imports at their peril.”

    “It is really seen as a home treat for Americans from Guatemala and El Salvador,” he says.

    While Pollo Campero’s menu includes both fried and grilled chicken, Pulido says the operator does not want to compete with the likes of KFC, Chick-fil-A, and Zaxby’s. “We are not trying to be Southern fried chicken; that market is extremely crowded. Instead, we are trying to focus on Latin authenticity and fresh flavor,” he says.

    But El Pollo Loco and Pollo Tropical—domestic chains with international flare—do offer stiff competition to Pollo Campero. As a result, the Guatemalan chain is testing a new fast-casual concept at four stores in Houston. “We are looking at how we can make this brand go more mainstream,” Pulido says. “We are trying to take this authentic Latin essence … to the next level, and adapt it to the U.S.”

    The pilot stores feature an open kitchen layout where guests can see chicken being grilled and salads being made, something Pulido says adds theater to the experience. Different menu items are featured in the fast casual, including Peruvian Citrus Grilled Chicken, several salads, and six different tacos.

    Recently, Pollo Campero acquired two big groups of stores, one each in New York City and Washington, D.C., that were previously franchise-owned. Around 20 of its units are now corporate owned. "We wanted to have a stronger corporate presence and be concentrated in a couple of markets. If you plant the flag everywhere, you will get nowhere," Pulido says.

    Pollo Campero plans to continue its U.S. expansion, with plans to open “double-digit” units annually, Pulido says. He adds that the New York and Washington, D.C., markets are where the company plans to focus much of its growth.

    Toronto-based Freshii, with U.S. headquarters in Chicago, has also found success since its entry into the U.S. market in 2007. With 80 stores in the U.S. and 340 stores under contract over the next seven years, the chain plans to grow quickly.

    “What we did for the last two years is try to find great partners and have them develop multiple stores. Most of them will open a store or two a year, in 30–40 cities at a time,” says Matthew Corin, CEO of Freshii. The chain, which offers salads, soups, burritos, breakfast items, and other fresh food, has succeeded because of the balance it has struck between size and brand, Corin says.

    “We are growing very quickly for a brick-and-mortar operation,” he says. “If you just evolve, you are not going to get the benefit of scale and if you just scale, people will be doing interesting things around you and steal your business.”

    Corin says Freshii is also strengthening its roots in the U.S. by cornering a new restaurant category: “health casual.”

    “Health casual is using interesting sauces and flavors that are based on spice instead of a ton of fat,” he says. “There is an incredible emergence of [health-casual] brands rising across the country, and we are definitely the market leader in this space.”

    Freshii’s healthy menu ingredients include brown rice, quinoa, and kale. Corin sees primarily localized competition for the Freshii concept, such as Imo’s in Chicago.

    Though Asian food has long been a staple here, international brands are starting to carve their own Asian niches in the U.S. market. This year, London-based YO! Sushi opened its first franchised store in Washington, D.C.’s Union Station. The concept has been successful in the U.K. since 1997 with its conveyor-belt sushi model, which aims to make Japanese food more accessible and affordable.

    “The emphasis on healthy eating in the U.S. really played well into our hand, as sushi is such a healthy product,” says Alison Vickers, business development director for YO! Sushi.