The U.S. restaurant scene has experienced a significant shift in the past decade with the proliferation of fast-casual restaurants, a fresh concept combining the best aspects of quick service restaurants (QSRs) and casual dining. These outlets, including brands like CAVA, Sweetgreen, Chipotle, and Panera Bread, have successfully met consumer demands for quality, convenience, and health-conscious meals.
The fast-casual dining segment has not just expanded; it has exploded. According to a Technomic report, sales among the top 250 fast-casual chains grew 8% in 2021, totaling nearly $47 billion, outpacing the growth of QSRs which only managed a 5% increase in the same year.
Take Sweetgreen, for instance, which started as a single location in Washington D.C. in 2007 and now boasts over 120 locations across the U.S. Similarly, CAVA, which began as a single eatery in Maryland in 2011, has expanded its presence to more than 100 locations nationwide as of 2023.
Other fast-casual brands have witnessed similar expansion. Chipotle Mexican Grill, renowned for its build-your-own burritos, and Panera Bread, known for its fresh, clean ingredients, have rapidly expanded their footprint. By the end of 2022, Chipotle had more than 2,750 locations, and Panera Bread surpassed 2,300 locations.
While QSRs still dominate the overall market in terms of volume and revenues, fast-casual restaurants have started eating into their market share. According to Euromonitor, in 2021, fast-casual brands accounted for 11.4% of the total sales in the U.S. restaurant market, up from 7.8% in 2015. In contrast, QSRs' share declined from 37.6% in 2015 to 34.1% in 2021.
While these numbers might seem small on the surface, they represent a profound shift in consumer preferences and an unmistakable trend towards the fast-casual dining experience.
Traditional fast food chains like McDonald's, KFC, and Arby's have felt the heat from the fast-casual surge. According to Marketwatch, McDonald's U.S. sales growth slowed to 5.5% in 2021, down from 6.3% in 2020, and KFC reported a mere 1% increase in sales in 2021, a sharp decline from the 4% growth in the previous year.
In contrast, fast-casual chains have been thriving. Sweetgreen's sales grew by a remarkable 28% in 2021, and CAVA saw a similar growth rate of 27%.
The surge of fast-casual restaurants has prompted many traditional fast-food chains to reconsider their strategy. The incumbents are feeling the pressure to adapt, leading to some noticeable changes in their offerings and operations.
McDonald's, for instance, has introduced its "Signature Crafted" line of sandwiches, giving customers more premium and customizable options. KFC has explored higher-end, fast-casual-inspired versions of its restaurants, like KFC eleven, which offered flatbreads and rice bowls instead of the traditional fried chicken. Similarly, Arby's has been experimenting with its menu, offering more diverse and fresh options like the Market Fresh line.
Fast food giants are also investing in interior design upgrades to provide an improved dining environment. From comfortable seating to free Wi-Fi, these changes are clear attempts to compete with the more sophisticated dining experiences offered by fast-casual establishments.
The rise of fast-casual restaurants signifies a change in the American dining scene, highlighting the increasing demand for quality, health-conscious, and convenient dining options. While traditional fast food chains adapt to meet this challenge, the remarkable growth rates and increasing market shares of fast-casual brands indicate that this trend is not just a fad but the future of dining out.
