At their birth in the mid-1990s, fast casuals knew who they were and what their role was in the dining landscape.
Higher-quality food than quick service? Check.
Inviting dining rooms with hip decor that made you want to linger a bit or meet up with friends? Check.
The food and ambiance of casual dining without the long wait times per order or the need to tip the server? Check and check.
Drive-thru? Most definitely not.
“In the past, with fast casuals, you think about the environment. It’s someplace you could linger, that’s more attractive than sitting in a fast-food restaurant. The visitation was 50-50 on-premise, off-premise. That’s all changed because of the pandemic.”
The fast-casual segment arose as a middle-ground between quick-and-cheap fast food and higher-end (and slower) casual dining.
But the pandemic and its impact on consumer behavior has muddied the divisions between fast casual and other segments.
“In the past, with fast casuals, you think about the environment,” said Joe Pawlak, a managing principal with Restaurant Business' sister firm, Technomic. “It’s someplace you could linger, that’s more attractive than sitting in a fast-food restaurant. The visitation was 50-50 on-premise, off-premise. That’s all changed because of the pandemic.”
Despite those changes, though, the fast-casual space remains one of growth and innovation.
The segment is growing significantly faster than the restaurant industry as a whole, according to Technomic data. And fast casuals are performing 5% above 2019’s pre-pandemic sales.
“Fast casuals, no doubt about it, they’re the ones that jumped on delivery very quickly,” Pawlak said. “Consumers go to them for quality. We look at fast casuals for their quality of food. They still have that perception in the consumer’s mind and the consumers believe that’s what their advantage is.”
Fast Casual by the numbers:
Source: Technomic
Drive-thru revolution
Without question, the biggest recent change to the fast-casual operating model has been the drive-thru.
Until Chipotle Mexican Grill started rolling out its order-ahead Chipotlanes in early 2018, drive-thrus were virtually unheard of in the fast-casual space. The thinking was that fast-casual fare took a bit too long to prepare to work in a drive-up setting and, besides, that type of convenience was reserved for quick service.
The success of those Chipotlanes and, most importantly, the pandemic, changed that thinking.
Now, drive-thrus are almost fast-casual table stakes. Fast-casual chains from Shake Shack to Fuzzy’s Taco Shop to Juice It Up! have either opened their first drive-thrus in recent months or announced plans to do so.
“The lobbies have gotten more and more empty,” said Zak Omar, CEO of 11-unit Atomic Wings, which is planning to open its first drive-thru location next month in Maryland. “Customers aren’t coming into lobbies anymore … It just seems that’s the path America is going on.”
A smaller store, with a drive-thru, would likely be more profitable for Atomic Wings, Omar said. But getting to that point—without compromising on food quality—took some tinkering.
“The lobbies have gotten more and more empty. Customers aren’t coming into lobbies anymore … It just seems that’s the path America is going on.”
Omar’s concept is known for its fresh, never frozen, hand-cut and hand-breaded wings. Traditionally, those wings take eight to 12 minutes to cook and serve. But Atomic Wings has invested in new equipment and developed new procedures, which he declined to specify, that will slash wait times to a drive-thru-friendly 90 seconds.
“We’re still fresh, never frozen,” Omar said. “That’s something we’re not going to sacrifice … I don’t want to give away the farm or the secret recipe here. But that’s what’s going to let us go into the drive-thru space.”
Disappearing dining rooms
It’s not just drive-thrus, though, that are blurring the lines between fast casuals and other segments.
Some fast casuals are ditching their dining rooms entirely, in a clear admission that off-premise is the way of the future.
In December, Chipotle opened its first pickup- and delivery-only location, without a dining area or customer-facing front line. The Cuyahoga Falls, Ohio, restaurant has a Chipotlane, as well as a walk-up ordering window and limited patio seating.
Portillo’s, known for its sprawling dining rooms, opened its first pick-up-only unit this week and said it plans to shrink its seating areas going forward.
Also this week, Wingstop introduced its first location without indoor seating, calling it a blueprint for future units.
Fast casuals are also aggressively pursuing smaller, non-traditional locations in airports, college campuses and more.
Freddy’s Frozen Custard & Steakburgers opened its first airport unit late last month, a licensing deal with concessionaire Paradies Lagardere. The chain also has four campus locations and three arena outposts.
“We’re open to it as the situation arises,” said Andrew Thengvall, Freddy’s chief development officer. “It’s an exciting way to reach existing people who like Freddy’s but also influence new guests.”
Fast casuals haven’t completely ditched their dining rooms, of course. In fact, some chains are blurring the lines with casual dining a bit, enabling customers to place their orders directly from their tables.
Such operations are not yet widespread. But Panera Bread, which rolled out the functionality nationwide this week, said it is hearing good reviews from customers and seeing higher check averages among those who order via their phones from their tables. And McAlister's Deli now offers tableside ordering at more than 300 locations via its app.
Panera said it was a way of building on its off-premise innovations during the pandemic as customers come back into dining rooms, even as the chain remains “bullish” on its drive-thru initiatives, Panera’s Chief Digital Officer George Hanson said.
“Overall, there’s just been a total step change in both usage and comfort around digital,” Hanson added. “We see more and more of that integration with digital and physical.”
Even as fast casuals continue to blur the lines with other segments, they will likely remain differentiated so long as operators focus on some key details, Pawlak said. Fast casuals need to keep a focus on their higher-quality, made-to-order food as well as elevated service, even for off-premise, he said.
“You need to think about how you present our food,” he said. “Packaging plays a key role. How are we packaging the food? How does it look when it gets to the consumer? You can’t just put it in Styrofoam.”
But fast casuals’ future growth could be impacted by what kinds of menu prices consumers are willing to bear. Rising food, labor and other costs have forced fast casuals to drive up their menu prices, further widening the pricing gulf with quick-service chains.
Wingstop, for example, increased prices 10% in 2021. Omar said he was forced to raise prices at Atomic Wings by 20%.
“You can only raise your prices so much before the customer says, ‘I’m going to stay home,’” he said. “There’s pressure from all around us. I feel like we will come through this.”
*2019=100