Consumers in the shadow of a mortgage crisis, inflated gasoline prices and other economic forces have less money to spend on dinner. Quick service and fast-casual chains, though, are seen as less expensive options than sit-down restaurants. Fast-casual chains, which include bakery cafes, bagel bakeries, and even donut shops, are are testing strategies to capture the dinner market share that the casual restaurants might be losing. Of the Top 50 largest foodservice bakery chains in North America, the fast casual and quick service segments show the most growth.
According to the NPD Group, a market research group based in Port Washington, N.Y., the number of restaurant dinner meals per person per year has markedly fallen during the past two years, from 67 in 2005 to 64 in 2007. Lunch has fallen, but only slightly, while breakfast and afternoon meals actually have shown gains. The average check for other dayparts are half of a dinner check. While consumers are still eating out, they are targeting less expensive meals.
With this in mind, foodservice bakery chains are moving in on other restaurants’ turf as options for the evening meal. Breakfast mogul Dunkin’ Donuts, for instance, added pizza and flatbread sandwiches to its product line, and is testing a sandwich concept. Cosi dropped its coffee bar and expanded its dinner menu. Bakery cafe chain Panera Bread introduced its Crispani flat-bread pizzas in order to appeal to evening diners.
With increased business from all dayparts in mind, foodservice bakery chains are multiplying. Dunkin’ Donuts has a 12-year goal of increasing its unit count by 300 percent, while Panera continues on a 150 new store per year clip.
Bakery chains’ play for dinner dollars isn’t the only shake-up in traditional daypart niches. Wendy’s and Taco Bell are launching breakfast lines that will compete in bakery’s breakfast market. McDonalds, now offering espresso and cappuccino, is catching up to bakery cafes in coffee quality. As foodservice bakery chains move into new dayparts, other chains are crossing into bakery cafe territory.
Fast casual and quick service chains have to strike a balance between adding product lines for new dayparts and maintaining and innovating product lines that helped create the brand in the first place. They run the risk of diluting their brand with disparate products and losing their identity.
“For us anyway, it’s a focus on developing new products while a still being authentic to who we are,” says Andrew Carlson, Panera spokesman. “It’s an attempt to grow. We are always on the lookout for new and different products that will appeal to our customer base.”
In 2008, Panera will return its focus to the breakfast menu, introducing a new premium ciabatta breakfast sandwich line. Carlson believes that the line addresses consumer demand and bolsters the breakfast daypart while staying true to Panera’s premium-quality branding.
Restaurants dealing with decreases
Casual dining chains have been the hardest hit by the growing segment of consumers that are staying home to eat dinner. They can’t compete with fast casual restaurants for convenience or speed, even when price points are similar. But casual restaurants with bakery segments, such as Vicorp’s Village Inn and Baker’s Square brands, are not resorting to price cuts in order to draw consumers back to their booths.
“What we are trying to do is weave in a level of value that’s not related to price,” says Jill Preston, Vicorp’s director of communication. The company is offering combo meals at select Baker’s Square units that aim to re-energize consumers with value-added products instead of price slashes.
For example, prepackaged combo meals that include extra sides promise more meal for the buck. Restaurant operators hope once consumers get into the restaurant, they will order additional sides and dessert. Pies and desserts in the display case remain an important part of Vicorp brands.
Bakery cafes and other fast-casual chains continue to pursue day-time catering business. Bakery cafes target corporate events, in particular by offering bagels and muffins for morning meetings and sandwiches and salad at noon.
Catering packages can be economical for both the chain and the consumer because operators can produce large volumes of product with little variation or specialization for a single register transaction. Also, by packaging several catered meal options with a few price points, the operator can effectively upsell soups, salads, beverages and desserts.
Boston-based chain Au Bon Pain is looking to boost sales with a new catering and commissary facility. It opened this fall in Washington, D.C. Officials at the bakery cafe chain believe that the catering facility will increase business in the Washington area by 25 percent with its ability to cater large events, governmental and otherwise, with upwards of 5,000 people.
The 4,500-sq.-ft. commissary also provides baked products for Au Bon Pain outlets that do not have the space for major baking operations.
Growth via franchise
Panera, Atlanta Bread Co. and Au Bon Pain are the largest in the bakery cafe segment, but Dallas-based Corner Bakery Cafe, owned by CBC Restaurant Corp., is making a charge for a larger share of the market through franchising.
Until recently, the 97-store chain had only one franchisee, HMSHost Corp., which operates four airport units. This year CBC Restaurant Corp. granted Rose Group, franchisee of 54 Applebee’s units in Newton, Pa., the rights to open 25 new Corner Bakery Cafe units in Philadelphia and southern New Jersey.
Though previously relying on franchisees for less than five percent of their units, CBC is actively courting new franchisees in new markets. Depending on the market, Corner Bakery Cafe officials think each franchisee could open 10 to 20 units.
Opportunities on campus
The bakery cafe model translates well to college campuses. Students on the go and between classes benefit from transportable breakfast and lunch items, such as muffins, bagels, sandwiches and cookies. Also, these items provide healthful alternatives to fast food at a comparable price. Philadelphia-based Aramark tapped into this potential, introducing its Bleeker Street Cafe concept to four universities in late 2006.
“Our research told us that students were looking for more fast-casual dining options on campus, especially fresh-baked goods and gourmet style sandwiches,” says Karen Parker, National Marketing Director, ARAMARK Higher Education.
The majority of Bleecker Street Café units are 12- to 16-ft. in-line versions designed to fit into college campus food courts or retail spaces. A “stand-alone” version is based on a minimum of 3,000 sq. ft.
New look bagels and donuts
Bruegger’s bakery-cafe added its eighteenth bagel variety with its salt-encrusted pretzel bagel. The versatile bagel can be served with cream cheese as a breakfast option, served as a sandwich for lunch or dinner, or served alone with yellow mustard for an afternoon snack.
Dunkin’ Donuts made the switch to a trans fat-free frying oil and reformulated 50 menu items to contain a trans-fat content of less than 0.5 g per serving. The shift was four years in the making, as research and development teams tested nearly 30 different oils and oil blends. The franchise opted for a palm-soybean-cottonseed blend that will be distributed to its donut shops worldwide.
Krispy Kreme also introduced a healthful donut with its Whole Wheat Glazed Donut. It is made with 100 percent whole wheat and contains 180 calories, according to the company.
The introduction of a healthful donut punctuates foodservice bakery chains’ increasing willingness to address non-traditional markets with new product lines.