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Chipotle, Panera, fast-casual chains continue restaurant reign

August 26, 2013|By Tiffany Hsu
  • Chipotle and other fast-casual eateries continue their growth streak, according to NPD.
Chipotle and other fast-casual eateries continue their growth streak,… (Patrick T. Fallon / Bloomberg )

The sense of malaise settling over much of the restaurant industry seems to have missed a spot: the still-growing fast-casual segment that includes chains such as Chipotle Mexican Grill and Panera Bread.

A new report from researchers at the NPD Group found that the number of upscale quick-service eateries – known for higher service levels, better-quality food and larger check sizes than their fast food cousins – grew 7% in the year ended in May.

Foot traffic into such establishments rose 9% as customer visits to the restaurant industry as a whole stagnated.

“Traditional quick service restaurants have taken notice and are working to compete with the fast-casual chains’ offerings, especially in terms of the freshness and quality of food,” said Greg Starzynski, director of product management for NPD’s Foodservice unit.

Wall Street has taken note of fast-casual’s trajectory. Chipotle’s stock is up 35% so far this year, closing at $402.79 a share Friday.

When Noodles & Co. debuted in late June, it quickly became the year’s top-performing initial public offering, rocketing up 104%. It was upstaged earlier this month by Sprouts Farmers Market’s launch.

Panera, when it released its second quarter earnings late last month, reported a 16% surge in profit. Though the bakery-cafe chain revised down the low end of its predicted range for fiscal year same-store sales growth to 3% from 4%, it said it may exceed expectations to open up to 125 new locations in 2013.

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McDonald’s, by comparison, said its net income rose nearly 4% in its second quarter. Chief Executive Don Thompson said the remaining months of the year “are expected to remain challenged.” The stock is up not quite 10% year to date.

The country now has more than 15,700 fast-casual chain locations, according to NPD. Cities in Colorado – home to Chipotle, Noodles, Qdoba Mexican Grill and Smashburger – have some of the highest fast-casual-to-resident rates in the country.

The metropolitan area encompassing Fort Collins and Loveland has just 41 fast-casual eateries, but that equates to more than 13 restaurants for every 100,000 residents – the highest rate in the country.

The region that includes Denver, Aurora and Broomfield has a rate of nearly 13 eateries per 100,000 residents. Boulder has a 12.5 rate.

The average rate nationwide is five fast-casual outposts to every 100,000 residents.

[Updated, Aug. 26, 9:20 a.m.: Southern California still has the highest number of total restaurants, with 902 in the Los Angeles, Long Beach and Santa Ana area. Chicago is next with 703, followed by the Dallas, Fort Worth and Arlington region.]

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