The value of fast casual

The value of fast casual
Tags: Business Strategy and Profitability, Fast Casual Executive Summit, Operations Management
November 16, 2010

I'm spending my Saturday sitting on a Southwest Airlines cross-country flight, headed home after a whirlwind tour of our Firehouse Subs restaurants in Denver, Salt Lake City, and Las Vegas. Barely 12 hours after my arrival home, I'll be turning around Sunday morning for departure to Chicago and the Fast Casual Executive Summit. This will be my third summit, and I'm looking forward to seeing old friends and making new acquaintances among the rookie attendees.

With hours to burn on my flight, I am reflecting back on the origins of the fast casual segment. I think about where it has been and where it is going. I don't have a crystal ball, but I do have some thoughts that may be of value in regard to our branch of the restaurant family tree.

For starters, it is worth noting that the fast casual segment is the only part of the industry I can think of that is not distinct in the consumers' mind. The typical restaurant customer (if there even is such a being) doesn't think in such terms. I imagine that the average American, unfamiliar with the parlance of the industry, would simply break restaurants into two broad categories: fast-food and "sit-down." Name any restaurant of any ilk, and the consumer will lump it into one of those two genres. If you'll grant me that assumption, then the further categorization of restaurant concepts really has to start from there. So, what places a restaurant into one category or another?

One need not look further than the service element. That is really where it all starts and ends. Before fast food, there was one animal: a restaurant (all be it in different iterations. Remember luncheonettes? When is the last time you even heard that term?). And along came new service systems that fit well with the changing lifestyles of America. The emphasis was on speed and convenience, and that branch of the restaurant family tree embarked upon a decades-long mission of becoming as fast and convenient as possible. Drive thru was born, and the overwhelming focus of that segment was on the need for speed. If you had it, you had a supreme competitive advantage in your category that could trump all else. No major player in the industry ever wanted to be anything less than the fastest, and if you were the slowest, you knew you had a major competitive disadvantage. It was all about speed. To this day, for each and every meal occasion, the first question that has to be answered in the consumer's mind is, "what do I have time for." The answer dictates not only the type of restaurant they may choose, but also how far they can travel to for the occasion.

Of course, when people go out to eat, given a choice, they would like to enjoy their food. But in the fast food world, speed and efficiency trumped food quality and flavor in almost every case. Where fast casual "fits" is that restaurants in this segment achieve a balance between great tasting food and convenient service times; not as fast as fast food, but faster and more convenient than full table service. The food is a clear step above traditional fast food fare (and in some cases, even exceeding the offerings of food service restaurants. As anyone who has gotten a bad meal from a full service restaurant, just being a sit-down establishment doesn't immunize you from having a bad menu). Of course, fast casual restaurants typically have a menu pricing strategy that reflects the superior product quality they serve, and their customers assign the proper value to it. Better food in better surroundings, served by a more appreciative staff in a timely fashion equals value, despite the higher price tag.

In summary, fast casual restaurants have staked out the middle ground in speed of service, ambience, pricing, and food quality. Within the segment, different brands leverage different aspects of this to varying degrees. Much of the battle within the Fast-Casual segment rests on how a brand distinguishes themselves from the competition when it comes to these four elements.

So, while the consumer may not consciously think of the fast casual segment, when they place restaurants into their consideration set for a meal occasion, they are very much lumping fast casual brands into their consideration "buckets." Call it what you will, but fast casual brands are unique animals.