Fast casual taking a bigger bite

CHICAGO — Darren Tristano’s daughter had a definite preference when it came to where she wanted to celebrate her 16th birthday: She wanted to go to Panera Bread, a favorite among her peers.

“That’s when you know fast casual has arrived,” said Tristano, executive vice president of Chicago-based food-research firm Technomic, at a recent conference in Chicago on the growing popularity of restaurants that offer a casual environment mixed with fast service, such as Panera and Chipotle Mexican Grill.

U.S. sales in the fast-casual segment are expected to swell to $62 billion in 2019, up from $39 billion in 2014. Pushing that growth, Tristano said, are millennials hungry for higher quality foods at affordable price points, now at $9 to $13 per check. Behind them are teenagers, like his daughter, who prefer cheaper meals but are evolving into the next wave of fast-casual customers.

As the industry grows, Tristano said, restaurants are experimenting and expanding on their success. Chipotle, for example, partnered with two restaurateurs in Colorado to open Pizzeria Locale, a fast-casual restaurant with the assembly line concept customers seem to love. Denny’s launched a fast-casual restaurant called The Den that targets college students. And Panera is experimenting with having customers place their orders on computers.

The new ideas seem to be working. Fast casual is gobbling up sales of quick-service restaurants, such as McDonald’s and Subway. In 2014, the segment grew to own 16 percent of the limited-service restaurant market, up from 12 percent in 2009. By 2019, it’s expected to reach 21 percent. Because of that growth, Tristano said he expects that sales at quick-service restaurants will not rebound, but rather will continue to decline as fast casual takes over.

Fast-food chains still command a hefty presence, however. McDonald’s has about 14,000 U.S. locations, compared with Chipotle, which has about 1,800 locations.

A young player in the segment, Protein Bar, has grown to 20 locations, mostly in Chicago, but also in Washington, D.C., and Colorado.

Protein Bar founder Matt Matros cobbled together $600,000 in loans, savings and credit card debt to open his first store in 2009 in downtown Chicago.

Matros, 36, said he was an overweight child who heard all the fat jokes in the book. His father died of a heart attack when Matros was 11, which motivated him to lose weight in his early 20s. He went on a high-protein diet, losing 60 pounds in seven months. A few years later, after earning a master’s degree in business administration, he landed a job in Chicago selling cheese for Kraft, he said.

He quit his job in 2009 to sell juices, but within seven months he realized he needed food in his menu to keep the doors open. So he started selling high-protein meals, made with ingredients such as quinoa, organic tofu and black beans. Two months later, he started making a profit. In the summer of 2010, he partnered with a customer to open a second location. And in 2013, he got money from a private equity firm to further grow his business. He now has 65 investors, 550 employees and more than 10,000 daily customers.

Matros said his customers, who are between 25 and 40 years old, care about healthy foods, which makes Whole Foods one of his biggest competitors.

To compete, he said, he focuses on the customer experience, which makes engaged employees key to his success. To keep them happy, he said, he offers small raises every few months. In Chicago, he said his employees start at $8.25 per hour, the state’s minimum wage, but could move to $9 per hour within 60 days. About 65 percent of his workforce work more than 25 hours per week, he added.

Matros’ restaurants are considered part of the “healthy” segment of fast casual, which is expected to grow by 30 percent annually. Other segments expected to have double-digit growth include Mediterranean concepts, pizza and salads.