Fast-casual restaurant chains continue reign

Traditional fast-food companies feel challenge to compete, especially with food quality




Local angle

• Chipotle Mexican Grill and Panera Foods each have one outlet in Clark County, in a shopping center at 915 S.E. 164th Ave. near Columbia Tech Center.

• Noodles & Co. says it’s “coming soon” to 19151 S.E. Mill Plain Blvd.

photoChipotle Mexican Grill stock is up about 35 percent this year; fast-casual restaurants are outpacing much of the industry.

(/The Columbian)

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 percent in the year ended in May.

Foot traffic into such establishments rose 9 percent 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 food service unit.

Wall Street has taken note of fast-casual's trajectory. Chipotle's stock is up about 35 percent so far this year.

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

Panera, when it released its second quarter earnings late last month, reported a 16 percent 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 percent from 4 percent, it said it may exceed expectations to open up to 125 new locations in 2013.

McDonald's, by comparison, said its net income rose nearly 4 percent in its second quarter. Chief Executive Don Thompson said the remaining months of the year "are expected to remain challenged." The stock is up less than 10 percent for the 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 5 fast-casual outposts to every 100,000 residents.