Better burgers, choicer chicken: Why slightly more upmarket outlets are eating fast food’s lunch

Bridging a gap in the market between fast-food joints and full-service restaurants, fast-casual chains such as Nando’s chicken, Shake Shack and Chipotle Mexican Grill are enjoying success across the world. The combined sales of American fast-casual outlets rose by 10.5% last year, compared with 6.1% for fast-food chains, according to Mintel, a market-research firm, reports The Economist.

There are four main reasons why these outlets have been winning customers. First, they promise “fresh” food, meaning at the very least not frozen. Chipotle also says it uses, where possible, meat from animals raised without hormones or antibiotics, and organic and locally grown vegetables. Having once been controlled by McDonald’s, Chipotle is now a threat to its former parent. Although still relatively small, it is enjoying 20% annual growth, quite a feat in the crowded restaurant market.
Second, they offer diners a high level of customisation, such as choosing each ingredient in a sandwich, burrito or burger. This appeals to fussy eaters and those with allergies. The service is not always as quick as at a burger joint but, it seems, quick enough. Some fast-casual chains let diners order at their tables.

Third, clever pricing helps these chains optimise their profits. They offer some dishes at around the same price as those at burger joints, but they seem to be better than McDonald’s at nudging diners towards pricier dishes and extras. Fast-casual chains typically manage to squeeze 40% more out of each diner’s wallet than fast-food joints do.

Fourth, fast-casual chains often try to give each outlet a touch of distinctiveness. This distances them in the eyes of consumers from the “corporate” feel of burger chains—and their legacy of bad publicity—says Sophie Carroll of Planet Retail, another research outfit. Nando’s, for instance, decorates its restaurants with South African art.

For all their success so far, some of the fast-casual chains are finding that as they get bigger, they come under more scrutiny. Campaigners have recently criticised Chipotle and Panera Bread for using ingredients from genetically-modified crops and artificial additives—they say they are working to eliminate these. Campaigners against the use by companies of (legal) tax-avoidance techniques have added Nando’s to their targets. Fast-casual restaurants are joining the ranks of big business and having to endure the attention that comes with it.

Source: The Economist