Article

Fast casual segment outperforms industry

March 14, 2011 by Valerie Killifer — Editor, FastCasual.com

Visits to fast casual restaurants grew 17 percent throughout the last three years while the rest of the industry experienced its steepest traffic declines in decades. The increase and consumer demand for fast casual offerings exceeded the unit growth of leading fast casual chains, according to a study by foodservice market research firm The NPD Group.

The growth of the fast casual segment has been captured by NPD CREST, which continually tracks consumer usage of foodservice outlets. For the year ending December 2010, visits to fast casual restaurants were up 6 percent versus a year ago. This compares to a 1 percent decline in total industry visits for the same time period.

Bonnie Riggs, an NPD analyst, said the growth of the fast casual segment has been occurring since 2006.

“If we were just looking at the last couple of years, in 2009, when fast casual was up 5 percent, fast food was down 2 percent, and casual dining was down 4 percent. Then in 2010, when fast casual was up 5 percent, fast food was still down 1 percent and casual dining was down 2 percent. Fast casual growth slowed because they curtailed unit expansion somewhat,” Riggs said. “In 2010, if I’m looking at traffic on a comp basis, traffic was positive. There was real growth in demand in both years, it wasn’t growth just based on expansion.”

Even with this growth in demand and traffic, fast casual unit availability expanded 12 percent since 2007, Riggs said.

According to the NPD report, “A Look into the Future of Foodservice,” the fast casual segment will continue to lead the restaurant industry overall in terms of growth throughout the next 10 years. Based on aging, population growth and trend momentum, while the restaurant industry overall is going to grow less than 1 percent, fast casual is forecasted to be the strongest growing segment, Riggs said.

“Currently, fast casual growth is supported by a broad range of consumer groups, but there are other things coming onto the scene that will provide additional support,” she said. “When we look at our customer satisfaction data, when consumers rate different attributes on a 5-point scale – fast casual is considerably higher than what we see for fast food. When it comes to flavor, taste and quality, they come out way ahead of fast food and casual dining in some instances.”

Riggs said fast casual diners will continue to cross all age groups, “it’s just that the older ones will hold a higher share of the market than they currently do,” she said. “Incremental traffic for fast casual will source to teens and young adults – particularly those 10 to 30 years of age (Generation Z), and to a lesser extent, those 55 years plus. By 2019, Generation Z will be the single largest population group at 90 million strong, and that will provide a lot of support for fast casual. As long as the segment stays relevant, which it has, there isn’t any reason that it shouldn’t continue on this strong growth path.”

Also, according to the recently released Technomic report of the top 500 largest U.S. restaurant chains, fast casual concepts hold seven out of the top 10 positions, with Five Guys leading the way. In total, the top 10 fastest-growing chains' sales accounted for $7.8 billion, an 18 percent increase over 2009. Unit counts grew 14 percent.