Fast Casual Restaurants: A segment to watch for

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Edelweiss estimates that while the entire food services market plunged 82 percent year-on-year in the first half of FY21, the contraction that organized fast casual chains such as Domino’s, Burger King, McDonald’s (West & South) reported was restricted to 45 percent; by September recovery was already at 85 percent of pre-covid levels.
  • Sakshi Singh
Fast Casual

Globally, the fast-casual restaurant market size was valued at 125.6 billion dollars in 2019, and is expected to reach 209.1 billion dollars by 2027, registering a CAGR of 10.6 percent from 2021 to 2027. The burger and sandwich segment led in terms of fast-casual restaurant market share in 2019 and is expected to retain its dominance throughout the forecast period.

Also Read: Fast on Move Easy on Returns: How Fast Casual is Biting a Larger Share

Today, eating out is common but the food services sector is complex. A fast casual restaurant, found primarily in the United States and Canada that initially does not offered full table service, but advertises higher quality food than fast food restaurants, with fewer frozen or processed ingredients. It is an intermediate concept between fast food and casual dining.

The fast casual restaurant market is segmented into food type, mode of operation, nature and region. By food type, the global market is classified into burger/sandwich, pizza/pasta, Asian/Latin American Food, chicken, and others. By mode of operation, it is bifurcated into dine-in and takeaway. By nature, the market is divided into franchised and standalone. By region, the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA. The burger/sandwich segment accounts for the major fast-casual restaurant market share however, the pizza/pasta segment is poised to grow with the highest CAGR during the analysis period. 

What’s happening in the Indian market?

“The fast-casual restaurant segment in India is the space to watch out for because changing employment has been altering the food preferences of consumers. The growth in the market is driven by increasing urbanization and the shift of people from Tier 2 towns to Tier 1, and metro cities. Globally, customers are more inclined towards food items that can easily be consumed without any effort,” Himanshu Nangia, Director of RHNS Food Services commented

The rise of nuclear families and double-income households coupled with a busy lifestyle as well is driving demand for convenience in food products. Consumers today are not brand sticklers, they are now receptive to newly launched and lesser-known yet quality-driven products. This has given growth opportunities for many homegrown fast casual brands.

Additionally, India is a very price-sensitive market and looking at its huge middle-income population, that loves to eat out making it an entire wholesome family experience, fast-casual dining is displaying its prominence.

“This segment is catching up very fast as peoples income increases, there are multiple earners in households, the popularity of fast-casual restaurants are the place to be in,” Chef Harsh Shodan commented.

Witnessing the booming phase

“It definitely is, and will only be booming further as long as food and its quality is consistent. The fast-casual restaurant segment is sure to witness substantial growth in the coming years. The pandemic has given rise to consumer behaviour that leans toward delivery and carryout,” Nangia added

Edelweiss estimates that while the entire food services market plunged 82 percent year-on-year in the first half of FY21, the contraction that organized fast casual chains such as Domino’s, Burger King, McDonald’s (West & South) reported was restricted to 45 percent; by September recovery was already at 85 percent of pre-covid levels. Fast food chain Burger King reported a blockbuster IPO last year; meanwhile Jubilant Foodworks, that operates the Domino's pizza franchise in India recently revised its potential store opening target in India from the earlier 2,000 to 3,000.

“Fast-casual restaurants attract a lot of day crowd which helps in sustaining the restaurant for a longer period of time and the turnover in a fast-casual restaurant is also high as people visit more often depending on the experience of the place,” Dhaval Udeshi from Chrome hospitality who is the managing partner at London Taxi, Butterfly High, Silly and Blah commented.

The more recent popularity of online food ordering and food delivery platforms have enabled QSRs to reach more consumers. However, the report also flagged concerns over challenges that restaurant chains could face. Fast-casual in the country is now much more than large food services chains such as McDonald’s, Burger King, Domino’s.

Also, what's emerging in India is a halfway house between QSR and Fast Casual. Food, design and service are better but prices are closer to QSR. The business challenge is giving quality at these low prices. US Fast Casual prices are double QSR, while in India the delta is around 10-15 percent.

May Interest: Fine Dining to Fast Casual…How to Build a Concept That’s a Scalable Brand

How will Fast Casual play out in India?

It depends on: a) the rate of target customer growth; b) the rate at which customers, particularly millennials, turn away from QSR and c) the potential for lower operating costs.

The last of these is intriguing and while Indian demonetisation creates uncertainty, one outcome may be lower rents. If this happens, our Indian Fast Casual pioneers may find that higher margins buy the time needed for target customers to emerge en masse. Like so many things in business and in life, it's all about timing.

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