Health Food Restaurant Franchise Industry.
This study is a brief review of the U.S. health food restaurant franchise industry based on data collected from Franchise Disclosure Documents (FDDs) and from published industry sources.
A health food restaurant franchise is defined as an eatery that serves healthy food and/or organic food. Health food restaurants also use nutritionally beneficial ingredients and preparation techniques.
Restaurant franchises across the U.S. are removing fat and calorie laden items from their menus and introducing lighter, healthier options as Americans are giving a clear indication that they are more conscious of their health and the types of food that they eat. According to the National Restaurant Association’s 2009 trend forecast, before going to a restaurant, nearly three in 10 adults or 27% have gone online to search for nutrition information about restaurant food.
As reported by the National Restaurant Associations’ 2009 restaurant industry fact sheet, 76% of adults said they are trying to eat healthier at restaurants than they did two years ago. According to research undertaken by Franchise Direct, the health food restaurant franchise industry grew by 20% in 2007 and by 17% in 2008. Continued growth is forecast for the industry.
The rise in the popularity of restaurants which cater for the health conscious consumer is a reflection of strong consumer trends towards healthier living. Consumers are demanding nutritious and healthy food, served in a manner that fits into today's hectic lifestyles, at a low cost and with fast service. Health food has shown to be a sustained and growing trend in the food industry and attractive to all demographics.
Pita Pit for example, founded in 2004, has experienced a 131.3% growth since it began and posted revenue for 2008 at $10.8 million. Pita Pit is fast food but they have left out the carbohydrate and fat that today’s health-conscious consumers are trying to avoid.
Healthy Fast Food
Some franchised restaurants focus entirely on serving food that is nutritionally healthy and low fat. Other franchised restaurants, either quick-service or full service, have noticed the rise in popularity of healthy food and have devoted a portion of their menus to this trend. McDonalds, for example, over the years has added or removed different products from their menu in order to cater for health conscious customers. For example, McDonalds’ Happy Meals can now be ordered with a side of apple dippers (with low-fat caramel) instead of fries and low-fat milk or fruit juice instead of soda. McDonald’s fries are now also made in a healthy canola-blend.
Another example is KFC, owned by YUM Brands. KFC realized that the trend for healthier living would affect the sales of their fried chicken and so in response to consumer demand they have recently launched “Kentucky Grilled Chicken”. It has fewer calories, fewer fat grams and less sodium then the original recipe and appeals to a much larger audience.
“The investment we have made in Kentucky Grilled Chicken will help us be much more competitive in 2010 and beyond,”said David Novak, chairman, president and chief executive officer of KFC.
When the founders of Saladworks first pitched their idea for a salad only business, they were told “a salad-only business would never survive,” and were pushed to add sandwiches and other items to the menu. But the salad concept proved itself when Saladworks began outselling all of the mall’s burger and pizza franchises in its inaugural year. The store’s sandwiches were quickly dropped, and a new kind of healthy dining experience took root. Saladworks now has over 100 locations, is slated for burgeoning expansion: over 1,000 locations nationwide over the next 10 years and has become the nation’s #1 salad franchise.
The retail health food franchised business is a fast growing sector of the health food industry with 88,000 stores across the US and sales of $235 million last year. Health food retail franchises sell items such as organic and natural groceries, produce, meats, dairy and supplements. UFood Grill restaurant locations, for example, offer integrated convenience-style retail franchise stores that carry various health-oriented nutrition products, such as supplements, vitamins, nutrition bars, energy drinks, and healthier snacks.
Children’s health food
Health food for children is a major trend this year as stated by the National Restaurant Association's annual survey of more than 1,800 professional chefs – members of the American Culinary Federation. This trend forecasts an increase in sales for health food restaurants and will also encourage quick-service and full-service establishments to provide healthier options for their customers.
This is evident with certain market leaders, such as McDonalds, who, as we have seen, have altered their menus to include more healthy foods for children. In a separate survey, also conducted by the National Restaurant Association, quick-service operators named healthy options in children’s meals as the No. 1 food trend in the quick-service segment in 2009.
Organic food is increasingly popular. Total U.S. organic sales were $17.7 billion in 2006. They are estimated to have reached $21.2 billion in 2007, and surpassed $25 billion in 2008. UFood Grill has responded to this growth, and not only offers a tasty and nutritious alternative to burgers and fries but also uses natural and organic ingredients wherever possible.
Many consumers have specific dietary requirements and expect restaurants to offer customization on menu items to cater to their needs. These requirements may be for medical reasons, such as an allergy or they may be part of a personal diet plan. Either way there is a strong consumer trend towards restaurants that offer this type of customization. Qdoba, for example, offers fresh and wholesome food that is easy to customize for specific dietary needs. They offer one-third of the core menu ingredients and all of the salsas as fat-free. Qdoba can cater for any dietary request.
Zoup! also customizes their menu to consumer dietary requirements. Zoup! offers 12 rotating soups, including low-fat, dairy-free, vegetarian and spicy selections. Each soup is served with bread baked on site.
Health Food Restaurant Franchise Companies
The table below provides an overview of the estimated initial investment required to open a single unit of the 7 health food franchises sampled in this report. It includes the initial franchise fee payable on signing the franchise agreement, and the ongoing sales royalties payable to each franchisor. It also contains a detailed profile of each franchise which presents these costs in more detail. The profiles are extracted from the Franchise Disclosure Document (FDD) of each of the 7 franchises.
|Name of franchise||Royalty||Estimated Initial Investment – Low-||Estimated Initial Investment – High -|
Health food restaurant franchises offer a tried and tested formula and a proven business model to prospective franchisees. With ongoing franchisor support and experience, franchising gives a new operator the recipe for success. The table below outlines the store numbers of seven health food restaurant franchises, extracted from Franchise Disclosure Documents and other industry sources.
|Name of franchise||Number of Franchised Units||Number of Company Owned Units|
Labeling Education and Nutrition (LEAN) Act of 2009
As health and health food becomes more important, more cities and states are demanding that nutritional information be displayed in restaurants so that consumers are more informed about the nutritional value of their food. The desired result is that consumers will make healthier choices when faced with the calorie count or grams of fat that are in their food. For this reason the Senate reached a bipartisan agreement to include a federal menu-labeling law as part of comprehensive health-care reform which will require restaurants with over 20 units to display detailed nutrition information. In 2007, researchers in New York City examined consumer eating habits at Subway, which voluntarily posted calorie information in its stores. This study, also published in the American Journal of Public Health, reported that Subway patrons who pondered the calorie information purchased 52 fewer calories than those who didn't.
Technomic, a food industry consulting and research firm reported that 82% of New York City residents said that the new highly visible nutrition information affected their ordering. Of those people, 71% said they sought out lower-calorie options, and 51% said they no longer ordered certain items.
According to the National Restaurant Association, healthy food opportunities were the culinary theme for 2009 and this trend is set to continue. The health food restaurant industry has experienced huge growth in the past 3 years and this growth is forecast to continue. This is due, mainly, to an increased interest in healthy living for both adults and children. Consumers have been educated of the dangers of fatty and unhealthy foods and the importance of living a healthier life. This translates into increased popularity, sales and market growth for the health food restaurant franchise industry.