The ambitious growth plans of La Verdad’s founders seem out of proportion for an unknown fast-casual startup with only a single prototype.
The brainchild of an award-winning chef, a foie gras producer and a nightclub mogul, La Verdad is a two-month-old, fast-casual concept offering authentic Mexican cuisine. Located right outside of the Boston Red Sox’s home stadium, Fenway Park, La Verdad intends to sell franchises only to accomplished chef-entrepreneurs who share with La Verdad’s founders a passion for high-quality food prepared with an eye toward healthfulness.
For a newcomer to the fast-casual business, La Verdad has quickly caught on to one of the segment’s primary marketing messages to consumers and potential partners: The category is raising the bar in offering affordable, higher-quality foods—often with a healthful bent.
Looking for a way to further distance their operations from the proliferation of premium and healthful options exploding on fast-food menus, fast-casual players increasingly emphasize such aspects as sourcing, cooking methods, ingredients and the caliber of their franchisees to uphold high food standards and push what they want to be perceived as more healthful agendas.
“We’ve always been committed to the health of our customers,” says Matt Andrew, brand leader for the 350-unit Moe’s Southwest Grill chain. “From the very beginning, the decision was made to never use MSG and use the freshest ingredients possible. Our units are designed and built without freezers, and we stay away from overly processed and handled foods.”
Moe’s, a division of Atlanta-based Raving Brands, in April entered an agreement to be acquired by Focus Brands, also in Atlanta. The deal is expected to close later this year.
According to a study by The NPD Group, a Port Washington, N.Y.-based global market research firm, the segment’s focus on food is not lost on consumers. In the year ended November 2006, 46 percent of respondents rated as “excellent” the taste and flavor of foods at fast-casual restaurants, and 43 percent rated as “excellent” the quality of food served.
One reason that operators in the fast-casual category can pursue their healthful goals and tinker with a higher-quality menu mix is because the segment is highly fragmented. Broad geographic dispersal and different specialties within the fast-casual category mean that national chains, regional players, mom-and-pop enterprises and celebrity-chef-owned ventures rarely bump heads with exactly the same menus in the same market.
So unlike players in the burger segment, which several years ago suffered chronic same-store-sales declines because of overbuilt trade areas and discounting, individual fast-casual operators are able to better market to consumers the idea that they serve more upscale, unique and healthful fare.
Ed Frechette, director of marketing and advertising for Boston-based Au Bon Pain, which has 225 units and is one of the oldest members of the segment at 30 years old, says the chain has long operated with a nutritional advisory board and offered kiosks in its units so guests can check the nutritional content of menu items.
While he admits that the chain will not be trans-fat-free until this summer despite a three-year bid to purge the brand of the substance, Frechette says the French-inspired menu remains focused first on flavor.
“Taste and innovation are where we begin,” he says. “We think we provide full disclosure so guests can see, good or bad, exactly what they are getting before they buy it. We think we’ve enjoyed a good relationship with our guests who value that kind of candor, especially when it comes to eating more healthy and considering healthier options.”
Even the Washington, D.C.-based Center for Science in the Public Interest, a harsh critic of the nutritional value of many restaurant meals, pays a begrudging nod to the healthful agenda operators in the fast-casual segment say they pursue.
“There is no denying that many restaurants in that category are doing the right thing,” says Jane Hurley, senior nutritionist for the CSPI. “They are using whole grains in the breads and pastas, and you a see a lot of innovative and healthy salads out there. We are also seeing more fresh fruit cups and great soups and salads loaded with fiber, and I’d definitely would recommend that grilled chicken salad at Panera Bread.”
She cautions, however, that there are still a lot of minefields on fast-casual menus.
“You can get just as fat at Panera or Chipotle as you can at McDonald’s,” she says. “There are still a lot of 1,000-calorie burritos and 1,000-calorie ciabatta and panini sandwiches on the menus. You have to be careful about what you pick. “Still, you have to give them credit for moving in the right direction.”
The crew behind the launch of La Verdad—Ken Oringer, the 2001 James Beard Best Chef in the Northeast and co-owner of the restaurant Clio and the recently opened KO Prime steakhouse in Boston; Michael Ginor, a James Beard Foundation 2001 Who’s Who of Food and Beverage inductee and co-founder, co-owner and president of Hudson Valley Foie Gras and New York State Foie Gras; and entertainment entrepreneur Patrick Lyons—intend to make their commitment to nutritious but authentic food part of their franchising mission.
“Kenny and I are street food addicts,” Ginor says. “No matter where we traveled, Europe to Korea, it was always the street food that turned us on, and one day we went to Mexico, in our own backyard, to realize that we could do great street food right here and it could be healthy and delicious.”
Unveiled on baseball’s opening day in April, La Verdad is a taqueria concept derived in spirit from Oringer’s tapas joint, Toro, also in Boston. In addition to making tortillas using only corn and water—and no lard—La Verdad also serves up the iconic, grilled sandwiches of Puebla, Mexico, which inspires much of the menu, Ginor says.
Ginor, who accuses the giant national Tex-Mex chain brands of giving Americans a distorted view of what tacos are like texturally, said La Verdad’s tacos feature soft shells and only the freshest ingredients.
The commitment to truth—the English translation of the Spanish word “verdad”—in ingredients and cooking also extends to the search for franchisees from among the industry’s top chefs, Ginor says. He notes that Douglas Rodriguez, a chef recognized for his Cuban cuisine with restaurants in Philadelphia, Miami and other cities, plans to visit the concept and discuss with La Verdad’s owners a possible licensing deal.
Ginor also plans to link franchisees with locales in shopping malls and airport as the chain takes off.
“With rare, rare exception, whenever a fine-dining chef entered this side of the business and got to about the 10th unit or so, the units began to lose their spirit and the talent that created it,” Ginor says. “I mean, do you really feel Wolfgang Puck in Wolfgang Puck Express? Maybe Tom Colicchio’s ‘wichcraft is one of the few exceptions where the spirit of the chef still comes through in the menu. But that’s only two units. What’s going to happen when he hits 10 or more?
“We know we can’t be everywhere at the same time, but we can keep the same quality and commitment to the concept by licensing to people who share our passion. And who better than a fellow working chef who already commands the industry’s respect and attention?”
Given the difficulty of maintaining quality in each unit as a chain grows, Bob Nilsen, president and founder of the 10-year-old, 16-unit Cafe Rio Mexican Grill in Salt Lake City, says he refuses to franchise despite getting some 2,000 requests a year from entrepreneurs and corporations to do so.
Nilsen, formerly Burger King president, Taco Bell chief operating officer and senior international development officer for Yum! Brands Inc., says his days running franchised systems taught him that there is a disconnect between a corporation’s ideals to serve quality foods from well-run units and the execution in the field.
“What I’ve observed is that you get a great franchisee on paper, and, for a year or so, things are great,” he says. “They talk the talk, and they walk the walk. But you inevitably get a few who don’t care, never had the background or were not cut out for this business, and you end up in a bad situation.
“It’s remarkable to see that more than half of all marriages end up in divorce, but a franchise relationship continues even when both sides are dissatisfied,” he continues. “So unless we can find a more bulletproof way to go about it, we won’t do it.”
Cafe Rio was recently honored for its human resources practices at the Elliot Leadership Conference and by a Utah business group for being one of the fastest-growing small businesses in the state, gaining new customers and making loyal fans of those who are drawn to the chain’s made-from-scratch Mexican food anchored on hand-rolled tortillas, Nilsen says.
“We just take extreme pride and care in what we do here, and I don’t know how you franchise that,” he says. “I mean, our goal is to assure that every meal is a masterpiece. Every batch of food goes through two culinary-trained tasters.
“Everything is as fresh as we can get it, and a lot of it is local,” he adds. “We have no freezers. No microwaves. Our steak is USDA Choice, and our salmon and poultry is the same quality of a fine-dining restaurant.”
Jeff Levine, who founded a barbecue chain in New York City before devoting his restaurant entrepreneurship to the development of the 20-unit Salad Creations chain in Fort Lauderdale, Fla., says he is probably not unlike a lot of his customers who ate poorly in their early adulthood and worked out too infrequently while pursuing a career.
Now 39 with two young children and eager to be a grandfather some day, Levine say he eats better, works out more, lost weight and saw Salad Creations as being a more honest way to grow a business that synchronized with his and his guests’ desire to eat better.
“People are making better food choices,” he says. “After a certain age, you have to eat right if you want to live.”