Article

Fast Casual predicts top trends for 2011

December 28, 2010 by Valerie Killifer — senior editor, NetWorld Alliance

It seems that 2010 brought about a series of buyouts and capital investments for fast casual chains looking to improve their operations for the year. While the fast casual segment seemed to outpace the rest of the restaurant industry in terms of posting positive sales, the category wasn’t completely sheltered from the multi-year economic tornado that tore through nearly every segment in the United States.

As the year came to a close, many business concepts spent the last month reviewing where they were and where they’d like to go as they look to a more positive future.

We have predicted six segment trends in 2011 and their impact on future operations:

Expect more capital improvement and growth efforts on the part of fast casual chains.After two to three years of limited growth, concepts are repositioning themselves to enter new markets and further grow into existing ones. Einstein Noah Restaurant Group has already indicated this will be a top priority for the chain in the coming year. In December, the company announced plans to re-allocate available cash flows to, among other things, finance growth priorities. The effort will be funded by a $125 million senior credit facility and a board-approved capital-expenditure budget of $30 million. Meanwhile, Noodles & Company’s capital-investment boost from Catterton Partners is speculated to help the 250-unit chain grow into new and existing markets. In just four years (from 2005 to 2009), sales figures for the noodle chain have grown an estimated 84 percent. The investment gives Catterton controlling ownership of the Broomfield, Colo.-based chain that opened its first restaurant in 1995.

Asian menu category gains ground.With Chipotle already announcing its plan to launch an Asian restaurant in 2011, and Panda Express looking to expand its unit count by 70 percent throughout the next five years, this menu category is establishing itself as one to watch. Ethnic trends have played a large role in menu and concept development throughout the past three years; however, there has been little new concept development in this category for quite some time. In 2010, The Chalak Group opened Babu San, a Dallas-based, Asian-inspired fast casual restaurant. Depending on its 2010 sales, we expect to see at least one more opening of this concept next year.

Children’s meals will get a healthy boost.Highlighted by the National Restaurant Association as one of 2011’s biggest trends, we expect children’s meals to get healthier next year and in years to come. Freshii announced the launch of its healthy kid’s meal program in November based on founder Matthew Corrin’s inability to find healthy restaurant meals for his own 3-year-old daughter. The trend will be aided by further interest from consumers/parents in healthier menu items. We believe there is a big opportunity for restaurants that cater to their youngest guests, as seen firsthand by Bean Sprouts, a Wisconsin-based fast casual restaurant that sells everything from freshly made baby food to vegetarian, dairy- and nut- and egg-free menu items. By catering specifically to kids, the concept has built a business fit for adults.

Meals on wheels to face regulatory obstacles.State and city regulations are being considered in regard to the food truck trend and we expect this aspect of the industry to keep gaining momentum. For example, the Washington D.C. Department of Consumer and Regulatory Affairs proposed a legislative measure in June to formally codify the city’s food trucks into city statutes. Some restaurant owners wanted to place restrictions on the number of feet a food truck could operate in relation to an operating restaurant's front doors. Other arguments concluded that food truck operators don’t pay for community development projects that many restaurant operators financially support. Rumors also were verified as early as December that the city was considering a moratorium on food trucks in operation. While nothing has been passed, communities across the United States will no doubt take a more in-depth look at the growing trend and ways they can control it. 

Popularity of farm to fork programs to increase.Corner Bakery’s launch of its Get Fresh program and subsequent community garden grant program speaks to the continuing trend of restaurants using fresh, local ingredients. Burgerville and Chipotle have also both taken pride in their use of naturally raised beef or locally produced fruits and cheese. In 2011, more restaurants will support community gardens while others will continue to partner with community organizations for locally grown produce. Restaurant operators and consumers are gaining more awareness about where their food comes from and menus are reflecting the farms where ingredients are purchased.

Business intelligence to get smart. As more is learned about the social web, companies that provide social web conversation monitoring and business analytics will become a restaurant chain’s secret weapon. For example, in 2010 Genghis Grill launched a social media music tour based on surprising demographic findings tracked over the company’s social networking sites. As conversations continue to move from the cell phone to Twitter, restaurant operators will look for ways to leverage this free access to information and turn it into positive ROI. New and creative algorithms designed to look for key demographic trends will launch in the coming year, as will the innovative marketing strategies intended to capture more market share.

* Photo by valcanno