For decades, the value equation in the limited-service restaurant industry was this: Divide what you get by what you pay. The lower the price or the greater the discount, the better the value.
Today, that equation more or less holds up for a large portion of U.S. consumers who remain budget-conscious in a post-recession world, and several quick-service brands are still committed to value deals and low price points to sway customers.
But the limited-service industry has also come a long way from the days of burgers for a quarter and milkshakes for a dime. Demand for high-quality and innovative foods is at an all-time high, and the fast-casual establishments that have sprouted up to answer that demand are growing faster than the rest of the restaurant industry; according to a report from The NPD Group last summer, fast-casual unit counts were up 7 percent compared with the year before, while that figure was just 1 percent for all chains and minus 1 percent for the whole restaurant industry.
The only problem? The high-quality foods served in fast casuals come at a premium. While average per-person checks at quick serves don’t often eclipse $5–$6, the average is often between $7 and $15 for fast casuals. These prices have forced fast-casual operators to consider their value equation and how they get customers to buy in, especially as they grow into areas with lower median incomes.
“Many people thought value meant lowest price or highest discount. But that’s an old way of thinking,” says Mark Mears, CMO of Noodles & Co. “Today, our guests want and demand more than just a meal; they want a total dining experience where the whole is greater than the sum of its parts.”
Adds Frank Paci, CEO of Corner Bakery Cafe: “At the end of the day, that customer has X number of dollars to spend. How do you get them to spend them with you?”
The sliding scale
Paci has been CEO of Corner Bakery—the nearly 200-unit, Dallas-based bakery-café chain serving upscale sandwiches, salads, pastas, and soups—since the fall. One of his first commitments has been to comb through the menu and find a way to bring the value within the brand’s menu to the forefront.
That’s included emphasizing the fact that the restaurants use fresh ingredients and make food to order. But he also wants customers to understand the wide range of menu options that can be mixed and matched to the customer’s liking. Paci points to the chain’s Corner Combos as a great value proposition because customers can bundle a number of different items—choosing two from among sandwiches, salads, Panini, pasta, and grilled flats—together for one price.
“One of the things we’re going to emphasize moving forward is, it’s all for the same price; you make the call as to what it is you get,” he says. “There are a lot of different ways people can get value, and we feel like our value is not to direct them. As opposed to the value menu, where you can have this and this and this for a price, we’re basically saying, ‘Here’s the price
point, you figure out how you want to take that from here.’ It’s just a different way to think about it.”
That sentiment is shared at Corner Bakery’s fast-casual peer, Noodles & Co. The Denver-based global-cuisine chain offers a menu where customers can pick an entrée size (regular or small), protein (meat or tofu), and side (vegetables, soup, or salad), all of which determine the final price. Mears says providing these options empowers customers to make their own decisions on portion and price, which delivers value.
He adds that the value extends to the several different occasions in which guests choose to dine at Noodles & Co. There’s dine-in and carryout. There’s catering, online ordering, and possibly soon delivery. Breaking it down even further, Mears says there are five types of customers who dine at Noodles & Co.: the habitual (those who crave the food), the flavor seeker (those who want something different), the health-conscious, the budget-conscious, and the family-first (young families whose kids influence their decisions).
By offering a range of items and prices for every type of customer and occasion, Noodles & Co.—where he says the average check is somewhere between $8 and $10—presents a value to its consumer base. “You can build a meal that’s customized to your particular taste or craving, your appetite, and certainly your budget—how much you want to spend during that particular dining occasion,” Mears says.
Customization has been key to the growing fast-casual movement, creating a sliding scale upon which guests can determine their price preferences, and, therefore, their value experience. Paci says this sliding scale creates an opportunity for Corner Bakery to reach many new customers across the country, especially as more people become educated about the food system.
“We don’t necessarily appeal to the person who is looking for the dollar menu. If they want the dollar menu, they’ll go find the dollar menu and say, ‘I’m happy with what I get for what I pay,’” Paci says. “Whereas, people who are stepping up to fast casual are saying, ‘I’m more interested in making sure that what I’m getting is worth what I’m paying, but I’m also interested in what it is I’m getting.’”
One of fast casual’s calling cards in its competition with quick service has always been the quality of the food. And that quality is increasingly important to customers. Local and organic foods found their way into the fast-casual system in the last decade, while clean-label foods—those without additives, genetically modified organisms, antibiotics, and other artificial ingredients—have become a part of the foodservice conversation in the last year.
Now operators are leveraging that quality by putting it front and center of their value proposition.
Sean Pourteymour is CEO of Luna Grill, a San Diego–based Fast Casual 2.0 concept dishing a fresh Mediterranean menu at 21 locations between California and Texas. The chain features wraps and sandwiches for about $9, salads for $6.50–$10.50, and signature plates for $9.50–$14. The online menu lists calories and denotes items that are vegetarian or vegan, as well as those that include either all-natural or free-range proteins.
Pourteymour says customers don’t put price first as much as they used to when searching for value. Anymore, he says, they’re looking at the makeup of the food.
“I want to have a real, nutritious meal,” Pourteymour says. “That’s what I think customers look at, and that’s value. Because you can get cheap food. … But I don’t think just slapping on some food and putting a low price on it is what people are looking for anymore.”
He adds that portions are large and calories are low at Luna Grill, giving customers health-conscious choices while also giving them the option to stretch their food to another meal with leftovers. The value equation at Luna Grill is especially popular with Millennials, he says, which helps solidify the concept as a dining destination for that ever-important demographic.
Keith Melker, a partner with business consulting firm Boston Consulting Group (BCG), says fast-casual operators have done a good job listening to consumers and focusing their development on what potential customers want from the restaurants where they commit their dollars.
“If you think about a lot of fast-casual restaurants, they’ve really begun to talk a lot about the way the food is made, the quality of the ingredients, and some specific food characteristics like natural and organic that actually resonate with consumers and create a higher willingness to pay,” Melker says.
The use of characteristics, or “sensory terms,” says Jason Felger, CEO of market research firm Food Genius, is still in its infant stages but on the rise, especially at upstart fast-casual concepts in major food cities like New York, Chicago, and Los Angeles. Adding these terms to the menu makes sense for concepts that are trying to fit into customers’ healthy lifestyles and those that post higher prices, he says, because they illustrate the value proposition.
“The fact that they’re being called out and there’s such an overemphasis on it helps drive that price point to the consumer and reinforce it,” Felger says.
Bun Mee is one such place where food characteristics have found their way onto the menu. At the San Francisco–based Vietnamese sandwich shop, descriptors like fresh, organic, and gluten free help describe the menu items, which include things like the Grilled Lemongrass Pork sandwich, the Saigon Peanut Rice Bowl with Tofu, and the Mango Sesame Salad. Prices at Bun Mee range from $6.95 to $8.49 for sandwiches and from $9.75 to $11.75 for salads and entrées.
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