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Highlights from the 2023 Fast Casual Executive Summit

RJ Hottovy
Oct 13, 2023
Highlights from the 2023 Fast Casual Executive Summit

This past week, we attended the Fast Casual Executive Summit in Louisville and led a discussion with several CEOs about the state of the fast casual and broader restaurant industry in general. The panel include a group of executives representing a diverse group of brands, business strategies, and expansion plans, including André Vener from Dog Haus Worldwide, Elisia Flores from L&L Hawaiian Barbecue, Richard French from The Works Café, and William Dissen from The Market Place Restaurant/Billy D's Fried Chicken. We’ve included some of the key highlights from our discussion below.

Fast Casual Starting to Outpace QSR?  

We’ve written about the convergence between the QSR and fast casual concepts in the past. In the two years prior to the pandemic, fast casual concepts saw 14% higher visits per location than QSR concepts (below), but since the beginning of 2021, fast casual and QSR chains have seen roughly equal visits per location. We believe these trends have been influenced by several factors including migration, changes in consumer behavior regarding mobile ordering, drive-thru and delivery.

Despite these trends, the executives on our panel still believed there was a distinction between fast casual and QSR operators, including better-quality ingredients, elevated customer service, and menu diversity. Interestingly, these factors–along with a push to more suburban locations and some improvement in year-over-year return-to-office trends--may be translating into higher visit per location trends for fast casual operators, which outperformed QSR chains by 12.5% during the most recent quarter.

Technology Use Cases Differ by Fast Casual Brand  

There are a wide range of technologies that restaurant operators are currently investing in. We covered automation for assembly-line fast casual operators in last week’s Anchor, and we heard from several other operators at the event that are also exploring robotics/automated assembly lines for future store openings as well. However, most of operators we spoke to are using technology for more practical purposes, including market/site selection applications, developing and expanding virtual brands, predictive ordering, and inventory management purposes.

Restaurants Ready to Grow    

Despite all the changes brought about by the pandemic, many fast casual restaurants are ready to grow again. This was a topic we discussed in our recent The State of Restaurant Real Estate webinar, as commercial real estate operators want new restaurant concepts for their properties. Most operators on the panel and at the event they were finding more attractive locations--many located in smaller markets–and that some of the contractor and equipment bottlenecks that prevented new construction from taking palace earlier in the year have eased, although the cost to build a new location (both because of higher interest rates and equipment cost inflation) is still a prohibitive factor in building out. Most restaurant operators we spoke to were looking to expand their footprints by a high-single-digit clip in 2024.

What is the State of Franchisee Health?    

With year-over-year visit declines across most restaurant categories (below), higher operating costs (food, labor, and utilities), and elevated interest rates, the question of franchisee health was a popular topic at this year’s Fast Casual Executive Summit. Ultimately, several operators told us that the pandemic weeded out many of the weaker franchisees in their systems and that current franchisees are in good health and well-capitalized. Healthier franchisees should help restaurant operators reach their new unit targets for 2024.

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RJ Hottovy

Head of Analytical Research,

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank. R.J. also brings a wealth of experience with early-stage investments as a committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he advised over 50 food service companies on more than $200 million in early-stage capital raises and M&A transactions.

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