Fast casual restaurants occupy the space between traditional fast food (or quick service) restaurants and full service restaurants.
Like fast food restaurants, fast casual restaurants typically offer counter ordering and relatively quick service. However, some fast casual restaurants may also bring food to a customer’s table and clean up trays after the customer has left – a characteristic more common of full service restaurants. Because of this blending of service levels, fast casual restaurants are seen to be a little more upscale than fast food restaurants, but much more casual than full service restaurants.
Another big difference between fast casual restaurants and fast food restaurants is food quality, or at least perceived food quality. Though they have been around since the 1990s, fast casual restaurant franchises exploded in popularity in the early 2010s alongside an increased consumer desire for healthier menu options with higher-quality ingredients that could still be delivered with a measure of quickness. Also, as a result, fast casual restaurants tend to charge slightly higher prices than their fast food counterparts – another notable characteristic.
<blockquote>“Dual-income families, people having less time, people eating away from home more than ever” all inspired the movement, Brett Schulman, CEO of Cava, told the Washington Post. People were “also demanding higher quality as well as better nutrition profiles.”</blockquote>
Fast Casual Franchises with Drive-Thrus Becoming More Common
Though fast casual restaurants traditionally have shunned drive-thru service as a characteristic, there has been a shift in recent years.
Some fast casual restaurants were experimenting with drive-thrus before the pandemic – one of the most notable being Chipotle, which introduced its “Chipotlanes” in 2018. But the pandemic showed fast casual restaurant franchise operators just how important having different modes of service can be, especially with how consumers as a whole have shifted towards a greater demand for convenience.
Now, with the traditional parameters of what defines the different restaurant types blurring even more, particularly in regards to offering drive-thru service, fast casual restaurant operators are taking the opportunity to experiment with ways to increase their profits and test for expansion in ways they perhaps couldn’t before.
“We’re very excited about the potential of drive-thru to meet that consumer occasion for the guest who wants even greater convenience from a casual-dining operator, and in some senses, we’re kind of redefining what fast casual actually is,” says James O’Reilly, CEO of Smokey Bones. (Note: Smokey Bones is not currently franchising.)
According to Julie Littman, senior reporter at Restaurant Dive, the pandemic “proved that drive-thrus can fuel growth in a challenging economic environment, pushing several chains to explore drive-thru pick up windows and drive-thru only formats for the first time.” Per Littman, pickup windows for mobile orders “are proving to be a lucrative.” Unsurprising, considering mobile app usage for food franchises has been growing at record rates over the past couple of years.
Future Growth Prospects for the Fast Casual Restaurant Industry
<blockquote>The demand for innovation and personalization in food menus is one of the primary elements driving the global fast-casual restaurant industry's growth, as customers currently seek a combination of food infused with fresh and robust flavors. Another market trend that is predicted to favorably impact the industry in the forecast term is the rise in popularity of chef-driven fast-casual restaurant franchises.
~ From Technavio’s Global Fast Casual Restaurants Market 2022-2026</blockquote>
According to Technavio, the industry is forecast to experience growth of 11.39% in 2022 and a compound annual growth rate of 12.41% until 2026. The company estimates that North America, particularly the United States and Canada, will account for 44% of the market's overall worldwide growth in the given time period.
Initial Investment and Opening Costs for Fast Casual Restaurant Franchises
The amount necessary to open a franchise varies depending on the unique business system and execution requirements.
The opening costs for a food franchisee can depend on many factors, including but not limited to: the franchise fee, land and building costs, training expenses (such as travel and living expenses, not the actual training courses), grand opening advertising and marketing costs, and more.
One of the most important variables in how much it costs to open a fast casual restaurant franchise is the type of franchise being opened and how big it is. The two types of food franchise most commonly offered are traditional and non-traditional. Traditional franchises are usually the biggest option. They are typically standalone buildings where the service of the franchise is the only business offering. Non-traditional franchises are smaller, and typically located within another building like malls, airports, or gas stations.
In addition, food franchises are increasingly being run from a small or shared kitchen facility, referred to a “ghost kitchen,” and is only used for pickup or delivery. Food truck franchise opportunities are also on the rise.
Our franchise profiles will present you with a basic range for the initial investment required to open a chicken franchise. But when it comes to finding out the details of an initial investment, the franchise disclosure document (FDD) is the best place to look. Franchisors offer itemized estimates in their FDD based upon their experience establishing, and in some cases operating, units.
Franchisors offer estimates in their FDD based upon their experience establishing, and in some cases operating, units. However, prospective franchisees should keep in mind these estimates are just that—an estimate. Prospective franchisees should review the figures presented with a business advisor, taking into consideration their unique circumstances, before making the decision to enter into a franchise agreement.
Ongoing Costs for Fast Casual Restaurant Franchises
Throughout the length of the agreement there are costs for being a part of the franchisor’s business system. These costs include items such as royalty fees, charges for technical support, and continued advertising/marketing costs.
The most common is the royalty fee. Royalty fees are assessed for the continued use of the franchisor’s trademarks and patented processes, along with certain types of operational support. In addition to regularly assessed fees, other fees are charged on an “as needed” basis such as audit fees, or costs for additional, non-mandatory, training.
In addition, it’s important to note that while many initial and ongoing costs are detailed in the FDD, there are some costs inherent to business ownership, like employee wages or utility costs, that aren’t.