The fast casual gold rush

Dec. 3, 2009 | by Valerie Killifer
It's no secret that within the last 12 to 16 months, the restaurant industry has cut 104,000 jobs. The cuts have led operators to look for growth opportunities where the unemployment rate has stayed relatively slim. While California was the land of promise during the Gold Rush of the 1840s-50s, it's the Midwestern and Northeastern states that are now giving operators a vision for the future.
Texas topped several lists in 2009, from Forbes' and Kiplinger's "best places" rankings to the U.S. Census Bureau's numbers on a bevy of economic indicators. It seems as though the National Restaurant Association's promise that Texas would be a mecca for the restaurant industry has come true this year as a variety of brands planted new-store roots from Addison to Dallas to San Antonio. While Dallas may be fast becoming the fast casual capital, we chose the entire state of Texas to top our list of the best growth market in 2009 and beyond.
Here's a rundown of our top five hottest fast casual growth markets:
Texas – Towns from Austin to Dallas to San Antonio saw an increase in fast casual brands opening locations in the Lone Star State. In 2009, Red Mango moved its corporate headquarters to Dallas, while Pinkberry opened its first fro-yo concept there. Meanwhile, Smashburger opened in Addison and Einstein Noah opened in San Antonio, the concept's second franchise unit in the state. So what makes the Texas market tick? For starters, cities such as Austin are gaining in appeal. There's not a growth or hot list in 2009 that the city hasn't been ranked in the top 10: Austin ranked No. 8 in Kiplinger and 6 on Forbes's lists of "best cities for jobs," which means residents have more disposable income for meals out.
Boston – The markets that have done well for brands this year seem to be those anchored by university, hospital or government industries, and Boston is no exception. With an unemployment rate of less than 5 percent, Boston ranks No. 3 on the Forbes 2009 list of the 10 Cities Where They're Hiring. The city also plays host to 85 private colleges and universities, which employ a combined estimated 70,000 people. Vapiano opened its first Boston location in November, and Chipotle inked a multi-year partnership with the Boston Bruins. While there wasn't an explosion of new-store openings this year similar to Texas, we think Boston will emerge in 2010 as one of the top markets for fast casual brand growth.
Chicago РFirehouse Subs has plans to open 125 restaurants in the Chicago region over the next five years. And Firehouse isn't the only brand looking to set up shop in the Windy City. In July, Smashburger announced plans to open 11 units in the region through a franchise deal with Food for Thought Enterprises through their development arm, Smash Illinois LLC. Meanwhile, entrepreneurs David Gile and Ankit Jhaveri have announced their plans to open three Sandella's Flatbread Caf̩ locations in the area as well.
Denver – Chipotle, Spicy Pickle, Qdoba and Quiznos can each call Denver home, and it's no wonder why. Colorado is among the top 10 states with favorable business tax laws, according to the Small Business and Entrepreneurship Council. And the state is home to one of the biggest craft and microbrewery markets, a growing American industry. Forbes also called Denver and its suburb Boulder the 14th and 20th best places, respectively, for business and careers this year, and Boulder the No.1 for educational attainment (university restaurant operators take note). Red Mango just announced its first franchise location will open in Denver while several other concepts, such as Pollo Campero, eye the city for their future development as well.
New York City – As the United States' most densely populated city with a 2008 population estimation of 8.3 million people, you would think New York City would be a fast casual operator's dream come true (and for some, it is). But the city that never sleeps is just now emerging as a land of franchise growth and opportunity. Tasti D-Lite announced its first development deal for NYC in June, and Vapiano announced in July a franchise agreement for the region. New York City was recently named by Forbes as the eighth most expensive city in world (up from 22nd place on the 2008 list). It also received Forbes' top honor as the best city for singles, perhaps increasing the need for affordable restaurants.

Topics: Financing and capital improvements , Franchising & Growth , Operations Management , Trends / Statistics

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