A customer reviews the sandwich board at a Panera eatery.

Charles Krupa, Associated Press - Ap

Appetite for fast-casual

  • Article by: DON JACOBSON
  • Special to the Star Tribune
  • April 4, 2010 - 3:08 PM

In the struggle to fill the chronic vacant space in retail centers throughout the Twin Cities, there have been very few bright spots in recent months. One of those, however, remains the "fast-casual" restaurant segment, which seems particularly attractive to cash-strapped diners.

These restaurants, such as Panera Bread and Fazoli's, are popular among families moving from full-service "sit-down" eatery chains such as Red Lobster, Olive Garden and Outback Steakhouse to cheaper alternatives in an effort to save money. But they're still looking for high-quality food -- better than can be expected at true "quick-serve" outlets such as McDonald's, KFC and Pizza Hut.

Thus, a sweet spot in the sour economy is turning out to be the hybrid fast-casual space, where chains tout high-quality fare for prices below full-service restaurants. Such eateries are similar to the fast-food experience in that diners order at a counter and eat at tables within a 1,000- to 2,000-square-foot space.

But instead of the familiar, mass-produced burgers and chicken whose health benefits and calorie levels are regularly questioned, "fast-casual" customers demand low-fat, high-quality ingredients, freshly-baked bread and organic fruits and salads at prices not much higher than true "fast-food" fare.

Other examples include Smashburger, Noodles and Company and Pei Wei.

Industry statistics show that even at a time when restaurants as a whole are taking their lumps, fast-casual chains are doing well.

According to restaurant analysts Technomic Inc., the fast-casual segment posted revenue gains last year even as overall sales for the top 500 U.S. chains fell $2 billion to $230 billion.

Panera Bread, for instance, posted a 7 percent sales increase, while revenues for the ever-expanding "gourmet" hamburger chain Five Guys Burgers and Fries grew a whopping 50 percent in 2009. Also proving very popular with cash-poor-but-quality-hungry consumers was Chipotle Mexican Grill, which posted a 14 percent sales gain.

The situation is prompting roll-outs of new fast-casual concepts in the Twin Cities. Smashburger is one, and another is the Dallas-based Dickey's Barbecue Pit. The company is in the midst of a major expansion at a time when Twin Cities shopping center owners are looking at 7 percent vacancy rates and new retailers coming into the local market are few and far between.

A group of Dickey's franchisees are set to open eateries this spring in Coon Rapids at Riverdale Crossing Mall, in Roseville at Rosedale Square, in Shakopee at Shoppes of Southbridge Crossing and in Burnsville at Nicollet Plaza -- two of them in space once occupied by Starbucks outlets. An existing Dickey's is at Fountains of Arbor Lakes in Maple Grove.

David Brooks, a franchisee for the Roseville, Coon Rapids and Burnsville outlets, said he's convinced the Dickey's concept is a winner. Dickey's is the country's fastest-growing barbecue chain, an area in the fast-casual segment that is largely untapped, he said. "It's tough to maintain consistent quality across multiple locations with barbecue. But we're doing it by smoking our meats right in each restaurant, and we'll have open kitchens so customers can see how fresh it is."

The key, Brooks said, is the cost controls possible with fast-casual. Ultra-cautious lenders are comfortable with their books, he said, and the price points such restaurants can offer allow a family of four to six to eat relatively cheaply.

Customers and struggling shopping center owners both find much to like about fast-casual, agreed Andrea Christenson, a vice president with the Minneapolis office of Cassidy Turley and a broker specializing in retail leasing.

"As a customer, you're saving 17 to 20 percent right off the top by not having to tip," she said. "That's a pretty big savings. Usually in fast-casual settings, you don't have add-ons that can run up your bill, which is huge in this economy.

"And it's not so much that the food is fast, but that it's a quality product. You look at some quick-serve chains and you see food that has been frozen and reheated. But at a lot of fast-causal places, the food is actually better than at 'sit-downs.'"

Christenson added that families with small children are opting to go fast-casual because of the variability of wait staff service at sit-down eateries.

"There's nothing worse than trying to control kids while you're getting bad service at a restaurant," she said. "At fast-casuals, you can still sit around a table together and enjoy a true meal without the problems of bad service."

Don Jacobson is a freelance writer based in St. Paul.

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