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March 28, 2007

Fast-Casual equals fast-Growth!

This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Analysis By:
John Macaluso, President & Chief Executive OfficerJohn Macaluso
President & Chief Executive Officer, Cornell Management Group
Implications:

STRENGTHS: 
1. The sales to investment ratio of Fast-casual is much better than either QSR or Casual Dining Segments.
2. The segment is ideally positioned to deliver fresh, quality, and healthier menu attritubutes than QSR.
3.  The segment's  stronger value perception gives it an advantage over casual dining.

THREATS:
1.  QSR segment is upgrading menu offerings and product quality and in many cases comes very close (e.g. McD's new Angus Burger) to Fast-Casual attributes.
2.  QSR can deliver much faster speed of service and typically easier access and convenience to consumers.
3.  Many Casual dining restaurants are now offering low-priced "combo meals" --typically appetizer, entree, and desert -- to dirve traffic.  This tactic may encourage consumers to visit the Casual Diners, where they can sit and be waited on, have a cocktail, and the price is very close to a full meal at fast-casual. (Of course, they also have to leave a tip.)

 



Analysis: Overall the Strengths and Opportunities far outweigh the Weaknesses and Threats.
Many QSR brands are facing market saturation -- not the case with most fast-casual brands.
Unit level economics generally favor Fast-Casual vs. QSR or Casual Dining.
In many communities across the country, drive-thru locations (QSR)are increasingly difficlult, if not impossible, to permit.
The big-box Casual Diners (especially Mexican)are finding it difficult to justify the large footprint buildings in the face of declining sales.
The product, the business model, the presentation, and the economics all point to continuing rapid expansion within the fast-casual segment.

Other Analyses of the Same Source Article:
An important sales-to-investment caveat
June 12, 2007, Author: GLG Expert Contributor
Not fast food, but fast cash
March 23, 2007, Author: GLG Expert Contributor

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