Keeping Up With the ‘Fast Casual’ Crowd

Faced with a deluge of choices, Michael Michner zeroed in on the turkey Pannido deli-style sandwich during a recent lunch break at a Jack in the Box in Echo Park.

“It looks healthier, so I don’t have to feel guilty,” said Michner, 45, of Northridge. “I’m health-conscious.”

Diners like Michner, who paid $4.75 for his sandwich including tax, are forcing some of the big boys of fast food to focus on far more than bargain burgers. Chains such as Jack in the Box, Carl’s Jr. and others are responding to the growing popularity of “fast-casual” restaurants by trying to imitate their fresh, affordable fare served up in festive settings.

Call it the “premium-izing” of fast food, said Bob Sandelman, a Villa Park restaurant consultant. Fast-casual restaurants “have raised the bar for traditional fast food chains by showing [that] consumers are willing to pay a little bit more money for higher-quality, better-tasting food served in a nice, more comfortable atmosphere,” Sandelman said.

Not content to merely upgrade their menus, some chains are looking at overhauling their entire concept to match the fast-casual approach, whereby meals typically are prepared to order and there is limited table service.

Jack in the Box Inc. announced last week that in the next five years it may convert as much as 15% of its roughly 2,000 company-owned and franchised fast-food restaurants to a fast-casual concept called JBX.

At JBX, customers can wash down a $5.95 chicken-avocado club sandwich with a $2.55 vanilla bean shake and coat their fries in any of six dipping sauces including wasabi or sweet and tangy barbecue. Food is delivered to customers by servers in a dining room featuring a fireplace, drop-pendant lighting and abstract and contemporary images of the company’s fictional mascot, the moon-headed Jack.

Jack in the Box, which also operates the fast-casual concept Qdoba Mexican Grill, has opened two JBX restaurants in San Diego, with plans for additional stores in Bakersfield and Boise, Idaho.

“Clearly Jack in the Box is attempting to segment the market between higher-end and middle-end customers,” said Dean Haskell, an analyst with JMP Securities. “The JBX concept appeals to the Starbucks, Panera Bread-type crowd with similar furnishings, price points and a higher quality of food.”

In addition to health-conscious diners, fast-casual fare offered by chains such as Pei Wei Asian Diner and Chipotle Mexican Grill has cultivated a following among baby boomers and others who are tired of traditional fast-food offerings.

This small but growing segment of the restaurant industry has been expanding by about 11% annually in recent years, according to Dennis Lombardi, executive vice president of Technomic, a Chicago food-service consulting firm. Technomic estimated the fast-casual market at just under $7 billion last year, about 4.5% of the $153-billion “limited-service” segment, which includes fast casual, fast food, cafeterias and buffets.

“It’s clear that the consumer has said they want a more upscale experience than what was traditionally known as fast food,” Lombardi said.

There are signs that some fast-casual players are experiencing slowing growth. Wendy’s International Inc., for example, anticipates opening only 35 to 40 Baja Fresh outlets this year after expanding the chain by 73 units last year. Currently, there are slightly more than 300 Baja Fresh restaurants.

“Sales have not met our expectations,” acknowledged Bob Bertini, a spokesman for Wendy’s International.

Not everyone has gone as far as Jack in the Box Inc. Some fast-food chains are tweaking their menus or redesigning restaurants. CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s chains, is focusing on premium Angus burgers.

The Carpinteria, Calif.-based company experienced an 8% jump in sales of Hardee’s so-called Thickburgers during the second quarter, compared with a 40% decline in sales of discount products. CKE officials credited the increase in Thickburger sales with helping the company’s operating results.

A similar premium sandwich is marketed at Carl’s Jr. as the Six Dollar Burger, which sells for $3.99.

Carl’s Jr. also has introduced a prototype restaurant in Downey featuring a sleek, space-age exterior with soaring roofs. The company is refining the design before rolling it out into other markets.

“We have already taken the quality of our food and service to a new level,” said Renea Hutchings, CKE’s executive vice president of development and franchise sales. “The next step is to align the design of our stores with that premium quality strategy.”

Dublin, Ohio-based Wen- dy’s International, which in addition to Baja Fresh is the parent of Wendy’s fast-food chain, is peddling Garden Sensations Salads at Wendy’s, featuring mandarin-chicken and spring-mix varieties. The company also has opened half a dozen newly designed Wendy’s restaurants in Columbus, Ohio, to drum up dine-in business.

“The interior looks more like a Panera Bread than a Wendy’s,” Lombardi said.