Post written by Sarah Crowley, Product Development Analyst
It’s 5:30 on a Tuesday night. You’re just leaving work and have approximately one hour before your nephew’s baseball game. You haven’t gone grocery shopping in the last two weeks so your only option is to eat out. You don’t have time for a sit-down dinner, but would really prefer to eat something healthy (as opposed to fast food). There is another option: Fast-casual dining.
Over the past 25 years, the restaurant industry was highly populated with fast food establishments and full-service restaurants. Fast food restaurants focused on speedy service and low-price point meal options, while full-service restaurants focused on good customer service, high quality food, and a comfortable, visually appealing atmosphere.
In more recent years, a new trend has emerged. A number of consumers are seeking an upscale dining experience in the fast, casual style. In a recent study, WD Partners found that customers are willing to pay slightly more and wait a little longer for better-quality food. On the same note, many don’t have time to enjoy a nice meal at a full-service restaurant, according to Joe Pawlak, vice president at Technomic and food expert.
The solution became apparent and a new type of restaurant emerged to accommodate a large portion of the population. Fast-casual dining was born. A typical fast-casual restaurant can be described as follows, according to Franchise Times:
- Checks averaging between $7 and $11
- Targets adults
- Upscale style / interior design
- Pay and pick up food at the counter (some fast-casual restaurants may deliver the food to the table)
- Food is made fresh
Fast-Casual Establishments Grow in Popularity
A restaurant must know its target audience before opening for business, and the fast-casual customer base may vary slightly from other markets. Most customers are married, both working, and between the ages of 35 and 54 without children, according to Scarborough Research.
Starting in 2007–during the economic downturn–fast-casual dining saw an uptick in sales. Fast food restaurants were under scrutiny due to the quality of their food, and full-service restaurants were not as affordable by parts of the population suffering financial hardship. Fast-casual restaurants provided an alternative solution, as well as healthier food options.
In 2010, fast-casual restaurant sales hit $23 billion, “a 30% increase since 2006,” according to Franchise Help. Of the top ten fastest-growing chains, eight are from the fast-casual sector, according to Fast Casual.com. Also from Fast Casual.com:
“In total, the top 10 fastest-growing chains’ sales accounted for $10.3 billion, a 22-percent increase over 2011. Unit counts grew 15 percent, according to Technnomic.”
Fast Food Restaurants Look to Compete
In efforts to stay relevant, some fast food restaurants are trying to update their current settings. For example, Wendy’s is transforming its design to reflect a fast-casual dining experience, according to an article in Newsobserver.com. Wendy’s added a lounge, Wi-Fi, flat screen television, a fireplace, and more. Other fast food restaurants, like Arby’s, have tried to compete with fast-casuals by offering fresh menu items.
Full-service restaurants are also taking advantage of the fast-casual appeal. Red Lobster is currently testing the Seaside Express; a pay at the counter option during lunch hours. Applebee’s is following suit with a similar concept: Applebee’s Express Lunch.
The restaurant industry itself has a handful of unique exposures; however, fast-casuals do not differ much from their fast food and full-service counterparts. Some notable exposures are:
- Cooking (sometimes with grease)
- Spoilage (food and beverages)
- Customer Safety (including slips, falls and food contamination)
- Employee Safety (including cuts, burns, slips, falls and theft)
- Data Breach (high number of transactions)
Regardless of the style of your establishment, several important coverages to consider for the restaurant industry are:
- Business Interruption (Pays for loss of income and expenses if there is a claim)
- Food Contamination (If the Board of Health or a government authority demands the closing of a restaurant, this coverage pays to clean the equipment, replace the contaminated food, loss of income, and medical tests for employees)
- Equipment Breakdown (Pays for equipment, i.e. machines, computers, etc., if they breakdown due to mechanical failure or electrical arcing)
- Spoilage (Pays for any food, beverages or other perishable stock if there is a mechanical breakdown, contamination by refrigerant, or a power outage)
- Data Breach (Pays for expenses associated with a data breach, such as response expense, legal expense, credit monitoring expense, and identity recovery expense)
It’s important for restaurant owners to work with their independent agent to determine the best possible solution for their insurance needs.
According to a study from Morgan Stanley, the main thing holding customers back is simply the availability and convenience of locations. This will change as more and more fast-casual establishments open their doors. The next time your kitchen is empty, you don’t have to eat cheap, low-quality fast food or spend a fortune at a fine dining establishment. You can simply visit a local fast-casual restaurant and get healthier food at a reasonable price.
What are some of your favorite fast-casual restaurants? Please feel free to share in the comments below!