The shine is coming off the star that is Fast Casual. With several exceptions, the category has had a rough year plus. This past quarter continued declining category sales overall. After several years of craving creating brands, headlines and growth the narrative has been changing.
Analysts are now looking back to QSR as the best bet for growth. Experts are calling for brands like Jack in the Box to spin off their Fast Casual sub-brands (in this case, Qdoba) because they are creating drag for the higher growth QSR.
Fast Casual brands have been praised for a simplified, focused menu. Under-complicated. Built around a single craving. Think Habit Burger (one of the Fast Casual brands bucking the growth trend). That is a fantastic attribute until it isn’t. One clear difference between FC and QSR brands is veto power. FC brands have menus based on one craving. A great burger. Custom pizza.
Across QSR, brands have built our a strong menu that attracts a core while adding a moat. That moat is the extra items that match the brand expectations but meet a different craving. This stops the veto, which is difficult for a brand like Qdoba with a very simple menu to do. Want a burrito, or something like it? Great, Qdoba works. But if not, the search for the next option begins. The single craving is a double edged sword.
Every new FC brand had a simple description: Chipotle for “insert cuisine here.” There was a novelty for most cuisines, as people flocked to see how pho or Uraguayan food could be presented to guests in an assembly line. But time passed and the unknown became the known. There was nothing new to try and back to Jack in the Box we go. Burgers, chicken, tacos, breakfast. Plenty of options for all.
People are not getting richer so price will matter going into the next 18 months.
Doing the mental math here? The next move for Fast Casuals would naturally be to combat the QSR menu moat by adding items. Not so simple. The expanded menu is just one moat. The second was built-in by Fast Casuals but has been enhanced. Pricing.
Fast Casuals took price as part of a premium positioning to differentiate against the perceived quality gap of QSR from the outset. In many cases, the claim that a tighter focus on a single craving made the price make sense. As in: we use the best ingredients to make the best burritos, sorry it costs a bit more. Now it’s a little hard to go head to head with QSRs and expand the menu to match. Sure, they may offer a more premium product but going head to head gives people a chance to compare price.
People are not getting richer so price will matter going into the next 18 months. Fast Casuals like Blaze can’t expand their menu. They’ll be unable to compete on price against QSRs and against Casual Dining if they try to add premium entrees. The question becomes what can they do to make people crave their food more? If they really wish to expand that craving, they’ll need to bring in new, unique flavors and innovation into their core. Fast Casuals have to go all in on ingredients in both variety and quality. Enhance that single craving and make people see the difference between their offering and QSRs.