The life cycle of a restaurant might better be measured in dog years. The accepted wisdom says something like 90 percent of eateries close in the first year of operation; and around three-fourths of the survivors won’t make it past year five. So actually, maybe mouse years is more accurate.
That’s why it’s always astounding to me when I’m reminded that Chipotle—the subject of our cover story and the veritable poster child for fast casuals, the focus of much of the issue—is over 20 years old. In many ways, its irreverence to the conventional operating theories of large chains feels more like the rebellious antics of a young buck than of the No. 17 U.S. chain in sales.
But just as the zeitgeist shifts when younger generations assert their buying power—and further bends and twists as they enter the workforce, have families, adopt new technology and mature—so, too, does the restaurant landscape under the influence of this generation of fast casuals. While forecasts predict continued, higher-than-average growth in the segment, says Darren Tristano, executive vice president of Chicago research company Technomic, “we’re also starting to see maturity in markets where growth started earlier.” He offers this snapshot:
It’ll surprise no one to hear that Tristano sees the fast-casual, better-burger segment as “very saturated.” That doesn’t mean it’s done growing, however. The genre enjoyed $76 billion in sales in 2013 and Technomic expects more growth, but not too much, Tristano says. “We’ve seen success in Five Guys and Smashburger. Now regional players, such as BurgerFi and Mooyah, are continuing to expand,” he says. “With burgers hitting everything from fast food to fine dining, it’s becoming a bit of a burger bubble. Markets that expanded five to seven years ago are starting to get mature; unit volumes have declined and we will start to see some closures from restaurants that can’t perform.”
Now that any old chain and their mother is getting hip to the fervor around fast-casual, customizable pizza concepts and launching versions of their own, the segment is seeing tremendous growth. Today these concepts are expanding rapidly, says Tristano, and moving nationally. Their strongest potential play? Lunch. “By serving pizza at lunch, it will make it harder for consumers to eat pizza at dinner,” the wheelhouse of the more-established players, he says.
Fast-casual chicken, Asian, Mexican and bakery-cafe concepts all are expected to expand, outpacing the industry as a whole. And all are still a number of years away from saturation, Tristano forecasts. Those that appeal to consumers’ more nuanced and healthier tastes have the most potential, he says. That includes chicken concepts building menus around fresh chicken and Asian concepts that delve deeper into Korean, Vietnamese and sushi.
Specialty segments: “Barbecue is poised for growth in fast casual,” says Tristano, as regional specialists infiltrate new markets. Also showing potential: seafood and health-focused concepts. “[Those in these] smaller, less penetrated parts of the business have great opportunity.”