The Latest on Casual Dining

Upscale sandwich shop continues to draw loyal following

In the revered tradition of great entrepreneurs, the idea for a new fast casual restaurant was conceived during a brainstorming session at a local bar. It was the late '90s when founders Tony Walker and Kevin Morrison polled their fellow patrons of the Denver establishment to come up with the perfect name for an upscale sandwich shop. Democracy ruled and the winning name, "Spicy Pickle," was scribbled on a cocktail napkin. The actual trademark pickle with its proprietary brine came later, followed by the opening of the first store in 1999.

"At the time, the two men were chefs at an Italian restaurant," says Marc Geman, CEO. "They felt that Denver was a sophisticated enough market to support an upscale shop serving an interesting assortment of panini's, salads, and other high quality lunch fare." Panini wasn't anywhere in Denver at that point so they were definitely ahead of the curve. And it was a very cult following then. The first restaurant was just off the downtown corridor and they had a very loyal following. Today, there are over 17,000 possible sandwich combinations (not counting the 8 specialty panini's) for customers to create from the wide choice of meats, cheeses, toppings, spreads, and fine Italian artisan breads.

The fast casual sector is getting crowded, but Geman says Spicy Pickle has a simple recipe for success. "Our real advantage is this: we make great food. Tony and Kevin did a masterful job of putting great flavor profiles together. People are addicted to our sandwiches. We generally have lines out the door of our stores during lunch hours. We do a lot of surveying of our customers on a continual basis and we find our customers visit us 4 to 6 times a month. That is a very strong loyalty."

Location, location, location

"Spicy Pickle customers are primarily white collar administrative, managerial, professional type people who are willing to pay a little more for better flavor profiles and more interesting sandwiches than they can get in a grocery store or a sub shop. So most of our locations are determined by that kind of white collar environment," explains Geman. "We look in off downtown areas for tech centers, universities, hospitals, government centers and anywhere else that has a big concentration of that kind of white collar population."

Location is critical. Geman has noticed that the stores with the best sales growth are located within walking distance for diners. He says, "People don't want to drive 5 miles to get a fast lunch, spending 25 minutes in traffic when there's only an hour to get back to work. When we do demographic studies, almost every universal study looks at 1/3/5 mile radius. But we look at a half-mile."

Finding ideal locations is a real challenge to expanding the Spicy Pickle organization. "We are location constrained at the moment," says Geman. "This is a highly competitive market with a lot of other concepts that are looking for exactly the same size, visibility, and access. We're not just competing for customers, we're also competing for space to serve those customers. And we are very careful. We are very nervous about putting a franchisee or a corporate store where our all-in rent is going to exceed 10% of our anticipated gross volume. We would rather wait than take a space that is too expensive."

More than one way to increase sales

While many fast casual restaurants are struggling to stay in the black, the Spicy Pickle organization is planning to increase volume by 25% or more. Is that a viable goal in today's economic environment? "Why not?" says Geman. "It's going to take some marketing. But I think it's a very viable goal for us. We have a catering program now that offers platters. That kind of service environment could increase our volume 15-25% all by itself. And then depending on where we are in the downtown market, we think our new breakfast panini's will bring in business from the going-to-work commuter side of that market. And for stores off the downtown corridor, where there's some more 24/7 activity and some rooftops, we're adding a dinner component built around the new Neapolitan pizza. So we have 3 ways to increase our volume right now: breakfast, dinner, and catering."

Contact Information: Spicy Pickle Franchising, Inc., Marc Geman, CEO http://www.spicypickle.com, (800)711-1902.

Sodexho subsidiary succeeds with U.S. rollout

In early 2004, a new fast casual restaurant company was launched in the U.S. operating as a subsidiary of European based Sodexho, Inc., a $15 billion giant in the food service industry. While the parent company imported 9 restaurant concepts, the Retail Brand Group managed a portfolio of 5 distinctive fast casual restaurant brands slated for franchise development. The original goal was to open as many as 250 new company-operated and franchise locations by May 2006. The goal was easily met - there are now 450 locations across these 5 concepts.

Bob Faller, VP of Franchise Development, says, "because of the breadth and range that Sodexho has across the country, we are able to handle national development. We literally go from coast to coast." Sodexho provided a significant advantage for RBG to thoroughly test its brands in an extensive array of venues across the country. But the primary advantage came from the distinctive assortment of concepts that collectively appealed to a diverse consumer population. The 5 concepts cover the most popular fast casual segments:

Jazzman's - upscale coffeehouse with fresh baked goods and jazz infused ambience
Pandini's - Italian bistro that combines old world classics and new world tastes
Salsa Rico - Fresh-Mex grill with Baja style menu
Sky Ranch Grill - serving a variety of big gourmet burgers
Sub Connection - high-quality sub shop using all fresh ingredients made-to-order

The different concepts appeal to every demographic, but Faller says that the variety of customer makeup is only part of the story. "It is the locational differences that are interesting. For example, there are a lot of ways you can put a Jazzman's into the market. The coffee café can handle myriad different locations - college campuses, direct neighborhood locations with good traffic on the going-to-work side, office complexes, retail centers, and even really high-end neighborhoods. Pandini's, our 2500 sf Italian bistro, is more suited for a middle income and higher location with a heavy emphasis on offices for lunch and upper income housing for the evenings and weekends," says Faller.

Quality is rewarded
Faller acknowledges that the competition is keen for fast casual restaurants, but asserts that those in the RBG portfolio have a competitive advantage: "The quality is very, very good across the board. The one ingredient linking our brands is freshness. We prepare almost everything fresh, not frozen, in all the brands. That's the mantra here - freshness. And I think the customers have shown they appreciate that - that's why we are rewarded with good success." Indeed, the quality factor has not gone unnoticed. Two of RBG's concepts have received the Hot Concept Award by the Nation's Restaurant News: Jazzman's in 2004 and Pandini's in 2006. Faller says, "It is rather gratifying that they have chosen us twice for our fast casual approach."

Despite any current struggles that the fast casual sector may be experiencing, Faller thinks it is still a good bet. "There's no doubt about that when you look at the trend. When you drive down the street and start looking at all the freestanding buildings that get built today, there is a preponderance of large, full service restaurant concepts, whether it be Bahama Breeze, Red Lobster, or Olive Garden. You're also still going to see Wendy's and McDonald's and other 4-5000 chains of freestanding stores. But for a lot of other concepts that move out of that large-scale chain arena, it is very difficult to afford the real estate. The way real estate is developed today it is very difficult to find well-positioned freestanding sites that you can buy. Consequently a lot of developers are easing that transition by giving a lot of excellent space in-line for restaurants. And a lot of that type of restaurant is the fast casual type operation. So it seems as if the trends are such that development of fast casual restaurants is ideal in the overall scheme of things," asserts Faller.

Contact Information: Retail Brand Group, Bob Faller, VP Franchise Development, http://www.retailbrandgroup.com, (888)79BRAND.