NPD Group: QSRs imitating hot fast casual segment

A new market research report from The NPD Group shows that quick-service chains have increasingly adopted strategies used by the fast casual segment, and for good reason. The fast casual segment is the only category in the restaurant industry that has sped up its growth throughout the unpredictable economic environment.

Although still relatively underdeveloped, major fast casual chain units increased by a double-digit rate throughout the last three years, according to NPD's Recount, a bi-annual census of restaurant unit counts.

Although still relatively underdeveloped, major fast casual chain units increased by a double-digit rate over the last three years, according to NPD's Recount, a bi-annual census of restaurant unit counts.

Fast casual unit counts are as follows:

  • 2007 - 11,013 units (11 percent growth)
  • 2008 - 12,108 units (10 percent growth)
  • 2009 - 12,801 units (6 percent growth)
  • 2010 - 13,161 units (4 percent growth)
  • 2011 - 13,643 units (7 percent growth)

During that same five-year period, unit counts among quick-service restaurants hovered between 1 percent growth and 2 percent declines. Unit counts at midscale restaurants decreased between 1 percent and 4 percent during the period. Meanwhile, unit counts at casual dining chains peaked at a 2 percent increase in 2008, followed by declines of 3 percent and 2 percent in subsequent years. 

NPD's "Fast Casual: A Growing Market" report finds that even with this growth, consumer demand outpaced the rate of unit expansion, reflecting higher levels of consumer satisfaction with the fast casual experience. In addition, several leading fast casual chains have built strong customer loyalty.

This success has motivated other segments, including casual and quick-service, to renovate, upgrade and enhance menu selections to compete.

"Many fast casual concepts were positioned as a fresh, made-to-order alternative to traditional fast food options, and consumers responded positively," said Bonnie Riggs, restaurant industry analyst at NPD and author of the report. "Although some fast casual concepts faltered, consumers responded positively to the concepts that offered a new fast food dining experience. The segment benefited from fast food consumers trading up and full service consumers trading down."

Riggs added that QSRs have taken note of fast casual's success and have begun offering more premium products, healthier options, and are upgrading interiors with a more upscale and modern look.

For example, McDonald's is in the middle of a $1 billion-plus remodeling effort that should be completed at its 14,000 U.S. units in 2015. Wendy's and Burger King are also reimaging their restaurants to include "lounge-like" features such as flatscreen TVs, Wi-Fi and fireplaces.

Taco Bell just launched a Cantina Bell menu, with creations by Celebrity Chef Lorena Garcia, that may better position the chain to compete with Chipotle and Qdoba.

Additionally, plenty of QSR chains – from Wendy's to Carl's Jr. – have upgraded their burgers to compete with fast casual's "better burger" brands such as Smashburger and Five Guys.

These types of changes, especially higher quality food offerings, are what consumers want and need, Riggs said.

"Fast casual concepts are in an excellent position for growth relative to the overall industry," she said. "However, the same growth opportunities are available to any restaurant operator able to innovate, provide value for money, and not just keep up but surpass competitors."

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