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Convenience, price key to driving fast-casual sales

Offering more convenient locations and lower prices could entice more hungry customers to grab a Panera panini or a Chipotle burrito, according a new survey conducted by Morgan Stanley.

According to the survey, which asked 1,300 regular restaurant users about their dining habits, consumers visit fast-casual chains two to three times per month or less — about the same frequency customers say they visit casual-dining chains. Fast-food chains, meanwhile, are visited at least once a week by half of their customers.

About 35 percent of respondents said they would visit fast-casual restaurants operated by the likes of Panera Bread Co. and Chipotle Mexican Grill Inc. more often if the locations were more convenient; nearly 30 percent said lower prices would entice them through the doors.

“Clearly price and convenience came back as the two most relevant drivers,” said Morgan Stanley analyst John Glass in a note to investors this week about the survey.

Even though customers may drive to their burger or fried chicken chain for a quick meal more often, the popularity of the fast-casual segment has been growing. Market research firm Technomic Inc. said the fast-casual chains that were part of the firm’s annual Top 500 Chain Restaurant Report grew their sales by 4.4 percent in 2009 — a decidedly better showing than the 3.2-percent sales decline of the restaurant industry overall during the year.


Copyright 2010 Morgan Stanley; Courtesy of Morgan Stanley

“Of the restaurant industry’s major categories (such as fast food, family dining, casual dining, and fine dining), the one that continues to evince the most sales growth is the fast-casual sector,” according to Janney Capital Markets analyst Mark Kalinowski, who released a separate note to investors this week.

On average, 31 percent of the Morgan Stanley survey respondents said they would have eaten at a fast-food restaurant if they hadn’t gone to a fast-casual chain for a meal. That statistic, Glass said, shows that fast-casual chains are pulling customers from fast-food restaurants more than any other type of restaurant. Brands in the Mexican category especially may be able to turn some diners from fast-food fanatics into fast-casual converts, Glass noted.

At the 1,400-plus unit Panera, price seemed to be the biggest impediment to more customer visits. About 46 percent of consumers cited prices as the reason they did not go to the chain more often. Indeed, in a move not many restaurant brands were able to do, Panera increased prices just prior to the economic downturn, which helped it maintain margins and responded to commodity cost increases.

Diners also said price was a roadblock at the 1,000-unit Chipotle, along with wanting more convenient locations and more menu choices. Chipotle, too, was one of few chains that took price increases just as consumers were starting to spend less.

Meanwhile, customers of Pei Wei, the fast-casual chain owned by P.F. Chang’s China Bistro Inc., said they would go more often if the company opened a location that was more convenient to them.

The 166-unit Pei Wei has substantially fewer locations than both Chipotle, which operates about 1,000 locations, and Panera, which has about 1,400 units.

“Pei Wei consumers seem to just want more stores,” Glass said.

Only Pei Wei seemed to threaten the market share of casual-dining chains, with 45 percent of respondents saying they would have eaten at a sit-down chain if they had not chosen to eat at Pei Wei.

Lauren Shepherd is a contributor to Nation’s Restaurant News. Contact editor Sarah Lockyer at [email protected].

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