Fast-casual restaurants have been the American food industry’s darling for over 30 years. And while the industry continues to recover from the coronavirus pandemic, some market analysts are pointing to fast-casual concepts to lead the recovery.
A recent report published by Allied Market Research estimates that fast-casual concepts will nearly double their sales within the next seven years. In 2019, fast-casual restaurants worldwide brought in just under $125 billion. Allied predicts that this number will jump to over $210 billion by 2027 with a combined average growth rate (CAGR) at over 10 percent.
It is certainly easy to write this estimate off given the uncertain future of the world economy at the moment. However, it’s important to note that fast-casual concepts have proven themselves to be one of the few restaurant concepts that are recession-proof. For example, during the 2007 recession fast-casual restaurants saw their sales grow by 13.3 percent while the industry overall struggled to maintain five percent growth.
Similarly, fast-casual concepts are immensely popular here in the US. Last year, US fast-casual restaurants accrued nearly one-third of worldwide sales with over $42 billion last year.
Allied also predicts the concepts seeing the most growth will be pizza/pasta specialties. Think MOD Pizza or Blaze Pizza. This segment has the highest estimated CAGR with 13.6 percent between 2021 and 2027.
But, the restaurant business is not won and lost on the spreadsheet. If it were as simple as finding a bargain piece of commercial real estate and putting together a profitable menu, everyone would own a restaurant.
The fact of the matter is: owning a successful restaurant is as much about understanding the people your business serves as it is about keeping a clean balance sheet.
So, we decided to peel back the layers of Allied’s research and see what human factors lay beneath their estimate. What we found is middle-class customers and technological improvements make up the two largest impetuses for growth. Fast-casual concepts also offer an avenue to explore other cultures for a fraction of the price of a plane ticket.
Feeding the Middle Class
Research shows that fast-casual concepts cater to middle-class lifestyles because they offer economic meals for the on-the-go worker. A study published in the Journal of Economics & Human Biology found that middle-income earners are twice as likely to eat fast-casual food as low-income earners, averaging about four meals every two weeks.
And nowadays, fast-casual concepts are more important to US workers than ever, since they are constantly on the go.
On average, Americans spend about half of their day either at work or working on work-related activities, according to the Bureau of Labor Statistics (BLS). Approximately 82 percent of employed workers work at their workplace, while about 24 percent perform their work duties from their home office. (This may change significantly in the wake of COVID.)
Meanwhile, the US Census Bureau’s American Community Survey found the average commute time of American workers is just under 27 minutes one way. Furthermore, The Washington Post calculated the average American worker spends approximately 225 hours on the road each year, the equivalent of nine full working days.
And between working and commuting, Americans don’t spend much time eating. BLS estimates that Americans spend just over one hour per day eating, including snacks. Furthermore, the Organization for Economic Co-operation and Development (OECD) found US workers are on the clock for about 1800 hours per year. So, it shouldn’t be shocking that researchers at Stanford University found over 20 percent of American meals are eaten in cars.
But, offering easy to-go meals isn’t enough to solidify a middle-class customer base. Instead, the 2007 recession showed middle-class Americans value fast-casual concepts because they provide them with affordable comfort foods during uncertainty.
The US Department of Agriculture found that total food spending by middle-income Americans declined by 7 percent between 2007 and 2010. Even so, food sales from fast-casual concepts were growing steadily while the average total spent on food away from the home dipped.
Taken together, these data points suggest that middle-income earners are more likely to spend money on convenience items like a burger and fries in order to keep to their schedules.
Fast-casual concepts are often the purveyors of the latest restaurant technology. Think of all the latest gadgets to enter the restaurant space. There are self-service kiosks, robot servers, tabletop ordering systems, and so much more. And fast-casual concepts are incorporating them all in the name of efficiency.
Even so, part of the continued success of the fast-casual concept is due to the advent of third-party delivery services like DoorDash, Uber Eats, and Grubhub. For example, DoorDash is a corporate partner of big-name restaurants like Little Caesars, McDonald’s, Wendy’s, and Chick-Fil-A, all of which combined to accrue over $37 billion in sales in 2019.
DoorDash’s platform allowed these restaurants to cater to customers who would rather not sit in a drive-thru lane or wait in line to get a hot meal. Tangentially, DoorDash showed just how necessary third-party delivery services are for fast-casual restaurants by allowing them to continue serving their customers even as cities across the US shut down restaurants over the coronavirus pandemic.
But, restaurant technology isn’t just about completing orders efficiently. Recently, there has been a renewed focus on technology that keeps restaurant workers safe so they can keep serving their customers to the food they love.
The Worldly Vehicle of Carbs
Everyone knows about Chicago-style deep dish and New York thin crust, but have you heard of Lahmacun? It’s a Turkish style pizza traditionally made with lamb or beef with seasonings such as cumin and cinnamon. In short, it’s proof that the Italian equation of dough + cheese = pizza truly is a universal language.
Moreover, each part of the equation can be made into gluten-free and vegan options, providing a seemingly endless supply of possibilities for fast-casual concepts to explore.
The same theory also applies to pasta dishes. While spaghetti with meatballs or pasta primavera dominate the American market, dishes such as Imqarrun il-forn—a Maltese dish that rivals spaghetti alla bolognese—and manestra—a Greek casserole made with a tomato-based orzo soup—can provide businesses and customers with new ways of exploring classic ingredients.
Adding worldly dishes to any menu gives your customers a way of connecting with a new culture from the comforts of their homes. In fact, DoorDash’s 2019 Trend Report found that 96 percent of survey respondents believe food is a great way of connecting with another culture. In the end, that’s what the restaurant business is all about, right? Connecting your neighbors to something they never knew existed.