Not so long ago, there was a huge buzz on how the fast casual restaurant segment was going to completely disrupt the foodservice industry. The idea was that smaller chains focused on higher quality and diverse menu offerings would continue to grab more and more of the market share.
Over the last several months, though, all we're hearing are reports of how the fast casual sector is continuing to take hits. The bubble has apparently burst as same-store sales are declining and many locations are closing.
At the same time, there was a recent report in the Wall Street Journal that was recapped by The Hustle. That report stated that "old-timey jobs are hot again" as more and more Millennials are turning to jobs where there's an "element of performance."
Jobs like butchers, barbers, bakers, and fishmongers are becoming more and more desirable, and this is a direct reflection of our collective movement toward everything "craft."
To be sure, one of the occupations listed as on the rise is the bartender. Craft cocktails are a huge revenue source for F&B operations, and as a result, the U.S. Department of Labor projects the number of bartenders will grow by 10 percent from 2014 through 2024.
So why are fast casuals struggling while focus is being placed on "craft" and "artisan"? The reality is there's no single answer, but there are some things to consider that point to what it all might mean.
OVERSATURATION
With so much emphasis on the growing fast casual sector comes so much growth in the fast casual sector. The most obvious reason for fast casual struggles is that there are just so many of them, and I would not expect this growth to slow.
Despite the fact same store sales are on the decline, venture capital investments into fast casual restaurant chains continues to remain steady. In 2016, there were 19 major investments in small chains with 20 or fewer locations. Those investments last year are turning into store openings this year.
SHIFTING DEMOGRAPHICS
Millennials are driving demands now more than ever. They are a major reason fast casual forecasts were so good a few years ago, and they are a major reason I personally expect fast casual chains to rebound in the coming years.
When you think about what fast casual restaurants offer, those benefits are all priorities for Millennials: speed of service, customization, visibility (in many cases food is made right in front of you in a serving line), variety and diversity (ethnic foods will only become more popular), and perceived quality to name a few.
Fast casuals, especially those that are smaller and more nimble, have a greater ability to control the quality of their products. In essence, they can be the "craft" QSR alternatives, which is a major reason they became so popular in the first place. But what happens when a fast casual chain becomes too big and changes its priorities or its ingredient suppliers?
SHIFTING IDEALS
Craft, craft, craft. The word that primarily began its renaissance in the beer industry has since spread to spirits, coffee, sodas, teas, ice cream, bakeries and breads, condiments, and just about every corner of the foodservice industry.
In part a manifestation of Millennial ideals but funded by the purchase power of Baby Boomers and Gen Xers, I would argue the craft movement has yet to see saturation in any segment. Yes, craft beer sales are slowing, but the market is still growing and those declines in growth are also, in part, due to the fact that craft breweries are being gobbled up by big beer acquisitions.
Look for more and more "craft" in the coming years. And I would expect "craft" to pervade the fast casual restaurant industry, as well. Because shifting ideals will put an emphasis on new, independent, and artisan, I would expect more and more VC dollars to enter the market. At the same time, the fast casual chains that can hold on to those artisan and crafty elements are the ones that will likely be able to maintain same-store sales.
Whether you're a Millennial walking into an artisan bakery or an artisan baker buying flour and convection ovens, our collective buying patterns are changing. Consumers are getting their information in different places, they're digesting that information in different ways, and they're putting that knowledge to use in order to make the most informed buying decisions possible.