The most interesting thing about the projected industry growth over the next five years is the way that fast casual restaurants continue to influence the future of all businesses.
— Kristen Hawley
After 25 years, fast casual is still in the driver’s seat.
New data from Euromonitor International shows strong growth in the overall consumer foodservice market, with quick service markets, like fast food, restaurants offering delivery and takeout exclusively, and cafes and coffee shops poised to grow fastest in the U.S. over the next five years.
“I think what we’re seeing there, and this is a global trend, is the casualization of almost everything, even fine dining,” Michael Schaefer, global lead of food and beverage at Euromonitor, told Skift Table.
The fast food market, already massive at close to $250 billion in 2017, is poised to grow at 2.3 percent per year for the next five years, a cumulative growth of 12 percent. At the same time, the much smaller delivery-takeout market (excluding third-party delivery services like Grubhub and Uber Eats) is projected to grow 18 percent over the next five years, according to the new data.
Much of this is driven by the popularity of fast casual and the way it has shifted expectations around food, service, and even restaurant design.
“So much of what defined the early fast casual chains has been taken onboard by every fast food chain to some degree. I think the next step of that is that we see a move away from these big nationwide mega-brands like Chipotle in favor of things that are going to be more local,” Schaefer said.
Small Names With Big Followings
Chipotle may have changed the dining landscape in America when it debuted a quarter-century ago, but a shift away from large national brands is driving development in fast casual and beyond. Much of this is thanks to the loyal fans of small and regional chains.
“Right now we might be in another stage of fast casual development where I think we’re going to see more fragemention. It’s going to be harder and hard to make that case for a new national mass brand,” Schaefer said.
That doesn’t mean that small and independent restaurants are poised to overtake larger legacy brands. Instead, and largely due to the influx of private equity funding, big companies that buy up smaller brands will keep them separate. As an example, look to how JAB Holdings has managed its suite of coffee brands from Peets to Intelligentsia to Stumptown. “Rather than have mega-mergers where brands vanish, I think we’re going to continue to see these kids of small brands build a following,” he added.
This small-brand focus is a direct result of the way restaurants market themselves to the Instagram generation.
“There’s so much more conversation and so it both is harder to stick out, but once you do stick out i think it’s easier to develop a following,” Schaefer said.
While the flashy openings of 2017, from The Grill, already a New York icon, to Los Angeles’ precious Vespertine, don’t exactly casualize fine dining, the overall trend is perhaps driven by chefs’ and restaurateurs’ freedom to experiment with different formats, said Schaefer. This is also why the current fine dining landscape can support both classic interpretations of the sector and formats not traditionally associated with fine dining, like New York’s Cote or Majordomo in Los Angeles.
Don’t Discount Delivery
Euromonitor’s delivery and takeout data focuses on restaurants, such as Domino’s Pizza, that operate and manage their own takeout and delivery operations, with no dining room. It does not include third-party ordering and delivery platforms which are experiencing growth and change of their own.
“Domino’s is a good example because, starting 10 years ago they bet the whole company on making delivery as frictionless as possible. As a result they’re seeing crazy same store sales numbers for the last five years,” said Schaefer. He sees future tension between the restaurants that have the ability to handle in-house delivery and most other restaurants who opt to partner with a third-party service. “The window is closing to build your own,” he added.
He also sees big brands having huge effects on delivery services. “The idea that McDonald’s is on the same platform as your local Indian takeout place is interesting, because it changes the competitive environment,” he said. It’s no longer a question of building networks and logistics and marketing to customers, instead it’s about creating good food that travels well.
“That creates a whole new set of problems and a whole new set of advantages for players we don’t even know of yet.”