Fast-Casual Dining Deep Dive

2015 Nicole DiCenso, Alexandra Lublin, Meg Roy Bryant University 1/1/2015

Deep Dive: Fast-casual Dining

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Contents

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Introduction Fast Food Industry Fast food is commonly described as food that is quickly prepared and is served in disposable wrappers or boxes (Funk & Wagnalls New World Encyclopedia). The goal of fast food is to offer customers food that can be ordered, prepared, and presented to them within a few minutes, and then can either be taken with them or eaten in a fast food restaurant. Fast food differs from restaurant style dining because customers are served over a counter or via drivethrough windows (Funk & Wagnalls New World Encyclopedia). Popular choices for fast food meals typically include hamburgers and French fries (Funk & Wagnalls New World Encyclopedia), although modern fast food has evolved to offer more variety to consumers.

Fast food was influenced by various types of dining styles. In the late 19 century, eating th

meals outside of the home at restaurants was considered to be a luxury and was only done on special occasions; therefore many Americans never experienced it (Hogan, 1997). As time went on, eating became a public activity, and more Americans began eating out (Hogan, 1997). Soda fountains were particularly popular in the late 1890s, acting as a place for people to socialize (Hogan, 1997) and enjoy soda while sitting at a counter, ultimately creating the social climate of the day (Fastcasual.com). Soda fountains began to expand their food services to lunch in order to better cater to customers’ needs, thus transitioning into “lunch counters”, better known as “luncheonettes” (Hogan, 1997). Fast food ultimately evolved from these luncheonettes, because as casual dining became more popular, the desire to increase the menu sizes, speed, and convenience of dining continued to grow.

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White Castle, established in 1921 by its founder Billy Ingram (Hogan, 1997), is believed to be the first American fast food chain restaurant. White Castle offered burgers for a mere 5 cents each (Hogan, 1997) that were served speedily, making it easy for families to go out to eat together without spending as much as they would have in another restaurant. Ingram even encouraged people to “buy them by the sack”, because they were cheap and delicious (Hogan, 1997). Hamburgers eventually became a staple on many fast food restaurant menus with the establishment of McDonald’s and Wendy’s, most likely due to a direct influence of Ingram’s success. Even today, hamburgers are considered to be an iconic American ethnic food (Hogan, 1997).

Fast food revolutionized the restaurant industry by offering affordable meals that still allowed consumers to have that “going-out-to-eat” experience. Over time, however, fast food evolved into a considerably unhealthy food choice. Due to the high amounts of fats and salts in fast food today, frequently consuming these meals can cause a variety of negative health outcomes, including cardiovascular disease, insulin resistance, type 2 diabetes, and obesity (Jaworowska A, Blackham T, Davies I, Stevenson L., 2013). With technological innovations, companies are also able to produce their food quickly while greatly increasing the quantity made.

In order to cut even more costs, companies have cut corners regarding the quality of the food, substituting unhealthy additives and preservatives to the food to make it taste better (Schlosser).

Today, fast food is not seen as a luxury as it was in the mid-1900s. Rather, it is seen as an unhealthy option that low-income demographics choose because it is cheaper and more convenient than cooking or going out to other restaurants (Harvard School of Public Health, 2012). The revolution of fast casual dining has emerged because of this; its goal being to offer

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healthier food options with the same speed and convenience found in classic fast food restaurants.

Fast-Casual Dining Industry The fast casual industry is growing at an extremely fast pace, due to finding success in a sector where there is little growth. The nature of this growth derives from the demand for fast casual restaurants. Consumer demand, “In the U.S. for restaurant meals is wage and salary income” (USA Today Magazine, 1992). Customers are flocking to fast causal establishments and willing to pay the extra costs to get a high quality meal and experience. The restaurant industry as a whole has been struggling to grow, due to consumer’s budgets tightening. Fast casual has found a space where they could provide both value and quality to customers. This can be described as “Casual dining in places that provide a wider range of mid-priced food and beverage choices, usually in a bistro-like setting that restaurateurs describe as ‘emotionally comfortable.’” (USA Today Magazine, 1992). These ‘emotionally comfortable’ establishments allow customers to save money while still being comfortable. This is driving business away from fast food restaurants, where customers are spending less but getting low quality food and experiences. It is also diverting customers from going to sit down casual dining restaurants where customers could get the food they want, but are unable to afford it or have time.

Fast casual dining is currently in the market majority stage of the life cycle, and constantly innovating to remain there and prevent from declining. Big players in this industry have gained massive market control over the past years, becoming a norm in the United States.

However, fast casual brands must remain competitive and relevant in the ever changing market.

Tom Ryan the founder of a fast casual brand called Smashburger explains that in order, “To compete long-term, fast casual restaurants will continue to create modern expressions of foods

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that approach… fast casual restaurants will also have to deliver food as quickly as fast food chains, if not faster” (Ryan, 2015). Fast casual restaurants will need to constantly innovate to remain within the market majority. They will need to provide customers with even more value, and justify their higher prices. It is important for the fast casual factor to attract more and more consumers, in order to expand their target audience, and to attract more segments. The fast casual segment will continue to see growth in the future the “NPD group estimates that fast casual will grow in the double digits through 2022, while the rest of the restaurant industry will seek out growth rates of around half a percentage point” (Ferdman, 2015). This is due to the success of the fast casual model and the value customers are seeing within it.

There are several risks which exist in the fast casual segment. The first and most important risk is that these restaurants will need to keep their costs low in order to remain relevant. One of the major reasons which fast casual establishments are extremely attractive to their customers is because they offer lower prices than their casual dining counter parts.

Consumers are willing to pay the current prices for these types of meals, but may start to lose interest if the costs began to rise. Fast casual chains need “To keep prices affordable keeping supply chains in line with the secret sauce of values the brand sells alongside its hot dogs, burgers and burritos” (Timbrell, 2015). This is extremely relevant if they would like to keep the price of their food to customers at the current point. However, with fast casual restaurants providing their customers with fresh and socially responsible ingredients this is a tight line to walk. Fast casual chains must keep their costs low in order to offer their customers a good value.

Another risk which is related to price is for fast casual to expand their customer base further they face justifying their higher costs. The Mintel Oxygen report on the fast causal sector states that “While a third of respondents agree that the quality justifies the higher prices at fast

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casuals, 28% agree that fast casual restaurants are too expensive to eat at regularly, while 37% are influenced by deals because they help them afford visits. However, price-focused discounts can cheapen a brand” (Wall, 2013). The existing customer for this segment are willing to pay a higher price, however nearly 30% of respondents find fast casual too expensive to work into their regular routine. This prevents fast casual brands from developing regular relationships and sales with more consumers. Mintel Oxygen also determined that almost 40% of their respondents were persuaded to eat at a fast casual establishment because of deals which make it more affordable.

Although these price promotions my drive short term sales for many brands, they also harm the image of the brand in the long term. Fast casual restaurants have framed their price promotions in certain ways to combat this. Panera bread does not give out price promotions often but they do have a rewards card which drives repeat purchases by a single customer. Additionally, Panera provides combo options in their ‘You Pick Two’ menu to give their customers even more of a value. Chipotle will never discount their food however, they will offer free food to new customers. The ideology behind this is that once a new customer tries their food they will return to purchase the food. While these brands are working to obtain the more price conscious consumers, they still struggle with providing value and quality.

The fast casual market is a very attractive market to enter with few barriers to entry, a crowded market potentially being a risk to brands. The main reason why fast casual dining is an attractive market is because it is a very lucrative one. NPD group conducted market research on the foodservice market and discovered that, “Fast casual is the only restaurant segment continuing to grow throughout the current economic times, which has motivated chains in other restaurant segments to renovate and upgrade and enhance menu selections to compete with fast casual chains” (NPD Group, 2014). While fast food establishments are losing their business

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because of their low quality food and casual dining restaurants are struggling with their high prices, fast casual restaurants have found the sweet spot between price and value. This is not only sparking interest in entering the market, but it is also causing existing brands to alter their models to mirror a fast casual concept. Fast food brands are simplifying their menus, adding customization, and attempting to use more fresh ingredients. Quick serve restaurants like “McDonald's are forgoing its core business to mimic the likes of Shake Shack points to a future in which the quick service food industry looks a lot more like Chipotle” (Ferdman, 2015). In order to stay in business fast food restaurants are going to need to start implementing elements of fast casual dining into their concepts. Fast casual success is also sparking many ideas for new concepts and brands to enter the market. The fast casual landscape is “About to get much more crowded, with at least a dozen new high-minded grab-and-go concepts set to debut or expand this year. It’s an opportunity for some of the country’s most rarefied chefs to reach a much larger audience than usual at a far lower price point—and cash in if they’re lucky” (Timbrell, 2015).

Casual dining chefs are discovering that they have ideas which would fit into the fast casual model and are inspired to enter this new market, where they could see rapid growth and profit.

There is an important barrier to entry into the fast casual market, which those who want to join are overlooking. This barrier is that there are several well established and national brands, which hold a large amount of market share. These brands such as Chipotle, Panera, and Shake Shack have large cult like following across the United States They are also experiencing massive growth “Chipotle… has seen its sales more than quadruple during that time; Panera… has watched its sales more than triple; and Shake Shack…has done so well that it just went public despite operating only 36 outlets (Ferdman, 2015). With growth like this it may be difficult for new brands to enter the market and gain market share against the big players. Smaller brands

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may thrive in local economies, but as fast casual becomes more of a norm it will be difficult for them to expand successful.

Major Players Panera Bread “Fresh bread makes friends” (Allen). That is the motto behind one of the most successful fast-casual dining chains in the country – Panera Bread. Ironically, Panera’s success actually stems from any entirely different restaurant altogether. In 1976, a French manufacturer of commercial ovens, Pavallier BVP SA, opened the first Au Bon Pain in Boston (Allen). They used this restaurant as more of a showcase than as an eatery. A few years later, Louis I Kane bought the business, partnered with Ronald M. Shaich, and created Au Bon Pain Co. Fast forward to 1993, when the company “purchased Saint Louis Bread Company®, a chain of 20 bakery-cafes located in the St. Louis area” (Panera Bread). At this time, the Saint Louis Bread Company owned 19 bakery-cafes (Allen). These chains specialized in lunchtime soup, salads, and sandwiches (Kowitt, 2012). For the next three years, the company continued to expand and by the end of 1996, had grown to 231 company-run and 58 franchised bakery-café’s (Allen). At this time, “Their menus included fresh baked goods, made-to-order sandwiches, soups, salads, and custom-roasted coffees as well as other beverages. The company's targeted customers were principally urban white-collar workers, suburban residents, and shoppers, students, and travelers with busy schedules to keep” (Allen). Ron Shaich says of this time: “We began to conceptualize St. Louis Bread as a gathering-place business. We created a new physical environment for the café. We started rolling out bagels, breakfast, and a take-home-bread business” (Kowitt, 2012). It was sometime between 1997 and 1998 when the owners decided to change the name of the

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company to Panera, a word that is rooted in the Latin word for breadbasket (Kowitt, 2012). 54 of the 58 bakery-café’s now operated under the Panera name while still being a sector of the larger Au Bon Pain company (Allen). By the end of the 1990’s, Panera was out-earning all of the Au Bon Pain bakeries. This was when Shaich decided that in order to succeed, he needed to sell off everything else and bet everything on Panera; “In 1999 we ended up with a public company with one division, Panera, which had about 180 bakery-cafés and a pristine balance sheet with a bunch of cash” (Kowitt, 2012).

During the early 2000’s Panera grew at a “blistering rate” according to the St. Louis Business Journal. The restaurants were now open in 28 states and opened 50 additional restaurants (Allen). The company was thriving with franchises (though only accepting 1 out of every 400 applicants) because they allowed for creative freedom among the franchisees in order to take initiatives to keep customer loyalty (Allen). Their number one rule was to “do whatever it takes to satisfy and make the customers happy,” a rule required by the Vice President of Franchising and Brand Communications at the time – Mike Kupstas. By 2006, Panera was recognized as one of Business Week’s 100 Hot Growth Companies and was named as the top performer in the restaurant category (Panera Bread). Currently, Panera Bread has 1,845 bakerycafé’s in 45 states as well as in Canada, 17,400 full time employees, and earns an average of $6 million worth of revenue a year (PNRA).

Panera is so successful for many reasons. First, it was one of the original restaurants to capitalize on the fast-casual dining revolution. Panera has adapted to the restaurant category effortlessly and is even a pioneer of many aspects of this industry. With innovations such as touch screen order kiosks, rapid pickup, and GPS buzzers that lead servers directly to your table,

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Panera is a frontrunner in the category and is definitely giant competition for any entrepreneur trying to break into the fast-casual dining experience business.

Chipotle Founder of Chipotle, another major competitor in the fast-casual dining sector, Steve Ells, learned to cook at an early age. “During high school and college, he often hosted friends for elaborate meals and fine wine — but never Mexican food” (Stock, Wong). His senior year in college, a friend asked him what he was going to do when he graduated. His response? He had no idea. But his friend offered to pay his way through the best cooking school in America if he agreed to spend a year in the restaurant business (Stock, Wong). Steve agreed and went on to graduate from the Culinary Institute of America in 1990 (Stock, Wong.) After graduation, Steve worked at various restaurants in San Francisco where he began to see the potential of expanding on the taqueria trend that was running rampant in this area (Stock, Wong). “There he was struck by the fat burritos prepared to order, everything bundled in a giant flour tortilla wrapped in foil.

Ells's idea was to put a twist on this traditional Mexican peasant food by stuffing the tortillas with gourmet ingredients, leveraging his culinary knowledge” (Alsever). With about $160,000 in loans from friends and family, Ells returned to his hometown of Denver, CO (Alsever). In 1993, the first Chipotle opened at a former Dolly Madison Ice Cream location (Chipotle.com).

Chipotle, named after a smoked and dried jalapeno pepper, started with a simple menu: burrito, taco, and fajita items, fillings of steak, chicken, pork carnitas, or vegetarian; and various other fillings or toppings (Alsever). It was very important to Ells that all of the ingredients were fresh and of high quality. In their first year of business, Chipotle massively exceeded Ells’ initial prediction of a $24,000 profit (Stock, Wong). By 1995, two more Chipotle locations were opened

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in the Denver area (Chipotle.com). Ells and his partners began their plans to expand and open more Chipotle restaurants across the United States.

“As six more Chipotle Mexican Grills opened in the Denver area during 1997, bringing the total to 14, Ells and other company leaders were seeking more funding to accelerate the growth rate” (Stock, Wong). Ells turned to none other than McDonalds to ask for an investment.

In February 1998, McDonalds bought a majority stake in the company (Stock, Wong). Following this deal, Chipotle began expanding to areas outside of Colorado. By 1999, Chipotle had restaurants in Chicago; Cleveland, Columbus, and Dayton, Ohio; Minneapolis-St. Paul; Phoenix; Dallas; Kansas, Missouri, and Washington, D.C. (Stock, Wong). Under the direction of McDonalds, Chipotle also started to franchise, through they were uncomfortable with the idea.

They eventually ended up buying back the 8 franchises that were established during that time (Alsever).

In the early 2000’s, Chipotle grew t0 175 restaurants nation-wide (Alsever). “Around this same time, the company made the first significant changes to the menu since the first store opened. In addition to fine-tuning the recipe for its homemade guacamole, Chipotle switched to free-range pork for its carnitas” (Alsever). The next change came in 2002 when Chipotle switched to serving naturally raised chicken (Chipotle.com). In the following few years, the company made numerous menu changes like white corn instead of yellow, organic beans, and using zero trans-fat frying oil long before the competition (Chipotle.com). Towards the end of 2005, Chipotle was nearing 500 restaurants and had become a prime competitor in the fast-casual dining industry (Stock, Wong).

In 2006, Chipotle launched its Initial Public Offering in addition to splitting from McDonalds (Stock, Wong). The main reason for this decision was because the Chipotle team was

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feeling too pressured by McDonalds and wanted to get out from under their wing (Stock, Wong).

It managed to be the best thing for the company.

Today, Chipotle has over 1,700 stores and boasts over $4 billion in revenue a year (CMG). Their newest venture is pizzerias with the same assembly line concept as the original store. Chipotle opened their first Pizzeria Locale in December 2013 and has plans to open a second location this year (Kaufman).

Shake Shack A company that has seen some of the same astounding results, however is a little more recent and runs in the burger business, is Shake Shack. Fifteen years ago, Madison Square Park in New York City wasn’t what it is today; it was infested with drugs, rats, and homelessness.

Along came a man by the name of Danny Meyer. He was the lead on a campaign called the Madison Square Pack Conservancy that aimed to turn the image of the park around (Wolfe, 2014). The first renewal project was an art exhibit where a hot dog cart was run out the kitchen of Eleven Madison (Wolfe, 2014). This wasn’t just any ordinary hot dog cart however; the stand boasted lines of up to 100 people (Berman, 2015). The cart ran this way for three years under the control of Meyer and his supervisor, Randy Garutti.

In 2004, New York City started looking into operating a new kiosk-style restaurant within Madison Square Park (Rainey, 2013). “On that day, Danny sat down and scribbled on the back of a napkin his vision of a modern version of a roadside burger stand. Not retro, not ‘50s music playing, but today’s version of what made that place great. All we ever wanted to do at Shake Shack was to have good people serving fresh food, and to sell a few hot dogs” (Wolfe, 2014).

Shake Shacks menu items include burgers, hot dogs, French fries, frozen custard, milk shakes,

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and even beer and wine, straying very little from their original menu back in 2004 (Shake Shack).

The rest of Shake Shack’s history is much more recent. It wasn’t until 2009 that Shake Shack opened up their second location on the other side of the park, mostly as a way to deter people from the original Shake Shack’s long line (Burstein, 2012). A third Shake Shack was opened in the city shortly thereafter for the same reason. This prompted Meyer to assign an entire team within his business, Union Square Hospitality Group, to just focus on Shake Shack and its expansion efforts (Kahn, 2009). Things were going so well for the burger company that they were even getting offers to franchise in the Middle East (Burstein, 2012).

Today, Shake Shack has 63 current stores (and some stores already slated to be built) in 9 countries and 34 cities (SHAK). They employ 1,630 personnel and own a majority of their stores nationwide (SHAK). The most exciting recent event for Shake Shack, is their latest IPO. “Shares in the company more than doubled in their first day of trading, valuing what once was a humble hot dog cart in Manhattan’s Madison Square Park at more than $1.6 billion” (De La Merced, 2015).

Some wonder what it is about Shake Shack that makes it so successful and prompted such a quick rise into the fast-casual dining sector. This can be attributed to many different things. First, Shake Shack bases its core beliefs on being an anti-McDonalds (De La Merced, 2015). They only offer premium beef, call their customers ‘guests,’ and treat every restaurant as though it is their one and only (Rainey, 2013). Shake Shack also keeps it simple. They don’t overwhelm their customers with pages upon pages of menu items; they stick to a menu of less than 20 total options in order to ensure the quality of every single item ordered. What also sets Shake Shack apart is their dedication to keeping ensure that all Shake Shacks have the same

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sense of hospitality. Meyer says, “We do the same thing everywhere we go- except for a few drinks we name after the neighborhood we’re in. We have a company called Hospitality Quotient, which teaches companies who are already the best in the world at what they do to become the best in the world at how they make people feel. So we use Hospitality Quotient to train the staff in with Shake Shacks abroad” (Burstein, 2012). Also, Shake Shack stays up to date with current innovations, such as using iPads as menus and ordering systems (Burstein, 2012).

We are in the middle of the Shake Shack boom right now and it will be exciting to see what’s to come for this trend-setter company.

SWOT Analysis In order to assess the overall success of these main competitors in the fast-casual dining space, it is important to look at the strengths, weaknesses, opportunities, and threats that each of these restaurants have. A main strength that all three of these companies possess is their brand recognition. Very few people don’t know who you are talking about when you say “Shake Shack,” “Panera,” or “Chipotle.” A piggyback strength of this brand recognition is that these companies don’t have to do much in terms of advertising in order to gain recognition. Chipotle in particular does almost no advertising and is still bringing in customers (Frizell, 2014). A very important additional strength Panera, Chipotle, and Shake Shack all have the ability to boast is their high quality food. All three companies strive to make their ingredients fresh and grown naturally (Frizell, 2014). While their strengths are what set them apart, their weakness are what make them susceptible to being taken over by the competition. Chipotle in particular has a good amount of weaknesses, although to date they have not been a downfall for the company. “By restaurant industry standards, Chipotle Mexican Grill does countless things wrong. Its outlets

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aren’t in the busiest locations. It spends too much money on food. It doesn’t serve breakfast; it doesn’t do drive-throughs, franchises, or even much in the way of advertising. It almost never adds anything new to its menu” (Stock, Wong). Additionally, Panera has a lot of competition in their sector, they are right now only operating in North America, and they have frequently long lines (Gara, 2013). Lastly, one of Shake Shacks most notable weaknesses is their small menu.

Compared to Chipotle and Panera, Shake Shack has the least amount of menu items and offers the smallest amount of variety. So far, this has been a strength for Shake Shack because they have been able to keep the quality of all of these items high, but down the road, customers might get bored with the same small menu and begin to venture to companies who offer more options.

The threats for all three of these restaurants are essentially the same: competition. Panera is facing competition from other smaller sandwich shops as well as chains like Potbelly’s. Shake Shack has numerous competitors like Five Guys Burgers and Fries and In-n-Out. Chipotle is being particularly threatened right now by Taco Bell. Both companies already have the same type of menu items, but Taco Bell is now offering a new Cantina menu which offers fresher food and the same choices as Chipotle (Sanburn, 2012). Luckily for these conglomerates, they also have numerous opportunities to look forward to. Chipotle is now looking into opening pizza chains with the same assembly line concept. Their first was opened just last year and it has been a small success so they are looking at expanding (Kaufman). They also have the opportunity to improve their ingredients with new technology and agricultural techniques (Frizell, 2014). Panera has started taking advantage of their own opportunities in regards to technology integration and innovation. With easy order kiosks and rapid pick up, Panera has streamlined their ordering process and decreased wait time. If they follow the path they are on now by continuously adding these types of innovations, they will soon take the fast-casual sector by storm. Lastly: Shake

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Shack. As the newest of three, Shake Shack has the greatest room for improvement. On the list of opportunities for them are expanding and increasing advertising. Shake Shack can also integrate technology the way that Panera has.

Perceptual Map Figure 1.0

Figure 2.0

Another important aspect in understanding how these companies compare is to consider where they each fall on a perceptual map. My team and I have created the two perceptual maps as seen in Figure 1.0 and 2.0. The first map compares the speed of service with the atmosphere of the restaurant while the second map focuses on the healthiness of the food and the variety offered. As you can see on the first map, Panera has the best atmosphere. It is easy to go to Panera and grab a sandwich, get some work done, hang out with friends, or just relax. Chipotle doesn’t really set its restaurant up to be a relaxing hangout. Its atmosphere is more for people who just want to order, eat, and go. Shake Shack has the lowest experience level of the fastcasual restaurants mainly because a majority of its chains don’t even have seats. Wendy’s edges out McDonalds slightly only because their restaurant tends to be cleaner and have less little kids

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running around. In terms of speed of service, McDonalds and Wendy’s are both fast food restaurants and therefore get their food out the quickest. Chipotle falls next because they make their food right in front of you at the counter. Depending on the length of the line though, it could be a longer wait. The same idea goes for Panera as well. Depending on the meal you order and the length of the line, Panera can go either way in regards to how quickly you will get your food.

Shake Shack falls last on the list only because of how long their lines are. It is still a relatively new company and is a giant fad so the lines tend to always be at least eight people deep.

In Figure 2.0, we compared how healthy the menu items are and how much variety the menu offers. Again, Panera is a clear winner in both categories. They are considered to be one of the healthiest fast-casual restaurants and they have a wide variety of menu items including sandwiches, salads, soups, pasta dishes, smoothies, and numerous dessert items. Chipotle is the next healthiest option considering how the company spends most of their effort in finding the high quality foods, but their variety is much lower, only offering options that can all fit into one counter. Wendy’s is slightly healthier than McDonalds because they have fresh, never frozen meats, but both companies have the same amount of variety. Shake Shack again falls at the bottom because for just one single decker burger with no toppings, you are looking at a 500 calorie meal. They also only offer hot dogs, burgers, fries, and milk shakes so their variety is low as well.

Innovations and Challenges The fast casual dining industry thrives on innovation. Panera Bread, for example, is currently undergoing a “makeover” called Panera 2.0 (Lutz, 2014), which uses technological innovations to give customers the option to obtain their food as quickly as possible without hassle. Instead of going into a Panera location and ordering at the counter, customers can place

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their orders online using the Panera Web Ordering Application and then pick up their food at a time they designate in the checkout process (Panera.com). In the restaurant, customers can even place orders from their smartphones and have the food delivered directly to their table. The application will also remember their order customizations and “favorites” to make ordering easier the next time they visit (Panera.com). No lines and no waiting ensure the “fast” in fast casual dining.

Chipotle was rated #20 on Forbes’ World’s Most Innovative Companies (Forbes.com).

Chipotle gives customers the option to completely customize their burritos, tacos, burrito bowls, and salads, all of which are made using fresh ingredients. In addition to this, Chipotle is beginning to offer innovative menu options, like the new vegan Sofrita, which appeals to vegans as well as meat-eaters (Chipotle.com). Giving customers exactly what they want may seem like the obvious thing to do in the food business, but many restaurants do not offer this option. The Chipotle burrito has even been compared to Apple’s iPhone in terms of innovation in an existing industry: “Steve Ells [Chipotle founder] invented a way to maintain the basic speed and experience of the standard fast-food experience and make the quality of the food a little better” (Yglesias, 2012). Chipotle’s innovations can also be found behind the scenes. The braised meats that are used to fill their burritos are all cooked in a large commissary in Chicago, packed sousvide in airtight bags (Pierce, 2014), and shipped out to various restaurant locations before being reheated and served to customers (López-Alt, 2011). This helps speed up the preparation process while maintaining the food’s freshness.

Although the fast casual dining industry has an eye for innovation, there are many challenges the industry faces. Constantly working to find the newest way to prepare and deliver food faster may imply that the food is becoming slightly lower quality. A negative customer

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perception could have a severe impact on these brands and the industry altogether. The “fast” in fast food was one of the reasons why the food quality significantly decreased. In an industry that is supposed to be healthier, speed has to be increased carefully in order to ensure it does not become a priority over the freshness and overall quality of the food. The restaurants should frequently emphasize quality as part of their mission, by using advertising to show where the food comes from.

In the fast casual dining industry, introducing new menu options is what keeps the brands in consumers’ minds and brings them back into the stores, preventing the dreaded “been-theredone-that” feeling. Panera recently introduced its Asian-Inspired Broth Bowls (Panera.com) to offer an exotic option instead of their standard bakery and café sandwiches, salads, and soups.

Similarly, Chipotle introduced new menu items to cater to various diet needs (vegan and vegetarian). However, it may come to a point where new, radical menu additions have become extinguished and only incremental additions and improvements can be introduced. These restaurants’ current markets will continue to dine there, but without being able to add different, exciting options without completely changing the brands’ images, new prospective customers may be harder to find.

Another challenge for the fast casual dining industry is emphasizing that healthy eating and fast casual dining are not simply a fad food trends. Today, there are many fad diets that are popular for some time, but then start to fade out once they lose their initial allure. Making sure that customers do not see restaurants like Panera, Chipotle, and Shake Shack as simply “trendy” may be a difficult challenge. These restaurants will have to market themselves constantly in order to gain the attention of future generations and emphasize that fast, convenient dining can be healthy, delicious, and can make an impact on consumers’ lifestyles in the long run. Showing

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customers the benefits and the overall value of fast casual over existing fast food restaurants is something the industry will have to work on through marketing.

Marketing is critical for the fast casual dining industry in order for its restaurants to stand out against competitors in the fast food sector and stay relevant. Based on Panera’s success with its online and mobile application ordering services, Panera should focus on marketing its technological innovations to ensure they stay relevant to the target market. By offering various technological means of ordering, Panera is marketing itself as a fast, tech-savvy company which is appealing. The ease and convenience of online ordering is a great way for Panera to stand out and bring back old customers as well as bring in new ones.

Chipotle has had great success from emphasizing their farm-fresh food, and should therefore continue to promote the company as a wholesome Mexican restaurant. On Chipotle’s website, consumers can find ingredient statements that list all of the available menu options and their respective ingredients. In addition, Chipotle has a Fresh Cooking section on their website that highlights different menu options’ ingredients as well as details about the cooking process (Chipotle.com). Chipotle stresses that “Making delicious food that you can order, pick up and eat quickly actually takes quite a bit of time and preparation” (Chipotle.com), making it known that a lot of care goes into the food they serve.

Shake Shack’s desire to give customers quality food with “no hormones and no antibiotics ever” (ShakeShack.com) is a great basis for their marketing in order to stay relevant.

In comparison to McDonald’s, Shake Shack offers a superior burger because they use all natural ingredients and refuse to use additives as a way to cut corners. Shake Shack’s social media game is “off the charts” in comparison to McDonald’s’ (Marino, 2015); their Instagram shows mouthwatering images of their fresh burgers and crinkle-cut French fries that are ultimately more

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appetizing than the deflated, sloppy fast food burgers and soggy fries we are used to seeing. This emphasis on quality should surely help the company to overcome various industry challenges and attract customers well into the future.

A marketing implication for the fast casual sector is Wahlburgers, a burger chain established by actor Mark Wahlberg’s family (AETV.com) that began in Boston, Massachusetts.

Wahlburgers became so popular that it got a reality television show on A&E that goes behind the scenes of the family and the restaurant. It was even nominated for a 2014 Emmy Award in the Outstanding Unstructured Reality Program category (AETV.com). This is huge in terms of marketing for the fast casual dining industry. The television show highlights quality burgers, sandwiches, craft beers, and signature cocktails, all of which are considerably different from a typical burger joint menu. Famous restaurants like Wahlburgers attract attention to the fast casual dining sector and show people that casual dining can be artisan yet affordable, and healthier than greasy, processed fast food.

Conclusion

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