I don’t make it to the movies much anymore. Like a lot of people, my wife and I find the price hard to justify; $25 for a night of entertainment where our only dining decision is which flavored spice to rain over burnt popcorn is far too steep in the age of Netflix, Hulu, and Redbox.
But I’ve got a bigger problem with movies these days.
Too many sequels. Too many reboots. Too many superheroes.
Hollywood, it seems, just doesn’t have many good ideas left. With theater traffic heading south and competition for consumers’ eyeballs more intense than ever, the pressure is on for studios to bankroll surefire hits—another comic book rip-off, say, or another ’80s-era franchise reboot. Instead of something fresh, something original, the box office is filled with imitators.
So I choose to stay home.
Call me crazy, but the limited-service restaurant industry is starting to feel a bit like Hollywood. Ever since Chipotle became a blockbuster with its elevated quality, chic ambiance, and invitation to customers to create their upscale meal exactly as they like it—and ever since the competition for customers’ foodservice dollars intensified in a post-recession foodie world—there’s been a flood of imitators hoping to capture some of its magic. And I’m not talking just in the burrito space; in the last decade, we’ve seen the “Chipotle of Italian,” the “Chipotle of sushi,” the “Chipotle of pizza,” and on and on. Everybody wants to be Chipotle.
Is that a bad thing? Absolutely not. From its branding to its sourcing to its growth strategy, Chipotle offers countless best practices on how to run a successful restaurant business. And trying to be like Chipotle isn’t necessarily a fool’s errand; just like in Hollywood, imitations can still make boatloads of money (earlier this year, Jurassic World, the fourth film in a 22-year-old franchise, became the fourth-highest-grossing film of all time).
But imitators can only go so far. Very few people would think Jurassic World is better than Jurassic Park; there’s something about the original that will always retain a certain magic, animatronics and all. Those brands hoping to be the next Chipotle have to remember that the secret to Chipotle’s success was always that it was the first one doing what it did. Nothing will ever change that.
OK, you say. We get it. What’s the point of all this?
Some of the leaders driving the industry's next great wave.
My point is this: In a world of imitations, original ideas shine all the brighter. And after a decade of measuring success against the Chipotle model, we’ve arrived at the cusp of the next great wave of innovation in limited-service restaurants. A bevy of foodservice entrepreneurs are refining Chipotle’s model and rolling out premium concepts that are chef-driven, designed around a high-quality experience and long-term relationships with their vendors, employees, and communities.
It’s a new era for fast casual, a step above the phenomenal things Chipotle has accomplished.
Say hello to Fast Casual 2.0.
What is Fast Casual 2.0?
Just like the difference between quick service and fast casual, the difference between fast casual and Fast Casual 2.0 isn’t so black and white. The fast-casual industry pioneered a dining experience where higher-quality ingredients, enhanced hospitality, and cozier dining rooms could mesh with lower prices and counter service, and Fast Casual 2.0 retains those touch points.
But Fast Casual 2.0 brands take those touch points to a whole other level. While they sometimes offer the same kind of menu customization Chipotle made famous, they tend to be more chef-driven, with signature items crafted by a team of culinary professionals. These brands often focus on an overall experience rather than just the value of what they offer; that generally includes an enhanced beverage program with beer and wine. Their ingredients are high quality, often local, usually healthy or without additives. And their growth strategies are tempered, with new-unit expansion and profits becoming secondary ambitions to other long-term goals like community development and an investment in suppliers and vendors.
At QSR, we’ve watched as these brands have popped up in the last few years—a “fine-fast” restaurant here, a “gastro-fast” shop there. But as we head into 2016, it’s become clear to us that these upscale fast-casual concepts are no longer one-off novelties confined to urban foodie meccas. As the economy improves and American consumers become increasingly interested in convenient, quality food, the opportunities for upscale fast-casual brands to grow—both in their home markets and out—are greater than ever.
So we’re calling it now: In the next 10–20 years, Fast Casual 2.0 will change the restaurant industry as much as the original fast-casual category did in the last decade—if not more.
To flesh out the Fast Casual 2.0 idea a bit further, I reached out to Mike Ganino, a California-based consultant who specializes in small and midscale brands and who spent time running operations at upscale limited-service concepts like Potbelly, Protein Bar, Wow Bao, and HomeMade Pizza Co. He agrees that the age of Chipotle imitators seems to be playing itself out.
“One of the things we’re going to see less of is ‘Chipotle of X, Y, and Z.’ I feel like that’s still really closely tied to [fast casual] 1.0. It’s 1.5,” Ganino says. The new fast-casual wave, he says, will focus less on an assembly-line experience that encourages mostly lunch business and more on a holistic, universal dining occasion. “It’s still very much order at a counter, but you sit down, they bring [your food] to you—maybe they have a couple local IPAs or something on draft or in bottles. And it’s still limited; it’s still not a full menu, you don’t have waiters who are waiting on you. … I think the ambiance feels a little bit more removed from fast food, whereas I think Chipotle and that kind of group of ‘Chipotle of X, Y, and Z’ is still very closely tied to fast food.”
Herein lies an important characteristic of Fast Casual 2.0, one that several brands I spoke with as part of this story (more on them in a bit) mentioned as distinguishing factors to what they wanted to accomplish when they opened their doors. Whereas the original fast-casual industry disrupted traditional quick-service dining, Fast Casual 2.0 is more prepared to disrupt traditional casual dining. When you consider the fact that the only real line between fast casual and casual dining is a wait staff, you come to understand the sliding scale upon which many fast-casual operators are starting to move their brands.
Just ask Mario Del Pero, cofounder and CEO of Los Angeles–based sandwich brand Mendocino Farms. Del Pero and his wife, Ellen Chen, first operated a fast-casual teriyaki brand that they opened in the late ’90s, before fast casual was even the term to define what they were doing. They sold the brand once it had grown to three locations, and in 2003—when they realized there weren’t enough alternatives to casual-dining brands—they started to develop the idea for Mendocino Farms.
“Since we were such early adopters of what would become fast casual, it gave us a lot of time to really study what worked, what didn’t work,” Del Pero says. “At that time, the only inspiration that people were taking from casual dining was basically the better quality of the ingredients. The format was very identical to fast food. … So when we were creating this concept, we had a little more context because we’d been in it for five years, and we were saying, ‘Can we pull more things from upscale casual?’”
The result? A Fast Casual 2.0 brand that launched in 2005, has grown to 12 locations, averages about $3.4 million per unit, and just welcomed upscale grocer Whole Foods as a minority stakeholder.
By our count, Mendocino Farms is just one of dozens of Fast Casual 2.0 brands across the country that have spent the last five to 10 years establishing their systems and infrastructure and refining their menu and culture to the point that the concept can be replicated.
Most of these brands have fewer than 50 units; several of them have yet to break out of their original market. But, just like Mendocino Farms, all of them are finally ready for the national spotlight.
Fine to fast
Let’s start our exploration of Fast Casual 2.0 in (where else?) New York City. Our nation’s culinary capital, New York has given rise to several innovative Fast Casual 2.0 concepts, from Luke’s Lobster and Dig Inn to The Little Beet, Fuku, and ’wichcraft.
Perhaps most importantly, New York is home to Danny Meyer and his Union Square Hospitality Group (ushg), parent company to Shake Shack. While Shake Shack is very much a tried-and-true burgers-and-fries brand, there is an “otherness” to it that countless others strive to replicate, much like Chipotle before it. Its hospitality, for example; by investing in its employees, Shake Shack has established a hospitality service more in line with full-service brands.
Meyer famously dodges attaching the “fast casual” classification to Shake Shack, opting instead for “fine casual.” If you thought that wasn’t intentional, think again. By ditching the “fast casual” moniker, Meyer is able to separate the brand from other better-burger players and any Shake Shack imitators, creating a closer association with the fine-dining expertise USHG is known for.
Some of the leaders driving the industry's next great wave.
A closer association to fine dining is also what Ratha Chaupoly and Ben Daitz are hoping to accomplish with New York’s Num Pang. The college buddies first opened the Cambodian sandwich joint in 2009 as a spinoff of Kampuchea, a fine-dining restaurant Chaupoly opened in 2006. That restaurant—one of the first Cambodian-focused concepts in New York, inspired by Chaupoly’s heritage—had num pangs (loosely translates to “sandwich”) on the menu that became so popular the business partners figured they could operate a separate concept around them.
They were right. The first location—squeezed into a 250-square-foot space near New York’s Union Square—was such a hit that it sold out every day for its first three months and the team had to prep food at home in order to keep up with demand. Num Pang has since grown to eight locations in the Big Apple and was recently ranked by Zagat as customers’ favorite fast casual in the city. While the first location only had a handful of sandwich selections on the menu, Num Pang now features several regular and seasonal sandwiches—like the Pulled Duroc Pork, Coconut Tiger Shrimp, and Grilled Skirt Steak sandwiches—soups, salads, and noodle and rice bowls, as well as premium beverages and, in some locations, beer and wine. The restaurants are vibrant, with graffiti splashed across the walls and hip-hop blaring over the speakers.
Chaupoly says the goal with Num Pang’s menu was always to replicate his and Daitz’s experience in fine dining. “Fine dining is such an art form, from plating, making, designing the food to building your service,” he says. “This is the way I think about it: I’m going to build you something beautiful. So how do you take this and get it to the public’s eye in order for them to taste and feel and experience it? You take that concept and you put it in [a counter-service format], and you don’t really think anything different.”
He adds that the ingredients and flavors are on par with what would be served in a fine-dining format, pointing to the brisket as an example of this. Taking eight hours to cook and chill, the brisket is something Chaupoly says he could serve as a main course in a full-service restaurant. At Num Pang, it’s served in a sandwich for around $9, paired with bold and fresh flavors that are packed into every bite.
Now Chaupoly and Daitz hope to deliver the Num Pang experience beyond the New York market. Their team is preparing to scale the concept, and they envision national growth, starting with the Northeast. As for growth methods, they hold to the same strategy as many other Fast Casual 2.0 brands: no franchising.
“I think the old franchise model works well when you’re delivering a bread, sliced meat, and sliced cheese experience,” Daitz says. “When you have a more culinarily advanced model that you’re trying to roll out, there are obvious pitfalls in keeping the brand consistent as you go out of market.”
This is a commonly held problem among Fast Casual 2.0 brands. Because so many of them are designed around a chef-driven menu, expansion becomes a little trickier than with traditional limited-service restaurants. Daitz hails Panera Bread and Chipotle as “incredible brands” but adds that what Num Pang is trying to accomplish is more complex to execute.
Overcoming that challenge, Chaupoly says, is all about the people Num Pang brings into the fold. “How can I give a great experience? How can I give great, thought-out food, with techniques you can find in a sit-down-service restaurant, and provide that with quick service?” he says. “It becomes really about the people you have. If you can build a model that you can train and cultivate and build a good culture within your business model, then I think you have something.”
Ganino especially champions the people piece to the Fast Casual 2.0 wave. While several Chipotle imitators studied that brand’s menu systems, he says, they missed the fact that one of Chipotle’s greatest strengths is its brand culture and the way it develops employees. Brands thrive when employees are invested in the company’s success.
“Most companies have one of two issues: They haven’t gotten really clear about what they want it to feel like to work there, or they have gotten clear but … nobody is held accountable for living those rules,” he says. “If you’re hiring people and paying the least amount you can, and giving them the least amount of training you can give them, and you’re not really doing something bigger than, ‘We sell food and this is a job for you,’ then the relationship with the consumer is not going to be what it could be.”
In scaling premium concepts, he adds, the trick to having several locations without the brand feeling like a commodity—the dreaded “chain” reputation—is to hire and develop people who help make each location feel independent.
Now to Los Angeles, the yin to New York’s culinary yang. In Southern California, local ingredients and healthy eating have become foundations of the foodservice scene, and that’s especially true of its Fast Casual 2.0 brands. And, like in New York, it’s an emphasis on culinary excellence that is fueling this premium limited-service experience.
Let’s go back to Mendocino Farms, where Del Pero and Chen are quietly building a burgeoning restaurant empire whose tagline is “Eat happy,” where several of Fast Casual 2.0’s signature traits are perfectly encapsulated.
First, there’s the menu, a “sandwich market” rife with locally sourced goods; there’s a Peruvian Steak Sandwich, a Kurobuta Pork Belly Banh Mi, a Vegan Dosa. But Mendo, as it’s affectionately known to staff and customers alike, is also busy creating a restaurant experience that Del Pero says strives to make the restaurants a gathering place for their communities. It trains its employees to take customers’ orders as they’re waiting in line and then run the food out once it’s ready to go. Each Mendo is designed by the same in-house architect but different interior designers, giving the stores a sense of unity as well as independent character. Fine-dining chefs regularly visit the brand for days at a time, working with its culinary team—made up of trained chefs, many of whom carry full-service experience—to develop new menu items. There are communal tables, cornhole courts, foosball, beer and wine.
Some of the leaders driving the industry's next great wave.
“We’re not trying to build 5,000-square-foot sandwich shops, but we’re also not building 2,500-square-foot sandwich shops,” Del Pero says. “These are 3,000-square-foot sandwich shops that typically do $1,500–$1,700 a foot. ... We’re doing as much as most casual-dining spaces and far more per square foot than Chili’s or any of those brands could ever hope for.”
Del Pero cites the convergence of three consumer trends from the last decade and a half for Fast Casual 2.0’s conception. First, he says, was the rise in popularity of grocery brands like Whole Foods, which educated Americans on local ingredients and wholesome eating. Second was the popularity of food TV, which further educated customers and got them excited about ingredients and recipes they’d never even heard of before.
The third trend, he says, was the food-truck boom. While the trend has, in many cities, come and gone, Del Pero says the timing of food trucks’ popularity, especially in Los Angeles—ground zero for the truck trend and home to the movement’s godfather, Roy Choi—is not to be underappreciated. Thriving at the peak of the recession, food trucks presented a creative outlet to educated people who were suddenly unemployed. “You had a lot of these specialized foods that were done by people who were unbelievably thoughtful and great students of trying to understand how to be successful,” he says. At the height of the food-truck trend, he adds, several trucks parked outside a Mendocino Farms location during peak hours—and he welcomed it. “All ships rise with high tides. It’s been one of the greatest movements.”
Like with Num Pang, Mendocino Farms is preparing for growth, though Del Pero still isn’t certain whether that growth will be regional or national. The trick, he says, is growing the infrastructure—the suppliers, the partners, the hospitality-training program—along with the brand. “One of the three things we’re fighting in ‘fine fast’ is, the minute you start trying to scale, you start watering down the food, you start cheapening the dining rooms, and your hospitality goes out the window,” Del Pero says. “So we’re fighting those three things.”
The recent investment from Whole Foods shouldn’t hurt. The grocer, which Del Pero cites repeatedly as an inspiration to Mendo (our interview was conducted before news of the investment broke), became a minority stakeholder and will help the sandwich brand expand to San Francisco and San Diego. It also plans to open Mendo within some of its Whole Foods locations.
Similar to so many other Fast Casual 2.0 brands, franchising isn’t in the cards, and Del Pero suggests the elevated level of service and culinary expertise in Fast Casual 2.0 isn’t something that can be easily packaged in a franchise model. “All of these places are doing pretty chef-driven menus, and any time you have that level of complexity, you better have [franchisees with] 50-plus units under their belt,” he says. “And if you’re thinking of franchising, it better be in area development deals with someone who already owns casual-dining chains—not fast-food places.”
Mendo’s friend and neighbor, Tender Greens, also isn’t franchising, and has its own investment partner on board to help with expansion: Meyer. The USHG mogul invested in the Los Angeles–based concept this summer, becoming a board member and minority stakeholder—the first such investment he’s made with USHG.
Tender Greens was founded in 2006 and has grown to 22 locations. While the core of the Tender Greens menu is salad, it also features soups, sandwiches, and plates with signature proteins like albacore tuna, steak, and chicken. Most of its produce is sourced from Scarborough Farms in Oxnard, California, which invested in the brand early on. Much of the rest of its menu is also locally sourced.
Tender Greens’ slogan is “slow food done fast,” and that stems from the chef experience each of the three founders—Erik Oberholtzer, Matt Lyman, and David Dressler—brought to the table when they decided they wanted to create a premium restaurant that was more affordable.
“We were just ‘quick casual’ by service model in that we wanted to pull the waiters out of the equation, valet parking out of the equation, so that it wasn’t so expensive, and it was also fast and efficient,” Oberholtzer says. “So we borrowed the efficiencies of the fast-food world, but wove the fine-dining and luxury space into every bit of Tender Greens.” He adds that the cofounders were “reluctant to absorb” the “fast casual” mantle, as it refers to a box created by Chipotle and Panera Bread that their team didn’t want to be lumped into.
With so much of its menu locally sourced—and in California, no less, the largest agriculture state in the nation—Tender Greens isn’t in a hurry to open new restaurants. Oberholtzer says USHG’s investment will help the Fast Casual 2.0 brand expand to cities like Chicago, New York, and Austin, Texas (in talking about expansion, Oberholtzer also brings up Whole Foods, noting that Tender Greens’ customer is the same one who visits the grocer). The team wants to scale its sourcing strategies along with the brand, and Oberholtzer says that will be easier with new hydroponics and aquaponics systems, through which Tender Greens can grow food under controlled conditions and as close to the restaurant as possible.
Oberholtzer sees the Fast Casual 2.0 movement thriving on the same idea he and his cofounders had 10 years ago: So many chefs around the country, he says, want to maintain their high cooking and sourcing standards, but in a package that is more accessible to the public.
“I think what you’ll see is there will be some great one-off local brands that emerge in markets across the country,” he says. “Then there will be other regional players that are able to scale up and enter suburban markets or secondary markets over time. And then there will be national or international brands that make it; they’ll have the bandwidth and the organizational structure and the systems and the brand identity to expand further. You’ll see success at all levels.”
Indeed, Fast Casual 2.0 comes in all shapes and sizes and in all manner of culinary styles and branding personalities.
Just look at Seattle, where two women who successfully accomplished their dream of opening a food truck have suddenly found themselves operators of two—soon to be three—mega-successful counter-service restaurants, each with its own unique flair. Marination, founded by Roz Edison and Kamala Saxton in 2009, first earned fans in Seattle as a roaming food truck slinging Hawaiian-Korean fusion fare like Spicy Pork Tacos, SPAM Sliders, and Kimchi Quesadillas. It then grew to a 600-square-foot brick-and-mortar space that Edison says was essentially a replica of the truck but with a “kegerator,” and then to a location on the Puget Sound that overlooks downtown Seattle.
“We try to distinguish ourselves from other fast casuals mostly by making everything in-house from scratch, even at mass volume,” Edison says. “‘Everyday Aloha’ is our model, and we love that. All of our order takers are trained to do everything they can possibly do to remember people’s names or faces or at least something about them. Even if they don’t remember any of those things but remember that they’ve seen this person before and say, ‘Welcome back, good to see you again’—that’s not very typical in a fast casual like Chipotle.”
Some of the leaders driving the industry's next great wave.
Marination’s growth plans, though, are tempered. After the third brick-and-mortar location opens, Edison and Saxton have no plans to continue building the brand. While Edison says “never say never,” she adds that she and Saxton are content with their small Fast Casual 2.0 operation, even as they receive invitations to expand out into the broader Pacific Northwest region. Growing beyond Seattle means giving up control and not being on the frontlines, Edison says, and that’s not something she and Saxton are interested in.
“You can’t separate Marination from who I am and where I go,” she says. “And for me, that means that it is a huge responsibility to make sure Marination continues to deliver a positive experience for every one of the people I run into.”
Look, too, at Austin, where a group of business partners went all in on the better-burger category, but in an effort to do something different, elected to make everything itself, from the meat to the buns to several components of its full bar. At Hopdoddy Burger Bar, guests order at the counter and wait for their food to be run out, and while they’re waiting, can order a drink at the bar and soak in all of the visual cues that denote a high-quality experience.
“You see our meat-grinding room,” says CEO Dan Mesches. “You smell our bakery and see the bakers working. You see the craft spirits at the bar. You see the local beers on tap.”
Hopdoddy has grown to 10 locations in four states and is looking at additional growth opportunities across the country. Mesches says the company’s leaders aren’t interested in “growth for growth’s sake,” and plan to grow at the right pace as the right opportunities present themselves. But more important than how many locations they have, Mesches says, is the culture they build into Hopdoddy as it grows. “We’re looking for people who have the spirit, who want to be part of the change, who want to grow with us and be proud of what we do,” he says. “We would love it if the people who work with us, if we’re the last restaurant job they ever have, that they continue in our company up through the ranks, or, if it’s a segue in their life, they can go on to what their chosen area is.”
You can even look at Denver, cradle of the original fast-casual category and birthplace to Chipotle itself, where a team of restaurant veterans—a fine-dining chef and Yum! Brands franchisee among them—just opened Honor Society, which its owners hope can be a destination for lunch, happy hour, or dinner. Rob Alvarado, CEO of Yum franchisee Palo Alto Inc./Alvarado Concepts LLC and one of the Honor Society partners, says he and his team wanted to add some “finer touches” to the traditional fast-casual model.
“It’s little things such as runners who actually take your food out to you, more linens and actual china plating and real silverware, things like that,” he says. “We do things such as making most of our food in-house. … We offer craft beers on tap, wines on tap, but we also have what we call our clean cocktail program, these healthier takes on cocktails, on tap. So it’s really a step above what you would find in a traditional fast-casual restaurant and more reminiscent of a true full-service restaurant.”
As Honor Society is just a few months old, the owners don’t have an idea for just what they might accomplish with the restaurant, Alvarado says, but he adds that they built its systems “with growth in mind.” Like other Fast Casual 2.0 operators, the Honor Society team understands that an elevated fast-casual experience has the potential to kick open plenty of doors with the restaurant-crazed public.
“Just how fast casual came in and played its role there, I think this is the next level, where restaurants can play for even a different demographic who maybe before were only visiting casual restaurants,” he says. “I think this will appeal to folks who want that same quality food but want to access it more frequently at a more affordable price point.”
Imitation may be the sincerest form of flattery, but it’s also the easiest blueprint for making money. Just ask Hollywood.
Here’s the thing, though: The easy way isn’t always the most fulfilling. In time, customers want something new, something fresh, something original, or else they’ll just choose to stay at home.
We believe a new wave of restaurants is up to the challenge. Call it whatever you want. Call it fine casual. Call it fine fast. We’re going to call it Fast Casual 2.0. And we’re excited to share its story as it revolutionizes the limited-service industry.