Fast casual restaurants are in steady growth mode and have been for the last decade. For investors, this means the opportunity to get in on the ground floor of a growing chain can lead to long-term value.
According to a new NPD Group report, fast-casual chain restaurants continue to grow and have been for the last decade. A relatively small piece of the restaurant industry, customers are responding, and there is plenty of room for both new and established chains. Investors should be looking closely at this category and seeking out newer chains with fresh concepts. One excellent example of which investors should be aware is West Coast Ventures Group, whose Illegal Burger chain is beginning its national expansion after great success in the Denver area.
Fast casual restaurant growth
The fast casual restaurant concept occupies a spot between fast food and casual dining. One example is Zaxby’s, which offers a healthier menu than most fast food restaurants and can charge a bit more while still being perceived as a budget option. Zaxby’s is also a franchise, like many such chains, meaning it can grow much more quickly and economically than a fully-owned chain.
In a recent report from The NPD Group, fast-casual chains were revealed to be “growing both in units and customer visits for the last decade.” Of particular note, over the last year as of February, fast casual customer visits increased 3 percent while the larger quick-service category grew visits by only one percent. Furthermore, foodservice traffic in the U.S. overall was flat for the year.
Much of the growth of fast-casual restaurants has been in larger cities with the concept gradually extending across the nation. It is a small sector of the restaurant industry suggesting lots of room for growth, especially given the positive response of customers. Also of interest, while customer visits have grown three percent, the unit count has only grown one percent. That means established restaurants are getting more visitors, another sign of the sector’s popularity.
Breaking down a unique example
The fast-casual sector is also a space for innovation. In a special report for QSR, Sam Oches coined the phrase “Fast Casual 2.0.” Whether or not that concept sticks, it does indicate that the sector is full of creative approaches at a time when most innovation seems limited to high-end restaurants and personal projects. One example of a creative approach to a previously standardized concept is that of Illegal Burgers, a chain operated by West Coast Ventures Group.
West Coast Ventures Group Corp (OTCMKTS:WCVC) currently operates two chains, Illegal Burger and El Senor Sol. Illegal Burger is a fast-casual burger and bar concept while El Senor Sol is a full-service fresh Mexican restaurant. Industry veteran Jim Nixon is CEO of West Coast Ventures Group and seems to be turning the bulk of his attention to the future of Illegal Burger. Based in Denver, Colorado, the chain is set for national expansion.
The Illegal Burger concept is a fresh, healthy take on the gourmet burger with all natural beef free of antibiotics and growth hormones. Chicken and salad options abound, gluten-free items are available and restaurant decor features sustainable materials. Illegal Burger also won Denver’s Top Ten Vegan Burger award so it is hitting multiple healthy food trends. Plus, Illegal Burger does offer alcoholic beverages, including craft beers, so revenue will reflect the inclusion of a full-service bar.
Participating in the growing CBD market
Illegal Burger is also participating in what could be called a mega-trend, the growth of the cannabis market and CBD edibles. The company has begun to introduce CBD menu items as well as partner on related projects. The CBD aspect will likely be a big growth factor given that the CBD market is projected to be huge in coming years in the wake of the 2018 Farm Bill’s passage.
Including CBD menu items is not just trendy but is a serious health and wellness factor adding to that aspect of Illegal Burger’s desirability to customers. It’s worth noting that there is a touching back story on Jim Nixon’s embrace of CBD. His son Jordan has multiple sclerosis (MS) and has seen great improvement in his health that he believes is due to use of CBD. This experience led Jim Nixon to recognize the value of CBD and then to begin to explore the possibilities for Illegal Burger. His sincere take on the matter will certainly support future marketing efforts.
The Illegal Burger value proposition
In an interview with RedChip’s Craig Brelsford, CEO Nixon broke down the value proposition for investors of his growing franchise. As Nixon points out, investors in WCVC are on the “ground floor” of a great opportunity. Nixon also elaborates on a point presented on West Coast Ventures Group’s website, the company scouts “second-generation locations” that already have such basic facilities as a “grease trap and a hood.” That approach allows for a quick start at a low overall price for a location that then generates a great deal of revenue. One example he shares required a $150,000 startup investment with $850,000 in annual revenue.
Illegal Burgers has already established a strong customer loyalty program. In addition, it has an online platform for ordering and delivery. Nixon revealed that the addition of delivery “increased revenue by almost 30 percent” which is quite impressive. Nixon, who is himself quite experienced in both operations and management, emphasizes that his team is composed of highly talented and experienced individuals at every level of the organization.
Great opportunities for investors
Both the quick casual sector and Illegal Burger offer great opportunities for investors. Quick/fast casual is outpacing other sectors and customers are very positive. Illegal Burger has built a solid base in the Denver area and is now poised for national expansion of its franchise operation. Investors have much to consider here for getting in on the ground floor of both an exciting sector and a promising restaurant chain.