The fast-food landscape is the wild west. Innovations are happening left and right and it's a full-fledged marketing heyday. Impossible meat? BK's got it. Chicken sandwich wars? Still raging on between Popeye's, Chick-fil-A and now KFC. Area 51 raid? "Sponsored" by Arby's.
You might wonder, why is the QSR (quick-service restaurants aka fast food) category going ham? Because fast-casual restaurants are eating their lunch—the only restaurant vertical to see traffic grow in the past 5 years.
The likes of Chipotle, Panera and Sweetgreen have carved out a new restaurant category between fast food and casual dining and it's putting a major squeeze on them. They combine the quickness of QSR with higher quality food and better service from casual dining. Typically the food is prepared in front of you and for just a few more dollars you get a way better experience and bang for your buck. What more could you want?
As you can see from the chart below, the majority of the top chain restaurants last year by sales are fast-food restaurants. But don't move on so fast—even though McDonald's has the number one sales by far, their units decreased YOY. Many are pointing to signs of "crisis" and restaurant-glut.
Casual-dining's decline has been even more drastic—more than half of the 186 casual-dining restaurants (like Chili's, Olive Garden, etc.) in Technomic's report showed the number of units decrease or level off in 2017.
While fast-casual only accounts for 8% of the total market, the growth has been super-sized—since 1999, fast-casual restaurants have grown over 500%. Last year alone, fast-casual accounted for $42.2B in sales and 4 out of every 5 new restaurant opened was a fast-casual concept.
Technomic's Top 500 List
Outside of the obvious benefits, why is fast-casual winning our wallets?
Brett Schulman, CEO of Cava, the fast-casual Mediterranean concept that bought Zoe's Kitchen last year (bringing their total spread to 327 restaurants across 24 states) says that "dual-income families, people having less time, people demanding higher quality and better nutrition profiles" all inspired the fast-casual movement.
So is America finally getting healthier? 61% of consumers said they are ordering healthier options at restaurants than two years ago. But don't just take their word for it—according to NPD, visits that include an item labeled healthy increased 34% since 2010.
With that being said, the obesity rate in America has been on a drastic incline, growing from 23% in 1988 to 40% in 2016. It seems then that yes, there are now more healthy options at restaurants and some people are ordering those more, but no, America as a whole is not getting healthier.
The NPD Group
I chatted with my foodiest friend, Ben Arnstein, the founder and CEO of Kaliflower, to get his expert thoughts on fast-casual trends. Kaliflower is a *delicious* new Chicago fast-casual concept using the flavors of Spice Road and modern cooking techniques to help you live a life well fed.
He shares that the concept of "health" has become more than just a calorie count. While health trends and diets will always be around, the biggest movement taking place right now is "a return to transparency and lack of additives". He sees people asking less about carbs, fat and calorie count and more about what's actually in the food—the ingredient list is overtaking the nutrition label.
Additionally, his hot take on local sourcing (which is seemingly every restaurant's go-to marketing tactic at this point) is that it also takes a back seat to the ingredient list. What you're actually eating vs. what farm it's from is still more important.
Kaliflower: The Path to Enlightenment Bowl
The big QSR behemoths like McDonald's and Wendy's are even responding to this trend. McD's has promised to reduce antibiotics and Wendy's goes overboard with their fresh, never frozen beef messaging, as evidenced by the tweet below.
Burger King has taken a different approach by adding a 100% zero beef option to their menu with the Impossible Whopper. For the uninitiated, Impossible Foods has created lab-grown, plant-based "meat"—a far cry from real ingredients, but a great option for many looking for these types of solutions. If you're curious about the science behind it, here's more info.
Wendys trolling McDonald's on Twitter
What are the other secret sauces of fast-casual success?
Data is their special ingredient and they use it as a feedback loop. Sweetgreen is a shining example of this. With a $1B valuation, 93 locations, 4,000 employees, 40% sales growth in three years and actual profitability, they seem to be doing something right.
With data coming from their 1MM+ app downloads (which accounts for 50% of their orders) they can figure out what people are ordering where, when and why. And then they optimize the menu accordingly.
They also have more than 10,000 elite Gold or Black members who spend upwards of $1K+ a year. They get insider access, swag and are used as a testing ground for new menu items.
But they aren't just stopping there. Their vision is to become a tech company—the Netflix of salads with the spirit of an Apple Store—and they're calling it Sweetgreen 3.0. They'll serve up even more nuanced recommendations on what to eat next based on previous orders and in the new concept stores people will be able to order from digital kiosks. They plan to use blockchain to track crops for peak freshness and even imagine having non-storefront "fulfillment centers" just for mobile orders.
Chains like Cava are also leveraging data to their advantage but in different ways. Per Forbes, they are "reimagining the drive-thru experience with help from data scientists" by launching five pick-up-by-car locations this year (similar to Target's service) to take even more friction out of the ordering process.
What other recipes for success have fast-casual chains whipped up? They create cult followings through celeb chefs, menu drops and VIP clubs.
If it's starting to sound more like an album drop than a salad chain, that's because it kind of is. Sweetgreen hypes the release of their seasonal menus by teasing ingredients, salad names and recipes. They've trained us like Pavlov to start salivating at the sign of each new season, and I don't hate it.
Inc describes how "social media is full of fans describing their love for [Sweegreen's] Shroomami grain bowls in ways normally associated with milkshakes, cheeseburgers, or Beyoncé." If you're lucky enough to reach SG black status you can tap into a VIP concierge service and also throw an SG party for you and 10 of your salad-loving friends.
With all the talk about business, you might think they're a very serious brand, but in fact, they're quite the opposite. They lean into memes on social media, channel rap songs in menu items like "beets don't kale my vibe" and other punny goodness like this one for their peach burrata launch.
If you can't tell already, I'm obsessed with SG and if anyone can pull some strings to open one in Raleigh I'll be forever indebted to you.
Sweetgreen on Insta
Michelin-starred, celeb chefs are throwing their spatulas in the ring and going all-in on fast-casual, bringing their fans along with them. The most well-known is likely Danny Meyer who opened Shake Shack in 2004 and made our hearts forever happy through crinkle-cut fries and custard concretes.
David Chang, the mastermind behind NYC's Momofuku, opened Fuku, an Asian fusion fried chicken fast-casual chain in NYC, Boston and Santa Monica (launching this week). Other chefs include José Andrés of minibar in Washington, D.C. who opened Beefsteak in 2015 and Chef Daniel Humm and Will Guidara of Eleven Madison Park and The Nomad that launched Made Nice, in April last year.
What does this all mean? In addition to creating a successful business model, fast-casual chains have developed a killer marketing playbook that we all can learn from, restaurant industry or not. And as with any trend, at some point, I'm sure we'll reach peak fast-casual. But in the meantime, go get yourself a Harvest Bowl and send me one in the mail.