Fast casual restaurants generally benefit from a higher-income clientele than regular fast food restaurant chains like McDonald’s Corporation (NYSE:MCD) and The Wendy’s Company (NASDAQ:WEN). Diners are aware they can get the same quick service with higher-quality food items like Panera Bread Co (NASDAQ:PNRA)’s sandwiches or Chipotle’s burritos. For that reason, analysts see fast casual as a promising industry with expected growth in the coming years.
Luring lunchtime crowds
For chains like Darden Restaurants, Inc. (NYSE:DRI) and DineEquity Inc (NYSE:DIN), lowering prices to compete, while still earning enough profit to survive will be the big challenge. If Obamacare and other changes drive prices up, neither chain will be able to compete with fast casual dining.
For casual dining establishments, an improvement in the economy may be the only way to win back free-spending customers. Another solution for these restaurants may be to take the server out of the equation. Chains like Chili’s have been experimenting with table-side tablets to allow customers to place their own orders, directly at the table. Food trucks and lunchtime kiosks could be other options for casual chains.
As investors continue to keep an eye on rising fast casual restaurants, chains like Red Lobster and Applebee’s will need to find ways to reach out to hurried, cost-conscious customers. One thing is clear: customers like dining out, but the closer a single meal gets to $10, the less likely it will be able to reel in the lunchtime diner.
The article Is Fast Casual the New “Dining Out” Norm? originally appeared on Fool.com and is written by Stephanie Faris.
Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill (NYSE:CMG) and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill, Darden Restaurants, and Panera Bread. Stephanie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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