The food sourcing headaches are plentiful, but the ability to raise prices because of the organic label is worth it.
— Erika Adams
Seattle entrepreneur Neal Zeavy was casting about for a new business a few years ago and hit on a novel idea: an organic burger chain.
Nic’s opened in the Chicago suburb of Rolling Meadows in 2017, serving up a classic fast-food menu of burgers, fries, chicken nuggets and soft-serve ice cream. Everything is organic: the pickles, seasonings, even the ranch sauce. If the grub isn’t healthy exactly, it appeals to diners keen to feed their families food guaranteed toxin-free by the U.S. Department of Agriculture.
“We’re not going to claim that you’re going to lose weight eating cheeseburgers and French fries even if they’re all organic,” Zeavy says. “It’s mostly knowing that you’re not eating all the other crap.” Business has been sufficiently robust for him and his partner to open two more locations, with a fourth scheduled to go live this year in Evanston, Illinois.
Organically raised food is commonplace in the U.S., and everything from peaches to chocolate bars carries the familiar green USDA-certified label. Last year, organic food and drink sales grew to almost $45 billion, a 5.5 percent jump from 2017, according to the Nutrition Business Journal. That’s faster than conventional food sales, which have been flat or declining for the past three years.
“Consumer demand for organic food is still growing very fast,” says USDA agricultural economist Catherine Greene. While millennial parents are feeding that desire, Gen Z will be “even more interested,” she says.
And yet very few big restaurant chains make a point of using organic ingredients. Even Chipotle Mexican Grill Inc., which prides itself on quality meat and produce procured from sustainable farms, makes no mention of organic in its marketing or menus. The 23.7 million pounds of organic rice, beans, tortillas and other ingredients the chain purchased last year represents a small fraction—Chipotle won’t say how much—of the total. That’s because getting organic items consistently is hard.
Recently, Zeavy’s operation was thrown into chaos when Costco Wholesale Corp. said it was out of organic vegan patties and wouldn’t be getting any in for a month. A few weeks later, Nic’s ran out of organic blueberry pie filling for yogurt parfaits, and managers couldn’t just run to the supermarket and pick some up. The chain sells about 50 vegan burgers a day, and the parfaits help bring in breakfast customers. “We were losing sleep,” Zeavy recalls.
In both cases, Sysco Corp. came to the rescue. North America’s largest food distributor is adding vegan burgers from the likes of California-based Don Lee Farms to its lineup and is now delivering Lucky Leaf fruit filling, as well.
Sysco didn’t return a request for comment, but Don Lee Farms development chief Danny Goodman says many food-service companies play it safe by selling legacy brands: Kellogg Co.’s Morningstar Farms veggie burgers, for instance. “They’re the bottleneck,” Goodman says. “They need to start bringing in the new and different, but it’s a slow process.”
The USDA also mandates annual organic inspections, which take about four hours and require lots of paperwork and labor. Inspectors from Quality Assurance International can show up anytime without advance notice. Every single ingredient must be organic; if even one isn’t, they can shut the joint down.
Zeavy is undaunted. Before starting Nic’s, he had spent several years running charity raffles for the likes of Ronald McDonald House, raising some $100 million by offering a house and lesser prizes (no one ever won a house but winners have received cash). Zeavy who still runs the raffles, has various business including a commercial real estate firm. He was looking for a tenant for a vacant restaurant he owned outside Chicago and decided to open an organic burger chain instead.
Nic’s has caught on with young families who are willing to spend a little extra money on a burger and fries. Zeavy estimates the organic label costs the company about $100,000 a year (that’s expected to drop by half this year) and he passes the expense along to customers. An organic grilled chicken sandwich is $1 more than the traditional variety at a nearby McDonald’s. And a Nic’s cheeseburger is about four times as pricey as the version sold at the Golden Arches.
Last year, Nic’s generated average per-store sales of $500,000 although Zeavy predicts that will double to $1 million in 2020. He expects to have 20 stores in three years and 50 in four. That’s an aggressive target by industry standards—especially for a niche brand.
Meanwhile, in an effort to appeal to a broader market, Zeavy recently added a menu item that’s the antithesis of fast food: vegan lentil chickpea soup. He says it’s selling well.
©2019 Bloomberg L.P.