The Daypart Dance
Aaron Lyons bucked conventional wisdom.
Whereas many upstart fast-casual players target customers within one or two core dayparts, Lyons launched Houston-based Dish Society in January 2014 with a determined quest to capture diners during breakfast, lunch, and dinner.
“When you’re paying rent and have all of these costs, you better maximize your performance,” Lyons says.
That sentiment continues gaining traction across the quick-service landscape, with established players and upstart brands alike seeking deeper inroads across all three traditional dayparts.
“With the industry flat, it’s a battle for market share, and restaurants are pulling out all the stops to drive performance,” says Bonnie Riggs, restaurant industry analyst at The NPD Group.
Take Modern Market, the 17-unit, Colorado-based chain formerly known as Modmarket.
When Anthony Pigliacampo led the fast casual’s debut in 2009, breakfast wasn’t on the menu. That changed in 2011, however, when the company opened its third store and tested made-to-order breakfast.
With minimal labor deployment, Modern Market captured positive results, and Pigliacampo revised Modern Market’s business plan to include breakfast. Today, the morning daypart accounts for 20 percent of sales at some Modern Market locations and about 50 percent of revenue at the company’s two units inside Denver International Airport.
“We always approached our business from the standpoint of finding revenue levers, and the more levers we can pull, the better,” Pigliacampo says.
It’s a search many limited-service players continue to endure, actively looking for ways to extend business into a different daypart or advance performance in an existing one to propel results.
Breakfast: Where the action is
According to NPD Group data, quick-service traffic for morning meals jumped 5 percent in 2015, and breakfast now accounts for 24 percent of all quick-service visits.
“Even before the recession, breakfast was growing year after year, and it’s a trend that’s held up, which explains why operators are so eager to capitalize,” Riggs says.
Aggressive marketing efforts from the likes of McDonald’s and Taco Bell illuminated breakfast and ignited awareness about eating breakfast outside the home, urging consumers to swap the protein bar or cereal for gourmet coffee, breakfast sandwiches, home fries, and other delights.
Though breakfast brings its share of operational challenges and traditionally lower check averages, as well as mounting competition from convenience stores—many of which have doubled down on morning customers with improved food and drink options—the quick-service field is loaded with breakfast action.
Fast Casual 2.0 concepts have worked to fill the gap between the quick-service drive thru and the full-service diner. Dish Society’s counter-service breakfast, for instance, features farm-to-table ingredients, cage-free eggs, and locally roasted fair-trade coffee, while Modern Market dishes up scratch-made plates like whole-grain waffles and a Southwest Tofu Scramble. Each fast casual has found a niche with healthier, higher-quality breakfast fare rich in vegetables and grains.
Last November, California-based Vitality Bowls, the 25-unit superfood café best known for its signature açaí bowls, installed coffee bars into all of its stores. The bars feature espresso and superfood drinks packed with antioxidant-rich açaí, pitaya, and kombucha.
“We’re not going to compete with Starbucks, but we know coffee is at the core of any sound breakfast program,” Vitality Bowls cofounder Tara Gilad says. “We just had to make it something really different and exciting.”
Simultaneously, many established quick-service concepts have pushed creative twists on traditional favorites, such as Taco Bell’s A.M. Crunchwraps and Waffle Tacos, as well as White Castle’s Belgian Waffle Breakfast Sliders.
The menu momentum continues to accelerate. Earlier this year, Pret a Manger debuted vegan Pret Pots systemwide, a selection of 100 percent gluten and dairy-free breakfast small pots with nutrient-dense recipes, while La Madeleine Country French Café introduced customized open-faced crepes and omelets.
And next year, Tropical Smoothie Café plans to implement its Breakfast All-Day menu systemwide. When the Atlanta-based brand promoted its breakfast offerings during a nine-week run last fall, it scored positive comp sales each week, including eight weeks with double-digit gains. Moving beyond smoothies, Tropical Smoothie will feature items such as the Fresca Verde Omelet Wrap and Peanut Butter Banana Crunch Flatbread.
While menu innovation is expected to persist, especially given the enticing white space many operators see in the morning daypart, convenience-driven service models to address customers’ hurried lives aren’t far behind.
Last September, Starbucks deployed its Mobile Order & Pay option across the country. Customers can order and pay directly from the Starbucks app, picking up their beverage in the store without waiting. And last October, the Seattle-based coffee giant began testing its Green Apron Delivery Service in New York’s Empire State Building, which, as the name suggests, features Starbucks baristas delivering items directly to office desks.
But Starbucks isn’t alone in the morning delivery game. Dunkin’ Donuts and others continue to look to leverage their own team members or on-demand delivery startups like Postmates or DoorDash to secure sales and, ultimately, market share.
“Particularly with breakfast, it takes a while to get into people’s routines, but if you can break in, they’re very loyal,” Modern Market’s Pigliacampo says. “That’s why breakfast is so intriguing from the business perspective.”
Lunch: The need for speed
Lunch has been the longtime linchpin of many quick-service enterprises, especially so at fast-casual eateries, where NPD reports lunch traffic jumped 11 percent last year.
Rejecting complacency, many limited-service concepts have pushed for increased throughput and enhanced menus.
Take the litany of fast-casual pizza players that have turned pizza, once a lunch afterthought populated by buffets and by-the-slice concepts, into an increasingly robust lunchtime category. Make-your-own pie concepts like Pie Five, Blaze Pizza, and Uncle Maddio’s have leveraged technological advancements in the kitchen to churn out custom-made pizzas in minutes. At the Uncle Maddio’s restaurant in downtown Charlotte, North Carolina, for example, staff members serve up to 200 pies each hour during the lunch rush, utilizing high-tech ovens to cook pizzas in six minutes.
With customer acceptance for fast-casual pizza growing, Uncle Maddio’s COO Scott Goodrich says, his team is now laser-focused on speed of service to accommodate on-the-clock lunch diners. The 44-unit chain preaches its 30-second rule to team members—greet a customer and toss his pie in the oven within a half-minute—and has also created two pizza-making lines in its stores: one for in-store customers and a second to satisfy phone and online orders.“At lunch, people need speed, and we’ve got to deliver it,” Goodrich says.
Diversified menus, healthier fare, and deeper customization are also increasingly lunchtime focal points. A number of concepts offer entrées and hot plates—Dish Society, for instance, trumpets Shrimp & Grits as well as a Brisket-Stuffed Sweet Potato—while others are providing fresh, culinary-inventive spins on classics.
During the winter, Pret a Manger promoted a range of seasonal dishes, such as the vegetable-heavy Mozzarella & Sage Pesto Sandwich and Pret’s Waldorf Flatbread, a traditional Waldorf salad reinvented in a wrap featuring antibiotic-free, char-grilled chicken alongside sliced apple, a sage and walnut pesto, baby kale, walnuts, mint, and Pret’s Yogurt Dressing.
Savvy concepts are being mindful of balancing this energized menu innovation with kitchen execution and profitability. In an effort to combat the veto vote against pizza, Uncle Maddio’s has begun championing made-to-order salads customized with more than 40 different toppings ranging from portabello mushrooms and zucchini to sundried tomatoes and artichoke hearts.
“It’s a calculated, strategic move,” Goodrich says, noting that the salad add-ons mimic each restaurant’s pizza toppings to drive operational and cost efficiencies.
Much to the chagrin of many in the quick-service space, however, another value war is on the horizon. The nation’s three largest burger players—Wendy’s, McDonald’s, and Burger King—all plugged value offerings at the end of 2015.
“These established players are trying to attract the value seeker they lost, and other players are going to have to come up with their own value proposition,” Riggs says.
At Dish Society, Lyons’ value proposition is in providing guests an elevated, albeit speedy, experience featuring chef-driven meals, real utensils, and glasses filled with craft beer or Chardonnay.
“There’s a sweet spot at lunch for people wanting that $30 experience for $15 and in 30 minutes,” Lyons says.
Dinner: Hot meals, warm environments
Though dinner remains a strong performer, collecting one out of every four quick-service visits, according to NPD Group data, quick-service dinner traffic remains flat, which Riggs attributes to growing competition in and out of the restaurant industry.
“Consumers are finding other solutions to their dinner needs,” she says, citing ready-to-eat options at retail establishments, as well as the dinner-in-a-box concoctions peddled by online startups such as Blue Apron and Plated.
In response, limited-service players are attacking the dinner daypart in a variety of strategic ways, ranging from line extensions and targeted marketing initiatives to restaurant design.
A pure-play frozen-yogurt shop upon its founding in 2007, Red Mango has diversified its menu over recent years to enter the traditional dayparts, finding morning success, in particular, with fresh-squeezed juices and breakfast flatbreads. But dinner has remained elusive, something the Dallas-based concept recently addressed with a dual-branded concept in west Texas alongside pre-portioned meals provider Healthy Meals To Go.
“I don’t think we’ll see people dining at Red Mango for dinner, but we think we can be a player in the grab-and-go and delivery space,” says Jim Notarnicola, CMO of BRIX Holdings, Red Mango’s parent company.
Others are prioritizing dinner-specific messaging. Uncle Maddio’s, for example, paired its online ordering push with communications about the chain’s extra large and medium pizzas.
On the menu front, many operators see an opportunity to supply heartier meals. Modern Market’s homestyle plates, which include dishes such as herb-roasted chicken breast and natural flank steak, represent only 15 percent of the eatery’s product mix during lunch. At dinner, however, the homestyle plates account for 40 percent of the restaurant’s product mix.
“A lot of fast-casual concepts have thematic items that are great to eat at lunch, but consumers want a more fulfilling meal at dinner,” Pigliacampo says.
Some eateries, meanwhile, are capturing dinner business by embracing, of all things, morning favorites. McDonald’s has seen customers flock to the company’s all-day breakfast menu, which McDonald’s U.S. president Mike Andres has publicly called the chain’s “next growth platform.” And when Modern Market opens an eatery at the University of Notre Dame next year, Pigliacampo says, the nontraditional location will offer breakfast throughout the day.
The greatest opportunity for quick serves at dinner, however, might reside in store design. Whereas restaurants will often get a pass for being chaotic during the lunch hours, consumers generally favor quieter and warmer environments during the dinner daypart.
In an effort to corral dinner guests, Memphis-based Lenny’s Subs has married hot sandwiches and a 15-inch “Monster” sub with a redesigned restaurant featuring a warmer color palette and aspirational wall art, while Modern Market has outfitted its stores with softer surfaces and zonal seating.
At Dish Society, Lyons pairs his contemporary store design with a service shift, employing the increasingly popular flex-casual model. At 3:30 p.m., the lights dim, employees trade short-sleeved tees for collared shirts, and Dish Society shifts from a counter-service spot to a full-service restaurant.
“At dinner, people don’t want to wait in line or get their own drinks,” Lyons says.
And as dinner brings a more sophisticated consumer eager to unwind, Lyons’ team serves appetizers, entrées, desserts, and craft cocktails. Alcohol, in fact, represents more than 15 percent of total sales at Dish Society, 95 percent of those beverage sales coming at dinner. It’s not a result Lyons believes he would achieve if not for the altered service model and focus on store design.
“We think about little things like where we put the registers and drink machines so that it makes sense for breakfast and lunch, but also dinner when people want a different kind of experience,” he says.