||Buying into Booze
Does the Future of Fast Casual Lie in Alcohol?
Fast-casual restaurants were once able to claim premium food, modern décor, and all-around upscale service as hallmarks of their category. But with more quick-service chains retooling in those areas to compete for post-recession consumers, fast casuals have been left to search for new ways to differentiate their brands.
For many, that search has turned up something typically better suited to fine- and casual-dining joints: booze.
"We're seeing a fair amount of it within fast casual; traditional limited service, not so much, although Starbucks obviously has been testing it," says David Henkes, vice president of Chicago-based Technomic Inc., adding that alcohol can account for 3–7 percent of a fast casual's sales. "For fast casual, it is a lot more in their wheelhouse than in traditional fast food."
At Blaze Pizza, based in California, beer and wine sales alone account for about 2 percent of sales, but president Elise Wetzel says food purchases with beer and wine sales account for another 3–5 percent. "Our estimate is that sales of beer and wine can boost our top-line sales by 5–7 percent," she says.
Fast casuals aren't just adding alcohol to steal back quick-service customers. Alcohol programs can eliminate the veto vote, in which patrons choose not to dine at a certain restaurant because it doesn't serve alcohol.
Pierre Panos, chief executive officer of Atlanta-based Fresh To Order, says he hopes to push alcohol sales to 10 percent at locations where it's served. Several Fresh To Order units serve beer and wine, while a new location just opened in Emory Point, Georgia, with a full bar.
The full bar removes the veto vote for nearby Emory University students, Panos says.
"We also want to further legitimize our excellent dinner offerings with alcohol, in order to reinforce that we are a solid choice for dinner," he says. "My goal is to get (Fresh To Order) to a 50/50 lunch/dinner mix from our current number of close to 40 percent (for dinner); the full bar will go a long way toward this."
While alcohol can improve sales and daypart opportunities, experts say fast casuals must consider the various ways in which it can change the brand before rolling out their own programs.
Henkes says alcohol doesn't just give customers a reason to choose a fast casual over a quick serve, but it also gives customers a reason to choose a fast casual over casual-dining restaurants.
Alcohol can also be an attractive menu option for several customer demographics, including Millennials, who have become an increasingly important consumer base for the fast-casual industry. A recent Technomic study, "Understanding the Foodservice Attitudes & Behaviors of Millennials," found that 41 percent of Millennials purchase food away from home at least twice a week, compared with 38 percent of Gen X-ers and 37 percent of Baby Boomers. Meanwhile, 20 percent of Millennials also agreed that it's important for restaurants to serve alcoholic beverages, compared with 12 percent of Gen X-ers and 10 percent of Boomers.
"Millennials certainly index a lot higher when it comes to fast-casual usage, and they're much more likely to experiment with different kinds of drinks," Henkes says.
Still, only 26 percent of all limited-service restaurants offer any type of alcohol, says Maeve Webster, senior director of Datassential, a market research firm. "So offering any type of alcoholic beverage -- whether that's beer, wine, or something else -- in that segment is going to set the operator apart," she says. Further, "of the (alcoholic) beverages offered, nearly 90 percent of all options are some type of beer or wine. Offering cocktails or some non-beer or wine options is going to set you apart even more so."
That's one of the reasons Fresh To Order's full bar serves liquor, including specialty cocktails that will change with the season. This past winter, it offered two hot drinks, including Açai Honeycomb, a mix of VeeV Açai spirit, honey water, and fresh lemon.
"Serving craft and seasonal liquor is once more a further differentiation, as almost no fast casuals offer a full bar. If they have beer and wine, it is almost an afterthought, and the sales reflect it," Panos says. "The bar now offers our guests that extra enticement and touch point to come into our restaurant."
The core concept
Fast casuals are always working hard to know their customers and identify their core concept. Implementing an alcohol program, the experts say, requires the same amount of due diligence.
Henkes says that because fast casuals have a more upscale image than their quick-service counterparts, they often skew toward more upscale alcohol choices, like craft beer. He says many chains will also use their alcohol program to complement what they're doing with food options.
"Chipotle obviously has Corona, and I think they have some domestics, too, but their big thing is Corona," Henkes says. "Smashburger's been really focused on offering craft beers, so I think the general expectation is that it's going to be a higher-quality beer or more of a craft or an import. But it definitely needs to match the menu orientation and sort of the quality tier that that fast-casual chain is going after."
Atlanta-based Uncle Maddio's Pizza Joint, which does 2–4 percent of its business in alcohol sales, serves bottled and draft beers in its stores, as well as wine. Cindy Wahl, field marketing manager for Uncle Maddio's, says the brand tries to shape its alcohol selections around its local communities. For example, because some stores have a large following of customers who order gluten-free pizzas, it now offers a gluten-free cider among its alcohol options, she says.
The same strategy is applied to Uncle Maddio’s beer options.
"We are always looking for ways to customize our beer selections to our specific markets," Wahl says. "We have brought in selections from several local breweries, as well. Wheat beers are popular, and we offer several other styles -- lagers, amber ales, and IPAs. We try to vary the craft-brew selection as best we can to match our customers' preferences."
Blaze Pizza locations also offer craft beers, plus some standards like Heineken and Amstel Light, along with red and white wines.
"It seems like a natural complement to our menu and really helps us drive our dinner business," Wetzel says. "As we expand our number of locations, we're letting each store pick local beers and wines that are most popular to that specific neighborhood."
In line with its fast-casual Mexican counterpart, Chipotle, Freebirds World Burrito is testing margaritas in its Kansas and Missouri locations, making a batch from scratch every morning using fresh-squeezed lime and lemon juice, simple syrup, tequila, and triple sec. The chain also sells draft, craft, and bottled beer, with selections tailored by market. Shiner Bock is popular in Texas restaurants, whereas Sierra Nevada or Lagunitas IPA is preferred in California, says Steve Byrne, vice president of culinary for Tavistock Restaurants, Freebirds' parent company.
Fresh To Order is also staying true to its core concept with its fresh-made cocktails.
"Using craft and seasonal liquors, wine, and beers that change regularly based on the seasons and the brewers, vineyards, and distillers we work with will allow us to always have something fresh, modern, and fun for our guests," Panos says. "Guests get to see a bartender build (the cocktail) in a (mason) jar. It's transparent; all the fresh fruit, herbs, and seasonings are in the jar. It feels, looks, and tastes more real." Jesse Gideon, corporate chef for Fresh To Order, adds that instead of offering common liquor brands, Fresh To Order sought out carefully crafted, artisanal liquors to pair with the brand's fine dining–style menu.
Datassential's Webster says that in addition to an increased interest in beverages that pair well with menu items, consumers are exploring more cocktails, mixologists, and fresh ingredients used in those types of creations.
"There's been significant growth in beverages from the country of the cuisine being served," Webster says. "It rounds out the experience of being at that operator. Experiences are, in particular, extremely important to Millennials, who are more likely to visit fast-casual operators than other demographics. There are popular alcoholic beverages that could be served regardless of cuisine, but part of the mixologist movement and cocktail renaissance is to make sure the alcoholic beverages complement the food."
Despite the benefits alcohol programs can offer fast casuals, Henkes warns that booze isn't necessarily the right solution for every operator.
"When you look at the upside for alcohol, and all the hoops that you have to jump through in terms of regulations, getting a license, all the additional insurance costs, and everything like that, if you're not generating a big number from alcohol, you really need to think twice about doing it," he says. "Not that it's not possible, but it's certainly not a slam dunk from any perspective."
Several challenges are inherent with a fast-casual alcohol program, including regulations. Because of the patchwork of local and state regulations and how hard it can be to obtain licenses, most fast casuals that Henkes has seen roll out alcohol programs have done so selectively based on where the unit is, the demographics, and if the restaurant can get a license.
"It's important that you make sure the CUP (conditional use permit from the city) on the location allows the sales of beer and wine," says Blaze Pizza's Wetzel. "If not, you need to go through the process to get it added. Employees also need to be well trained in handling this."
Freebirds is also putting up with the challenge of where to merchandise the beer. Because fast-casual dining rooms and kitchens are not typically designed with alcohol distribution in mind, there is no obvious place to stock the booze, Byrne says.
"We are testing a beer trough along the queue line in one of our Texas locations," he says. "Another challenge is that much of our business happens during lunch, and people are typically not drinking at lunch. It does help us capture more dinner business, though."
Henkes says fast casuals also struggle with the customer-service aspects of alcohol programs.
"The challenge for a lot of fast casuals is that they're not set up as bars, and integrating an alcohol system into their existing services system, just strictly counter service, can be challenging," he says. "I think one of the big things, from a service perspective, (is) fast casuals generally hire a lot of underage people, so depending on state laws, service can be a challenge in terms of just being able to make sure that your staff is legally able to sell alcohol."
Packaging and quantity are also challenges to consider. The easiest thing for a fast casual to offer is a single-serve product, like a bottle of beer or miniature-sized wine bottle, Henkes says. "And liquor, even at the Chipotles that I've seen that have the margaritas, it's premade, it's already in a cup, so they're not mixing it on property," he says.
(Source: QSR Magazine, 05/23/13)
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