Casual dining vs. fast casual: How do they stack up?

At the end of last year, we explored the future of fast casual and how, despite doom and gloom media coverage about the fast casual slump, things are looking optimistic for operators in the segment. Now we’re turning the spotlight to casual dining and how the segment is adapting to evolving consumer expectations.

Outlook is positive for both segments

Casual dining operators haven’t seen as much of a hit from the away-from-home slump compared to fast casuals – according to Datassential’s SNAP! Keynote Report: Casual Dining, half of operators in the segment say sales are higher today than one year ago. This is slightly more than the one-third of fast casual operators who reported similar sales growth (SNAP! Keynote Report: The Future of Fast Casual). Operators for both segments are also optimistic about future sales. Last year three-fourths of fast casual operators said they expect sales to increase in 2018, and over two-thirds of casual dining operators report positive expectations for sales in 2019. On the consumer side, close to 30% say they’re going to casual dining restaurants more often now than they did a year ago, comparable to the 33% who increased their visitation of fast casuals in 2017.

Operator challenges in casual dining

While the future is looking bright for casual dining operators, there remains one area that poses a major challenge – getting consumers to come back more often. While over half of fast casual patrons report going at least once a week, only 13% of casual diners visit weekly. Given that meals at casual dining restaurants tend to cost more and are generally served in a sit-down fashion with leisure rather than convenience in mind, it’s unsurprising that visitation frequency is lower for the casual dining segment. Still, around 70% of casual dining operators attribute recent sales growth to increasing numbers of loyal repeat customers. One strategy operators are using to attract and retain customers is by modernizing menus through safe experimentation. According to the report, one of the megatrends casual dining patrons are most interested in are mashup items that combine safe and familiar classics with a twist, like a Korean BBQ burger. Operators who offer a few of these items (either as permanent items or as LTOs) may have greater success at attracting new customers. For repeat customers, operators can also offer promotions that encourage increased visitation frequency, such as a discounted meal if diners return within the month.

Similar to the fast casual segment, visitors to casual dining venues highly value the balance between price and quality of the food. Consumers are less willing to trade quality for lower prices at casual restaurants compared to fast casual restaurants, which means casual dining operators must be cautious about pricing items too low so as not to be associated with lower quality. At the same time, casual dining customers are also reluctant to order high quality food if it means paying significantly more. With many casual dining operators anticipating an increase in food and labor costs, finding the right pricing balance that delivers the moderate price/quality level consumers desire can be difficult, but suppliers can play a role in assisting operators with this challenge – one in three casual dining operators say they are interested in menu analysis/costing support from suppliers.

Opportunities for innovation

To appeal to busy customers, casual dining operators can look to technology to simplify the ordering process. Tabletop tablets that allow diners to order and pay without having to wait for a server, for example, are being implemented at chains like Applebee’s and Olive Garden. For on-the-go diners who don’t have time for a sit-down meal, many casual dining establishments offer takeout, but could also take the next step by implementing delivery services (a strategy that 10% of casual dining operators say they’re planning to incorporate in the next year). New York’s Veselka, a Ukrainian diner that opened in 1954, started its delivery service with just having busboys deliver food around the neighborhood, but in recent years has signed on with third-party services like Seamless, ChowNow, and Caviar. Now delivery and takeout make up about 20% of the restaurant’s overall business, according to Eater. Still, as operators look to expand their off-site options, it’s important to keep in mind that any new initiatives should be structured so as not to interfere with the dine-in experience, which remains the largest source of revenue for the majority of casual dining operators.

Marketing is also a major driver of foot traffic at both fast casual and casual restaurants – nearly one-third of all casual dining operators agree that promotions motivate return business, and 30% of fast casual operators say LTOs and daily specials play a significant role on their menus. While the food/menu are the most important factors for consumers when deciding between casual dining establishments, operators should also consider other areas where they can stand out. For both the fast casual and casual dining segments, any aspect that can make an operator top-of-mind – whether it’s new or interesting menu items, promotions, décor, entertainment, or streamlined ordering technology –should be highlighted to customers. However, it’s also important to keep the focus narrow, as picking one or two specific aspects to improve upon will be more effective than trying to stand out in all areas. By assessing and addressing the most prominent needs of their customers, both casual dining and fast casual operators can devise long-term strategies for creating a unique presence for their business.

Sherry Tseng is a publications specialist at Datassential, a supplier of trends, analysis and concept testing for the food industry. To purchase the SNAP! Keynote Report: The Future of Fast Casual and SNAP! Keynote Report: Casual Dining mentioned in this article, contact Datassential managing director Brian Darr at brian.darr@datassential.com.

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