CREJ - Retail Properties Quarterly - May 2016
It’s no secret the restaurant industry is a major force in our economy. With $782.7 billion in sales nationally – and over $10.9 billion last year in Colorado alone – restaurant employees make up 10 percent of the workforce nationally. In Colorado, eateries have a larger percent of the pie – accounting for 12 percent of the workforce. These numbers are expected to increase with Colorado sales projected to grow to $11.6 billion in 2016, according to the National Restaurant Association. Enter the fast casual segment. A $38 billion industry, fast-casual is the fastest-growing segment of the restaurant industry and a big deal in Colorado. This hybrid restaurant concept offers quick service with sit-down ambiance and customizable, healthy food choices. Now representing nearly one-quarter of the total fast-food sales, fast-casual was brought to national prominence by Denver’s own Chipotle, and the area’s diverse, affluent, educated and healthy population who flocked to the original shop near the University of Denver to beta test the concept. Denver has a long history of fast casual innovation, going back to 1932 when Louis Ballast of the Humpty Dumpty Drive-In on Speer Boulevard (credited as the state’s first drive-in) filed paperwork to trademark the cheeseburger. Today, innovation and technology have joined together to spawn dozens of new chains, many of which were tried by Colorado residents. Brand names like Noodles & Co., Qdoba, Quiznos, Smashburger, Tokyo Joe’s, Modern Market (previously ModMarket), Larkburger and Mad Greens are familiar to anyone in the metropolitan area, but many people do not realize the role the population plays in testing these concepts for a national audience. Denver provides the perfect melting pot of demographics for fast-casual chains to be developed and tested. The people drawn to the metropolitan area are connected by the fact they typically are well educated, highly active people looking for fast, healthy food options to fuel their lifestyles. With double the restaurants per capita of any other state and a younger-than-average and increasing millennial population with a superior food aesthetic, the region offers a highly competitive restaurant environment and a ripe proving-ground for new concepts. People want more options for quick, healthy and delicious food and Kevin Reddy, CEO of Colorado-based Noodles & Co., thinks Colorado’s entrepreneurial focus and young, healthy lifestyle creates an environment that meshes new flavors and trends to make them appealing to the masses. The enormous success of many Colorado-based eateries testifies to that fact. Now with 470 restaurants nationwide, Noodles & Co. serves 60 million people a year and opens a new store nearly every week. People also are eating out more than ever, and millennials are at the forefront of this trend. Last year was the first year that restaurant and bar sales exceeded grocery store sales, highlighting that spending on eating out continues to increase and shows no sign of stopping. Millennials tend to be more willing to spend money on eating out, viewing it as social entertainment, and the restaurant industry is working hard to find new ways to appeal to this group. Millennials favor pizza, Mexican, fast-food and fast-casual concepts over sit-down restaurants, and are willing to try new flavors and internationally influenced cuisine – one reason why fast-casual restaurants often offer a more eclectic menu than a typical fast-food restaurant. The growth of “new” concepts like Garbanzo, Chipotle, Qdoba, Noodles & Co., and the success of Mexican food concepts – now the biggest segment of the fast-casual group – is due to this youthful attitude and desire for new tastes. What is especially powerful is how it has been embraced in markets all over the world. Providing healthy choices is another emerging trend in fast-casual, pioneered once again in Colorado by concepts like Modern Market. There is a greater emphasis on developing menus in a thoughtful manner the public likes – by locally sourcing food, eliminating preservatives, using all-natural products, and offering options including gluten free and vegan – which is trickling into the fast food industry as former trend setters like McDonald’s, Taco Bell and Subway fight to keep up. The front-runners in the business think about what will appeal tomorrow. New ideas include influences from Asia and the Mediterranean – hearty soups like pho and ramen as well as pizza and pasta. At the forefront of the fast-casual scene locally are new concepts by established greats. Chipotle is rolling out a pizza concept – Pizzeria Locale, as well as a new burger restaurant; and Smashburger’s parent company is focusing on a new pizza chain – Live Basil. Chef Troy Guard and TAG Restaurant Group rolled out a fresh bowl concept, featuring Asian flavors customizable with numerous protein options and seasonal locally sourced ingredients. With two locations currently, the concept is expected to satisfy the desire for the next big thing in the food revolution. In regard to real estate, the latest trend locally and nationally is communal or shared space. One example is Avanti Food & Beverage, located in Lower Highlands, which is a collective space offering seven culinary options served out of modified shipping containers. Offering a full bar, communal seating and an eclectic menu, the shared concept creates synergy with its multiple options, drawing the public to linger, explore and socialize. Most importantly, it creates a testing ground for new concepts and menu items, and appeals greatly to the younger set. Metro Denver’s growth rate has consistently outpaced the national rate and the region grew steadily in the past 10 years. With the projected population growth anticipated to increase to more than 3.3 million by the year 2020, it’s likely the Denver metro area will continue to be a magnet for testing menus and concepts for the masses. Expect to see new fast-casual food models pop up in a community near you.