Why we can stop freaking out over the 'decline' of fast casual growth
If I were to only read the headlines published over the past few months about the fast casual industry, I would probably start looking for another job.
A quick Google search brings up the following,
- "Why fast-casual chains are struggling"
- "5 reasons fast-casual sales are falling"
- "Here's Why People Aren't Eating at Fast-Casual Restaurants"
Those click-bait headlines will definitely get your attention but don't tell the whole story. Technomic, for example, reported this week that the Top 250 fast casual chains grew sales a cumulative 8.4 percent in 2016. That is admittedly less than the previous year's 11.9 percent and 13.8 percent in 2014, but an 8.4 percent growth rate in any other industry would be a huge success.
I get it. When an industry has spent the last two decades steadily breaking records, it makes sense for people to get a little paranoid when numbers start falling. We must keep things in perspective, however.
Part of that crazy growth stemmed from fast casual's being so new and different from all the other dining options. Customers were intrigued. Everybody wants to be "besties" with the gorgeous, exciting new kid with the unique haircut and clothes. Pretty soon, however, the other kids in the class are sporting the same "new look."
After spending 20 years watching fast casuals garner all the love and attention, QSRs and casual-dining brands have finally caught on. They've updated their looks, upgraded their menus and enhanced their customer experience. But that doesn't mean fast casuals are destined to fail. It only means that the novelty factor has worn off, and the playing field is a little more even.
A key factor contributing to the slowing sales growth trend is decelerating unit development within the segment, which registered at 8.9 percent in 2016, following a rate of 9.6 percent unit growth in 2015, according to Technomic. Is this signaling the demise of the industry?
No, it's simple science and math. A successful concept that was new five years ago may get to unit 50 pretty quickly, but growth must stall to let the operating procedures catch up. The lack of options 10 years ago made it easier for brands to grow without first getting everything in order. Customers would wait 15 minutes for their food or endure bad service because they had no other choice. A sub-par fast casual brand was still better than the local QSR. That's not necessarily the case anymore.
The Chipotle incident
Chipotle's issues haven't helped the industry either. The second-largest fast casual chain saw its sales drop by more than 13 percent in 2016, according to Technomic. The fact that one brand can pull down the average so much is a bit scary. But we must remember Chipotle is just one brand. And its brand-specific struggles don't reflect the hundreds of other brands that have thrived over the past year. Panda Express, Jimmy John's and Zaxby's all saw double-digit growth and operated with annual sales volumes well over $1 billion. Also, nearly all the brands on this year's Fast Casual Top 100 Movers & Shakers saw huge gains as well.
I don't need much more proof to be confident that the industry isn't going anywhere. We are admittedly approaching saturation, but the brands that offer innovative and high-quality menu items at an affordable price in an upscale, comfortable environment will thrive.
Isn't that the very definition of "fast casual?"
Topics: Trends / Statistics
Cherryh Cansler / Before joining Networld Media Group as director of Editorial, where she oversees Networld Media Group's nine B2B publications, Cherryh Cansler served as Content Specialist at Barkley ad agency in Kansas City. Throughout her 17-year career as a journalist, she's written about a variety of topics, ranging from the restaurant industry and technology to health and fitness. Her byline has appeared in a number of newspapers, magazines and websites, including Forbes, The Kansas City Star and American Fitness magazine. She also serves as the managing editor for FastCasual.com.