Article
QSRs adopt fast casual lessons
Upscale décor, menu translate to better sales.
October 13, 2008
Subway recently passed its 30,000 unit mark, and many of those stores are going into nontraditional locations, such as hospitals and even hardware stores. One nontraditional store is a new concept aimed at moving into the fast casual segment, the Subway Café.
Subway Development Corp. (SDC) of Washington, D.C., is testing the café concept for the sandwich chain. Larry Feldman, the area development company's chief executive officer, said the new store offers the sandwich chain the opportunity to move into higher end office buildings for the first time.
"This really was generated by an opportunity for us to get into, for lack of a better term, A-rated office buildings that we perhaps couldn't get into before," he said.
The Subway Café opened in early September in an Alexandria, Va., office building, and its décor, with patterned club chairs instead of plastic booths, is definitely fast casual. The menu is too.
Yes, there's the traditional Subway line, plus paninis, Seattle's Best Coffee, specialty salads, gourmet sandwich specials and Thomas' Bagels and English Muffins anchoring its breakfast sandwiches.
For landlords who see the concept, the reticence Feldman had encountered in the past is overcome. For customers, having the name recognition of Seattle's Best and Thomas' has elevated Subway's breakfast, a daypart where the chain has traditionally been weak, Feldman said.
"The opportunity to have those brand names . . . has enhanced the perception of our breakfast sandwiches," he said.
Breakfast has been a tough market for Subway because it's stores don't have drive thrus. The Subway Café, located on the ground floor of a multistory building, makes breakfast accessible.
"Now it becomes a very different situation because now you stop and see us on your way up before you hit the elevator," Feldman said.
SDC will test five to 10 more units in the Washington, Virginia and Delaware area. If that goes well, the concept will likely open to the rest of the country. Subway already has different designs in the works, including one with fireplaces, Feldman said.
Feldman said he expects positive results to come back quickly on the test because the Subway Café is meeting a need. He anticipates the fast casual concept likely will do well in large metropolitan area where office buildings also have migrated to the suburbs.
And he is counting on Subway's name recognition to help it compete with established fast casual brands.
"Because we have that history, we have that recognition, and now we bring it to a new level," he said. "We now can compete with them head on."
Move to upscale décor
Darren Tristano, executive vice president of foodservice consultants Technomic Inc., said it's becoming more common for quick-serve restaurant brands to reposition themselves for in-store dining with upscale décor or to add higher quality menu offerings.
"Everyone's recognizing the bar has been raised, and if you want to become more relevant to your customer or remain relevant, you have to change your image to meet the evolving needs of the younger generation and the evolving consumer," Tristano said.
For example, McDonald's began its reimaging process in 2003 after consumer research found that customers wanted "a more contemporary experience," said Danya Proud, spokeswoman for U.S. McDonald's operations. About half of the chain's 14,000 U.S. stores have been through interior and/or exterior updates.
"We know that our customers over the last several years have changed, people's lifestyles have changed, our customers have evolved," Proud said.
McDonald's operators have different designs from which to choose, including a contemporary design that zones seating areas based on whether customers want to linger or eat quickly. The décor is modern with pendant lights, plasma screen TVs and Wi-Fi access.
Tristano said that updating a QSR's décor won't necessarily translate into more customers dining in, and may even be more counterintuitive to a brand's need to "push people through the drive thru quickly."
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"So now all of a sudden, if you've go $3, $5 or $8, you can find the right price, and the right quality from what you expect" from McDonald's, Tristano said.
Fast casual model results in more sales
Dairy Queen. also responded to consumer research when it developed the Dairy Queen Grill & Chill concept in 2001. The concept's goal it to replace the Brazier, which was never known for its food offerings, said American Dairy Queen Corp. chief operations officer Chuck Chapman.
That research revealed that consumers wanted "a warm, comfortable, inviting, relaxing atmosphere" in the dining room without changing the chain's treat offerings, Chapman said. The new look includes padded, fabric seats and orders delivered to the table.*
About 450 units — 14 percent — will have upgraded to the new look by the end of the year, Chapman said. Another 150 units have committed to upgrades in 2009.
The upgrades, which are optional for franchisees, are beginning to catch on.
"It's franchisees telling other franchisees to go do it, so it's just growing on its own, which is the way we want it," Chapman said.
And the new concept is paying off for those who implement it. Chapman said average sales at Brazier units in 2007 were $636,000, while new/remodeled Grill & Chill concepts averaged $1.1 million, with more than 80 percent of the growth in revenue coming from food — and more customers through the door.
Tristano said that it may be difficult for QSRs striving to maintain quality on thin margins to also update their décor. But consumers have grown to expect the fast casual dining experience, so chains are likely to shift to that model in order to stay competitive.
"Unit volumes at these restaurants (that have moved toward a fast casual model) are much higher than their historical numbers, so it's definitely an opportunity to increase share and build their brand," Tristano said.
Restaurant Design / LayoutCoffee/Bakery/DonutFurniture and FixturesTrends / StatisticsBurger/Steak/BBQSandwichFood & Beverage
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