Can Fast Casual Restaurants Compete in the Beverage Alcohol Game?
As the economy continues its turnaround, restaurants everywhere are vying to get customers through their doors. By testing clever marketing tactics, unleashing new menus or offering almost too-good-to-be-true deals, operators are living in a cutthroat world as they try to wrestle guests away from the competition. For some, however, their new tactic is simple: entering the realm of alcohol beverage sales.
In the past few years, there’s been an onslaught of fast casual and even quick-service restaurants entering the drinks business. From Starbucks to White Castle, chains across the country have dabbled in beer and wine sales at select locations in an effort to increase profits. Last year, the fast-food joint Sonic launched beer and wine sales at two of its locations in southern Florida. And who could forget Burger King’s foray into the beverage alcohol world with its Whopper Bar’s U.S. debut that made headlines early in 2010?
Others, such as Shake Shack and Chipotle, have offered select alcohol beverages since their inceptions. And considering Chipotle’s No. 2 spot on Technomic Inc.’s list of the 10 fastest-growing chains in America, raking in $2.26 billion in total sales last year, it seems their sales strategy is working — although adult beverages might not play that large of a role.
According to David Henkes, Vice President of Technomic, fast casual chains such as Chipotle don’t necessarily make their money off of selling beverage alcohol; most chains average just 2 to 4% of total sales from beverage alcohol. However, they can use it as a point of differentiation among their direct competitors, he says, and even as a comparison to casual dining restaurants.
Plus, many restaurants are looking to what their venues could be in the future, and they’re attempting to become that “third place” for guests. “Numbers-wise, we talk to a lot of suppliers about the opportunities within fast casual, and it’s tough to make the dollars-and-cents case for alcohol,” Henkes acknowledges. “But if you talk about where these concepts are going, from an overall volume perspective, it makes sense [to offer it].”
Previously, Henkes notes, casual dining operators could rely on three factors in their success over fast casual restaurants: better food, a nicer atmosphere and beverage alcohol. But now, fast casual concepts are stepping up to the plate and negating many of these advantages.
“Fast casual concepts have caused everyone to up their game,” Henkes notes. “They have a price point that’s somewhat below casual dining, but consumers say the experience and ambience are similar — if not better — at fast casual [vs. casual dining]. That overall value equation — the price paid for what you’re getting — consumers see it as much higher at fast casual concepts, and alcohol is part of that. As share of wallet continues to get more competitive, the fact that you’ve got a very high quality segment that offers a great deal of value to the consumer — that makes it more challenging for casual dining.”
Henkes notes there are difficulties in fast casual and quick-service restaurants serving beverage alcohol, from storage issues to legalities, such as licensing and minors serving alcohol. Plus, there’s the simple fact that it might not be a good fit for the chain.
“In what’s been a very low- to no-growth environment, chains are always going to look for ways to expand, but it’s got to make sense within the chain itself and the demographics of who it’s serving,” Henkes says. “I think a lot of [fast casual or QSR] chains are looking at a lot of different ways to try and grow the pie a little bit, but none of them, in my opinion, are ever going to roll out alcohol much more widely than select markets where it makes sense.”
Casual dining operators must stand up to these ever-growing fast casual chains by creating a resonating point of difference, Henkes notes.
A few places in which casual dining operators can shine? Let’s start first with the beverage alcohol menus. While chains such as Chipotle and Baja Fresh offer a selection of beer, wine and Margaritas to their patrons, others, such as Steak ’n’ Shake, Shake Shack and even Sbarro, tempt guests with just beer and wine.
These restricted beverage alcohol offerings are far cries from the well-thought-out wine lists or creatively crafted cocktail menus — not to mention the skilled bartenders — available at full-service chains.
Additionally, a restaurant’s vibe is critical to creating an atmosphere conducive to lounging, and that’s something many fast casual restaurants fail to offer.
Recently, a Slate writer visited a few fast casual chains in New York City for the sole purpose of imbibing. What he found, though, was the atmosphere in nearly all of the locations wasn’t conducive to sitting back, relaxing and having a few adult beverages.
Their focus, as the name “fast casual” states, is on being speedy — getting customers in and out the door. As individuals rush in and out and employees work at a frenzied pace, guests don’t exactly feel like they’re invited to “come, stay awhile” in many of these locations.
So although these restaurants may be attempting to steal adults away from full-service restaurants — and some are seeing at least small success — the commitment to beverage alcohol and the inviting atmosphere full-service chains provide is unmatched. Although a bottle of Moscato with a trio of sliders may be a novel concept, eventually that novelty will wear off — and such a venture may not pay off.
At least, that’s how I see it. What do you think? Have you seen this trend affect your business? Or have you actually indulged in an adult beverage at one of these venues? What’s your experience? Sound off in the comments — I’d love to hear what you think.