Article

The year that shaped fast casual

Fast Casual reviews the issues, brands that had an impact on 2007.

January 2, 2008 by Valerie Killifer — senior editor, NetWorld Alliance

As a segment, fast casual gained industrywide acceptance during the year, continuing its separation from quick-serve designations.

 

Fast-casual restaurants generated approximately $10 billion in restaurant sales in 2007. Of that $10 billion, the top 10 chains contributed an estimated $6.6 billion, while the remaining contributed about $3.4 billion.

 

For much of 2007, the trends and issues affecting the fast-casual segment had an impact on the restaurant industry overall.

 

State and national legislative bills increased the minimum wage and set the stage for immigration reform.

 

In July, minimum wage increased 70 cents to $5.85 an hour, the first increase in a decade. By summer 2009, all minimum-wage jobs will pay no less than $7.25 an hour. The bill includes $4.8 billion in tax breaks for small businesses to help them hire new workers and offset any costs associated with an increase in the minimum wage.

 

According to the Economic Policy Institute, a labor-supported research group, increasing the minimum wage directly impacted some 6.6 million workers. An additional 8.3 million workers earning slightly more than the minimum wage would be affected as well, the EPI said.

 

Immigration reform also was a big legislative issue in 2007.

 

Although the Social Security Administration didn't send out no-match letters — meant to alert employers the Social Security information contained in an employee's W-2 form doesn't match Social Security database information — to employers in 2007, it's only a matter of time before the issue resurfaces, immigration lawyers say.

 

National Restaurant Association senior vice president of government affairs and public policy John Gay said the industry will see growing challenges in Washington, D.C., over the next year.

 

Although the association does not expect big-ticket items to pass Congress in 2008, "we have to remain vigilant because there are smaller-ticket items, some good and some bad, which could get through in 2008," he said.

 

Healthy eating, environmental initiatives

 

As reports of mad cow disease and increasing obesity rates make consumers more conscious of menu ingredients, eateries across the board used 2007 to tout the sustainable-farming label in an effort to reach health-conscious consumers. 

 

The trend, rated as one of the hottest movements in the restaurant industry by more than 1,100 American Culinary Federation chefs, emphasizes organic and locally grown produce, whole-grain breads and grass-fed meat products and eschews food treated with pesticides, antibiotics and growth hormones.

 

By far, the fast-casual leader in the sustainable-farming trend has been Chipotle Mexican Grill Inc. The concept, which encompasses more than 600 restaurants, sells about 30 million pounds of grass-fed meat each year, more than any other restaurant chain.

 

About 55 percent of the chicken the chain uses is raised naturally, as is more than 40 percent of its beef. By the end of 2007, the chain stopped using cheese made with milk from cows treated with the growth hormone rBGH.

 

"We are very proud of the tremendous progress we've achieved in promoting healthy, humane and sustainable farming practices and believe our efforts have positively impacted the nation's food supply," said Chipotle chief executive and founder Steve Ells.  

 

Au Bon Pain also made the switch to all-natural chicken products in October. And Eggland's Best became certified by the American Humane Association verifying Eggland's cage-free and organic egg products are produced according to the association's animal-welfare guidelines.

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Other brands such as Organic to Go and Freebirds World Burrito continued to do their part in 2007 to ensure consumers eat healthy and keep the environment healthy, as well.

 

While Organic to Go offers an all-organic menu, Freebirds prints its menus on 100-percent recycled paper and uses recycled napkin and paper products in its locations.

  

Alan Hixon, Freebirds president and chief operating officer, said the company always has felt a commitment to protect the environment "even before it was cool."

 

It's all about growth

 

Nontraditional locations and international markets were two popular restaurant-growth vehicles used to expand brand footprints.  

 

Penn Station East Coast Subs, Saladworks, California Tortilla, Au Bon Pain and many others signed agreements to enter ballparks, airports, hospitals and college campuses during the year.

 

The key to nontraditional venues, such as college campuses, is that there is a large, captive audience eager to spend money, said Paul Carolan, senior vice president of franchising for Einstein Noah Restaurant Group.

 

"We're getting the opportunity to meet 52,000 college kids at the same time and have them for four years with a whole new batch behind them. These are customers you may not be able to reach for years before you expand into their home market," Carolan said. 

 

International markets also played a large part in brand growth in 2007.

 

Raving Brands opened its first Doc Green's Gourmet Salads in Singapore in January and signed franchise agreements for the development of 150 restaurants, including Doc Green's, in markets that include the Middle East.

 

Au Bon Pain signed an agreement to develop 300 locations in Japan. The bakery-café chain operates 35 franchised international locations in markets that include Korea, Thailand and Taiwan.

 

"Fast casual is not just a U.S. phenomenon," said Aaron Allen, founder and chief executive of Orlando, Fla.-based Quantified Marketing Group. "It's finding its way to other countries, as well. From the consumer perspective you get the best of both worlds: speed and higher-quality products at a price point that's in the middle."

 

While brands were looking across the globe to expand, flavors from Asia and the Caribbean were hitting the menus in America.

 

Ethnic adventures was one of the top culinary trends influencing American restaurant menus in 2007. While Asian cuisine led the way, new menu items offered a cornucopia of flavors — from Caribbean, South and Central American and African.

 

"Ten years ago, Americans weren't as educated on Asian flavors. They might know Chinese food, but now they know the difference between Thai, Korean, Chinese and Japanese," said Suzy Badaracco, owner of Culinary Tides. "Most interesting is not that they're coming in, but they're coming in with their own voice."