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Lessons from Growth Chains

The taste of authentic old-style New York pizza shines at Florida-based Anthony’s Coal Fired Pizza, where ovens produce distinctive, winning flavors. Photo courtesy of anthony’s coal fired pizza. Quality, value and customization mark operations, large and small, exhibiting greatest growth

By Rita Negrete

Menu innovation tends to bubble up first at big-city independent restaurants, but chain menus across the country are still the best gauge of what the mass market finds new and interesting. Technomic’s recently released Top 500 Report tracks the 500 largest chains by sales and shows which companies grew fastest in 2010. The lists reveal a number of surprises and shed light on innovative concepts and menu categories that are taking off with the public.

Here, we’ve divided 2010’s fastest-growing chains into two groups. The larger chains (with annual sales above $200 million) don’t show such dramatic growth as the smaller, upstart chains, but the larger chains’ performance may be a better harbinger of longer-term trends. The smaller chains (under $200 million) sometimes exhibit dizzying growth rates, but it remains to be seen whether each concept represents a flash in the pan or a menu idea with staying power.

A look at the fastest-growing chains points to the meteoric rise of the fast-casual sub-sector of limited service. Technomic’s new Top 100 Fast-Casual Chain Report confirms that the category continued to outpace the industry as a whole, with the 100 largest fast-casual chains collectively growing sales 6 percent. Fast-casual concepts — with more-upscale menus and ambiance than quick-service outlets, at price points below casual dining — seem perfectly positioned for the prevailing economic and social climate.

The category essentially has blown through the recession without skipping a beat, but pressures are now coming from other types of concepts, including quick-service restaurants that are revamping their offerings and décor to take back market share.

While bakery-cafés led the way last year in terms of total sales, and Mexican eateries represented the largest number of concepts, the most dramatic sales growth came in the so-called “better burger” segment, with sector sales up 16 percent in 2010.

Fast-casual better-burger chains topped both lists of fastest-growing concepts. Leading the way among larger chains was Five Guys Burgers and Fries; the top growth rate for any chain was achieved by its smaller competitor, Smashburger, and The Habit Burger Grill also ranked in the top 10 among small chains.

Five Guys, based in the Washington, D.C., area, offers a no-frills menu of signature, made-to-order hamburgers of fresh, never-frozen, freshly ground 100 percent beef, cooked well-done and served on fresh buns. Hamburgers, bacon burgers and cheeseburgers can be topped with any combination of 15 free toppings, such as fried onions, sautéed mushrooms, jalapeños, green peppers and barbecue sauce. Kosher hot dogs, grilled-cheese sandwiches and a veggie burger are also offered. Premium, skin-on fries (available in regular and Cajun versions) are cooked in small batches in peanut oil.

Interiors feature a chalkboard that announces the origin of the potatoes being used that day; fresh potatoes are stacked in origin-stamped crates along with containers of peanut oil used for frying. Orders of “made-for-you” fare require about 10 minutes; patrons snack on free peanuts from a barrel near the counter as they wait.

Denver-based Smashburger sets itself apart with its signature cooking method — burgers are “smashed” onto the grill, then seasoned and seared, and served on butter-toasted artisan buns. House specialties include the classic with American cheese, lettuce, tomato, ketchup, onion, pickles and secret sauce; a barbecue version with barbecue sauce, bacon and cheddar cheese; and a version with garlic-sautéed mushrooms, Swiss cheese and mayonnaise. Alternatively, customers can build their own burger with an array of vegetables, cheeses and condiments.

Also on offer are smashed crispy or grilled chicken sandwiches, Angus beef hot dogs and salads. Sides include herbed french fries, shoestring fries, crispy onions, flash-fried vegetables and chili with beef. Beverage options include beer and wine by the glass. LTOs, seasonal specials and test items shake up the mix. Recent Smashburger examples:

> Grilled Cheese Sandwiches: Three-cheese or Swiss, spinach and mushroom
> Black Bean Smashburger: A black-bean patty smashed, seared and seasoned, with pepper-Jack cheese, guacamole, lettuce, tomato, onion, chipotle mayo and fresh jalapeños, topped with tortilla chips and served on a chipotle bun
> Sin City Smashburger, topped with American cheese, applewood-smoked bacon, a fried egg, grilled and haystack onions and signature Smash Sauce, served on an egg bun
> Nutter Butter Shake made with Häagen-Dazs ice cream

The Habit Burger Grill, a contender from Southern California, posts behind its ordering counters the slogan “Custom built! Quality food made to order.” The chain offers fresh, lean, 100 percent-beef charburgers in classic, double, teriyaki and barbecue-bacon varieties, each served with mayonnaise, pickle, fresh tomato, lettuce and caramelized onions on a toasted bun. Also available are sandwiches on toasted French rolls: fresh albacore, tri-tip, pastrami, chicken and chicken club. Salads, fries and onion rings round out the menu, along with handmade shakes, malts, cones and sundaes.

BJ’s distinguished itself with a new menu of low-cal Enlightened Entrées like Chicken a la Fresca, served over rice pilaf with veggies and topped with arugula. Photo courtesy of bj’s restaurant & brewhouse. THE CASUAL-DINING COMEBACK
Another notable finding from the lists of fastest-growing chains: Despite the struggles of the casual-dining sector throughout the recession and recovery, full-service chains are strongly represented. They comprise four of the 10 fastest-growing large chains and five of the 10 top sales winners among smaller chains.

Innovative concepts have found room to grow even in mature, overbuilt sectors of the industry. Bar-and-grill concepts like BJ’s Restaurant & Brewhouse, Yard House, Cheddar’s Casual Café, Buffalo Wild Wings Grill & Bar, and Tilted Kilt set themselves apart with craveable menus and affordable prices paired with a high-energy vibe that appeals to a wide patron base.

BJ’s Restaurant & Brewhouse is a Southern California microbrewery-and-restaurant chain; units sans brewery operate under the name BJ’s Pizza & Grill. The broad menu is moderately priced (check average is about $13). Handcrafted beers complement signature Chicago-style pizzas, baby back ribs, old-fashioned pot roast and meatloaf. Starters range from flatbread pizzas, Thai shrimp lettuce wraps and Santa Fe spring rolls to Italian salads, wedge-cut seasoned fries and chicken wings.

The menu changes frequently. This spring, for instance, BJ’s was one of several chains leading a trend toward menu items below a certain number of calories. BJ’s 575-calories-or-fewer Enlightened Entrées include Chicken à la Fresca, Creole Tilapia, Grilled Maui Glazed Pork Chop, Mediterranean Vegetable Pasta, Vegetarian Mini Pizza, and Garden Medley Salad with chicken, shrimp or salmon.

Complementing the entrées are 130-calories-or-less Skinny Rita, Guilt-Free Cosmo and Mojito Lite cocktails. Also new this spring were several seafood dishes, including Seared Ahi — sliced sashimi-grade ahi tuna served with Asian slaw, wasabi and a soy-ginger dipping sauce. A pizza with a gluten-free crust was added late last year.

Along with the boom in affordable bar-and-grill concepts has been a corresponding movement on the upscale end. Pricey steak and seafood restaurants, some of which saw double-digit dips during the recession, are enjoying a boom today as affluent Americans return to special-occasion dining.

In the steak sector, sales rose 46 percent last year at The Chop House, 11 percent at The Capital Grille and 10 percent at Texas de Brazil Churrascaria. Seafood sector sales were up 12 percent at Bubba Gump Shrimp Co., 11 percent at Chart House and 7 percent at Bonefish Grill.

Houston-based Perry’s Steakhouse & Grille tallied a 51 percent jump in sales. The concept combines colorful, contemporary, hip décor with a traditional menu: filet Oscar, filet mignon, rib-eye and three-peppercorn New York strip, along with seafood offerings such as pecan-crusted red snapper.

Appetizers include escargot, seafood-stuffed mushrooms, ahi tuna ribbons, tuna tartare and jumbo lump crab cakes; soups include French onion, lobster bisque and turtle soup; and sides include fried asparagus with crabmeat.

Desserts are just as indulgent: Bananas Foster, crème brulée, white chocolate cheesecake, and chocolate-dipped strawberries with berry coulis. Perry’s also recently introduced some surprisingly playful dessert items:

> Deconstructed Lemon Meringue Pie: A bowl of lemon pie filling with pudding, topped with gingered blueberries, shortbread crumbles and toasted meringue
> Milk-Chocolate Peanut-Butter Candy Bar: Milk-chocolate peanut-butter mousse atop a chocolate cookie crust, topped with hot fudge and served with candied peanuts
> Rocky Road Bread Pudding: Butterscotch bread pudding with chocolate chips, drizzled in caramel sauce, topped with a toasted house-made marshmallow and served with candied walnuts
> Grown-up Milk and Cookies: Chocolate-chip cookies and a Maker’s Mark milk shake

Playful additions to the dessert menu at Perry’s Steakhouse, like the Milk-Chocolate Peanut-Butter Candy Bar, end the meal on a fun and indulgent note. Photo courtesy of perry’s steakhouse & grille. DOING ONE THING WELL
Other winning full-service concepts have found favor with the public in the same way that many limited-service contenders have: by focusing on a certain menu item, perhaps one that requires special cooking equipment.

Anthony’s Coal Fired Pizza is based in Florida, but its 800-degree, anthracite-coal-burning oven produces the distinct taste of pies from old-style New York City pizzerias. Specialty pies include meatballs, sausage, hot peppers and ricotta cheese; fresh mozzarella cheese, basil and tomatoes; frittata with peppers, onion and egg; and white pizza with ricotta, Romano and mozzarella cheeses. Customers may also choose to build a pizza from premium toppings such as arugula, eggplant and prosciutto. The concept is also popular for its coal-oven-roasted chicken wings, served with caramelized onions and focaccia bread. Coal-oven focaccia sandwiches, pork ribs, meatballs with ricotta cheese, eggplant Marino and broccoli rabe and sausage are offered as well.

Dallas-based Genghis Grill saw a 50 percent jump in sales last year. (It wasn’t the only such concept to tally double-digit growth; sales at HuHot Mongolian Grill surged 13 percent.) Genghis Grill guests build their own rice and pasta bowls in a lively, family-friendly setting.

Patrons are seated at wooden tables and place their beverage order. They are then are given a metal bowl and proceed to Khan’s Kitchen — a food bar of more than 70 ingredients, including meats, seafood, oils, vegetables, sauces, spices, rice and pasta. Once customers fill their bowls as desired, a Grill Master prepares the meal before them in skillets on open flames.

It would be impossible to miss the presence of three frozen-yogurt chains among the fastest-growing concepts — or the fact that each one experienced more unit expansion than sales growth last year, meaning average unit volumes declined. Nevertheless, tart-sweet, healthier frozen treats are clearly a hot trend. Indeed, nine of the 10 fastest-growing frozen dessert concepts last year were yogurt specialists.

Complexity, customization and portion size are all very important. California-based Menchie’s and Yogurtland offer a self-service format and a wide variety of yogurt flavors and toppings.

At Menchie’s, customers craft their own treat in a cup or waffle bowl. They first select from a rotating lineup of fro-yo flavors (10 or more in each store daily, including regular, no-sugar-added, low-carb and dairy-free varieties, all loaded with calcium, protein, Vitamin A and iron). They then choose any number of toppings from the “Snackage” Bar (cookie and candy pieces, nuts and other options), the “Chill” Bar (fresh fruit and other cold options) and the “Hotties” Bar (hot sauces such as hot fudge and caramel sauce), after which they place their creations on a scale and pay per ounce.

Similarly, Yogurtland offers a wide selection of frozen yogurt with live and active cultures, available in classic, tart and no-sugar-added varieties, which patrons can customize with a variety of fruit, candy, cereal and nut toppings.

Red Mango Yogurt & Smoothies — a Korean import with U.S. headquarters in Dallas — serves all-natural, nonfat, certified- gluten-free frozen yogurt that contains live and active cultures and is sweetened with Purevia, extracted from stevia leaves.

Yogurt flavors include original Tart, Madagascar Vanilla, Pomegranate and a rotating selection of seasonal flavors. Also available are parfaits, smoothies, iced beverages, including green teas, and Hot Chocolate Chillers, available in five varieties.

Despite the diversity of winning chains,  it’s clear consumers are drawn to concepts that offer a set of common attributes:

> High-quality food for the price
> Fresh, “made for you” fare — even if it takes longer
> Customization opportunities
> Healthy options
> Wide variety in ingredients and portion sizes
> Price points that make for an outside-the-envelope value equation, whether lower or higher than the sector average
> Constant innovation
> Food and experience that can’t be duplicated at home or in another type of restaurant.

Taking lessons from growth-mode concepts is a payoff strategy for foodservice operations industrywide.


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