QUICK SERVICE VS. FAST CASUAL What consumers want and how your can deliver it to them. What’s next in QSR & Fast Casual dining? In a country that put fast on the map over 75 years ago, there’s a thirst among consumers and the industry to uncover “what’s next.”

And there’s good news for everyone: while fast still rules the day in both Quick Service (QSRs) and Fast Casual establishments, options are getting fresher every day. Old favorites are finding newer, healthier friends. (Would you like an apple instead of fries in your Happy ?) Ethnic-themed QSRs are joining the ranks of burger joints. (Choolah Indian BBQ, anyone?) And customizable Fast Casual options are becoming the new “family” meal. Consumers are happy with the results and showing it with increased traffic and dining dollars.

While QSRs and Fast Casual restaurants will never compete with fine terms of experience, these establishments still hold high appeal and play an important and growing role in consumers’ lives. There’s also a big difference in consumer expectations between QSRs and Fast Casual restaurants. QSRs must now compete with the fresher and perceived healthier options of their Fast Casual counterparts while Fast Casual chains try to match the convenience and speed of QSRs.

Convenience, menu consistency, quality, and healthier food: consumers are demanding it all. The good news for the industry? When consumers get the better choices they’re after, these food decisions are quick to turn into lifestyle choices.

Read on to learn more about consumers’ motivations, how they define “value,” what they want out of Fast Casual restaurants and QSRs, and the top trends in limited-service dining.

QSRs must now compete with the fresher and perceived healthier options of their Fast Casual counterparts while Fast Casual chains try to match the convenience and speed of QSRs.

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 2 CHAPTER 1: QSR VS. FAST CASUAL: A SNAPSHOT CHAPTER 1: QSR VS. FAST CASUAL: A SNAPSHOT Why Consumers Choose You – And Why They Don’t While QSRs and Fast Casual establishments often draw in the same consumer in terms of demographics, both establishments have their niche in a consumer’s life.

What a person chooses depends mostly on how much time they have, For the same reasons consumers choose a Fast Casual restaurant or who they’re with, and what they want in terms of an experience. QSRs QSR, they often choose not to go to one or the other. Sometimes, the are ideal when people are under a time crunch and dining solo; Fast Fast Casual diner wants to have someone bring them their food, refill Casual establishments are preferred for a shared sit-down meal in their , and just take care of them; they don’t want to “self serve” a nice environment. It’s also perceived to offer a healthier meal at a and they’ll choose an FSR, even if it’s more expensive. better price than a Full Service Restaurant (FSR), where they have to take tip into consideration. Consumers avoid QSRs because they believe the food isn’t as healthy – and they have a heightened awareness of their overall wellness. They Although the individual reasons for choosing a QSR or Fast Casual know that QSRs are now offering healthier options, but they also see restaurant vary, the reasons a consumer chooses away from that these choices are priced higher and are not of better quality. home (AFH) options are the same for both QSRs and Fast Casual establishments1. REASONS FOR AVOIDING2

QSR FAST CASUAL REASONS FOR CHOOSING

WHICH FACTORS DO CONSUMERS SAY ARE 26% 24% BARRIERS TO DINING OUT? HAVE NO TIME TO FEEL AFH IS EASIER THAN AT HOME 30% 43% 14% 10% PROCESSED FOOD NOT AFFORDABLE WENT OUT TO CELEBRATE THINK AFH FOOD TASTES BETTER 30% 30% LACK OF HEALTHY OPTIONS LACK OF DEALS 29% 20% LOW QUALITY SERVICE NOT GREAT

MORE LIKELY TO VISIT IF:

• Offer healthier value menu • Give discounts for frequent options and combo visits • Offer value menu options

1 Datassentials, CPP 2015 Segment Drive 2 Datassenials, CPP 2013-2014 Segment Overview

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 4 CHAPTER 1: QSR VS. FAST CASUAL: A SNAPSHOT

Overall, diners at both want their food and beverages to be fresh. What this means at each restaurant, however, is a little different:

DEFINING “FRESH”

QSR FAST CASUAL

Consumers expect (and demand) a lot of choices, but Consumers believe that a smaller menu want those choices to be served hot or cold, and taste means the ingredients are more seasonal “just made.” and fresh.

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 5 CHAPTER 2: MOTIVATIONS CHAPTER 2: MOTIVATIONS Diving Deeper Into Personal Motivators: Getting Traffic In The Door When you see a group of coworkers enjoying coffee at your restaurant in the a.m., you assume that the clean environment, fresh brew, and overall experience brought them in your door. But there’s often more going on behind the scenes in the consumers’ lives. As trends come and go, these personal motivators often stay the same and tend to drive consumers to dine at both Fast Casual restaurants and QSRs.

REASONS FOR VISITING You’re out anyway...why not grab a bite? Often, life’s unplanned circumstances draw consumers to Fast Casual or QSR dining. QSR FAST CASUAL TOP 5 MOTIVATORS FOR OUT: “I GO BECAUSE I’M CRAVING SOMETHING SPECIFIC.” 1. No time to cook 2. Enjoy the experience 3. Already out 4. It’s easier 64% 68% 5. Craving something particular AGREE AGREE Restaurant owners and operators can only influence 2 of the 5 top “I LIKE/APPRECIATE/DESIRE THE CONSISTENCY.” motivators: consumers’ experiences and their cravings. Focusing on customer service, consistency of product, and key menu offerings gives you a competitive edge. 86% 78% AGREE AGREE APPLICATION

“I LIKE/WANT INNOVATIVE .” SATISFY THEIR CRAVINGS: WHERE TO FOCUS YOUR TIME AND MONEY. While you can’t control how often consumers will be out and about, you can control what drives them into your establishment. 14% 22% Cravings are largely based on menu options, consistency, and quality. AGREE AGREE Experience involves a variety of factors including food/beverage, customer service, and environment/atmosphere.

• Offer consistency. Make a few select items on your menu more When consumers want to try something new, they consistent with semi-scratch or premade options. For example, use premade sauce on a grilled chicken or serve generally scale up to fine dining or check out a trendy protein-enhanced . option at the local . • Make impulse buying easier. Offer real rewards programs that pay off like a free meal or $5 off for every $50 you spend. Make the deal attainable and worth pursuing. • Be the “go-to” solution: Make useful suggestions/options that accommodate why consumers visit a QSR or Fast Casual restaurant. For instance, create family meals to-go that working parents can pre-order and pick up on the way home.

1 Datassentials, CPP 2015

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 7 CHAPTER 3: VALUE CHAPTER 3: VALUE Creating Maximum Consumer Value: The Overall Equation Do you think value equals price? Cost is often just one factor in a consumer’s perception of value.

There are many variables that come into play – from the way food looks to the smile that accompanies its delivery to the feeling the consumer has in your restaurant. When creating a sense of value for the consumer, it’s often just as important to deliver a good experience as it is to avoid a bad one.

VALUE DRIVERS

GIVE ME WHAT I WANT AVOID WHAT I DON’T LIKE LEAVE CONSUMERS The value equation includes several tangible Consumers will often consider a restaurant PLEASANTLY SURPRISED... items that can set your restaurant apart: a poor value if they encounter any of these turn-offs: When looking at how to elevate the value of your establishment, consider a few “hidden motivators” that often leave consumers happier. These drive 47% 57% 40% your value higher and can motivate people to revisit your establishment GREAT SERVICE NOT CLEAN INCONSISTENT QUALITY over the competition:

• Choices for the entire group • Offers top brands 41% 52% 20% • Good ambience GREAT FOOD & BEVERAGE CHOICES UNFRIENDLY SERVICE UNHEALTHY FOOD • Ability to customize 35% 42% 17% HIGH QUALITY INGREDIENTS SERVICE IS TOO SLOW NOT ENOUGH VARIETY/ BORING MENU

TOP EXPECTATIONS BY RESTAURANT TYPE APPLICATION

QSR FAST CASUAL ADD MORE VALUE TO EVERYTHING YOU OFFER: • Consider customizable beverages. Provide snappy service WHILE CONSUMERS IDENTIFY DIFFERENT EXPECTATIONS without limiting yourself to a soda dispenser. Beverage equipment OF A QSR OVER A FAST CASUAL RESTAURANT, for flavored iced , infused waters, and specialty coffee offers a CUSTOMER SERVICE REMAINS KEY. variety of customizable options without compromising speed and service. • Include your team. Ask your team to work with you to develop 45% 44% service standards. Having input on process and protocol helps employees feel a sense of ownership, which motivates and can FOOD DELIVERED FAST HIGH QUALITY FOOD & BEVERAGE positively impact results. • Feature healthier options prominently on your menu. Even if repeat visitors are driven by cravings for traditional menu items, 37% 42% they will be happy to know they have choices, especially when they want to experiment with something new. For a quick way to spice HIGH QUALITY INGREDIENTS GOOD SERVICE up your or side dishes, use Nestlé® Tribe Hummus, which comes in a variety of flavors and is free of cholesterol, 14% 22% hydrogenated oils, and high fructose corn syrup. HEALTHY OPTIONS VARIETY

1 Datassentials, CPP 2015

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 9 CHAPTER 4: MENU CHAPTER 4: MENU Driving Check Size: When & Why Consumers Will Pay More While consumers appreciate the convenience of dining out, they still have to consider their overall budgets. There are several areas where consumers state that paying a little more is worth it:

FRESHER, NAME-BRAND BEVERAGES INTERNATIONAL FLAVOR When it comes to food, consumers are more likely to pay a premium International is growing in popularity among both QSR and for fresh, all-natural ingredients at a Fast Casual resaurant than Fast Casual diners. In fact, Fast Casual customers state that they’re at a QSR. However, the rules are a bit different when it comes to more likely to experiment now and then – ordering a curry with beverages – and that’s good news for both. Consumers state that, no a Lassi instead of a burger and a soda (even if they come in craving matter what type of establishment they’re at, they’re willing to pay the latter). QSR consumers, however, are fairly limited in the types of more for drinks when they have any of the following attributes: international dishes they’ll experiment with; if it’s Italian, Mexican, or Chinese food, they’ll likely give it a try.

28% 24% TOP ETHNIC FOODS BY RESTAURANT TYPE: FRESH-SQUEEZED JUICE HAND-PREPARED BEVERAGES QSR FAST CASUAL

23% 21% 1. Italian 1. Italian ALL NATURAL POPULAR BEVERAGE BRANDS 2. Mexican 2. Mexican 3. Chinese 3. Chinese 4. Greek 5. Japanese 6. Thai 7. Indian

APPLICATION

ENHANCE YOUR MENU: GET THE MOST OUT OF EVERY CONSUMER TRANSACTION. • Pair food with all-natural beverages and feature these combos on your menu. • Design packs that offer healthy calories and a flavor punch between meals. Think small salad + fruit smoothie or half a turkey wrap + fresh-squeezed juice. • Pair drinks with the appropriate menu items – whether it’s an ethnic eat or signature dish. For example: iced tea with a deli item, juice with a breakfast sandwich, or San Pellegrino with a Caesar 1 Datassentials, CPP 2015 salad.

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 11 CHAPTER 5: TOP TRENDS AND INFLUENCES What’s Next? The more dining trends change, the more they stay the same.

Across most dining out options, consumers are looking for “good food fast,” specifically: MORE HEALTH & WELLNESS OPTIONS Today’s consumers care about their health and want to feel that • High-quality options their preferred consumer brands do too. 40% of consumers say they • Premium ingredients carefully watch what they eat and only 11% feel food that they eat • Great taste away from home is healthier than the food they eat at home. Good • Ingredients that come from a good place food is often healthy, fresh food. • Attractive presentation Today, fast dining options fall behind in this category, with only These factors not only create a great experience for consumers, 15% of consumers believing that QSRs care about their health they also provide the largest opportunity for restaurants to grow and wellbeing and 30% believing Fast Casual restaurants do. With their business. farm-to-table restaurants and local chefs parking fresh food trucks in front of office buildings over hour, QSRs and Fast Casual establishments need to increase their healthier options.

THERE’S AN OPPORTUNITY TO CHANGE CONSUMER PERCEPTIONS:

QSR FAST CASUAL

THEY CARE ABOUT MY HEALTH AND WELLBEING.”

15% 30% AGREE AGREE

“EATING AT HOME IS BETTER.”

84% 70% AGREE AGREE

“EATING AT HOME IS HEALTHIER.”

94% 85% AGREE AGREE

81% of Americans say that “eating well is important” and 70% state that “it’s worth paying more for healthy” products. 1 Datassentials, CPP 2015

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 12 CHAPTER 5: TOP TRENDS AND INFLUENCES

SOURCING INGREDIENTS “I’M WILLING TO PAY MORE FOR...” While consumer expectations for local, organic ingredients are pretty low in the fast dining categories, consumers are still spending more dollars on dishes that can prove their lineage: organic meats, QSR FAST CASUAL sustainably grown veggies, and low-hormone dairy. “Natural” tops the charts in terms of popularity with consumers – 88% of those FRESH INGREDIENTS polled claimed they’re more likely to buy those products. Americans also have concern over unhealthy farm practices, making “organic” and “pesticide-free” big purchase drivers. 22% 33% AGREE AGREE

THERE’S AN OPPORTUNITY TO CHANGE CONSUMER ALL-NATURAL INGREDIENTS PERCEPTIONS

QSR FAST CASUAL 21% 31% AGREE AGREE “THEY SHOW A COMMITMENT TO SUSTAINABILITY PRACTICES.” NO ARTIFICIAL FLAVORS

14% 19% 21% 27% AGREE AGREE AGREE AGREE

“I WOULD FEEL BETTER KNOWING WHERE THEY SOURCE THEIR INGREDIENTS.” APPLICATION

74% 81% SEIZE THE OPPORTUNITY: GIVE CONSUMERS MORE AGREE AGREE HEALTHY OPTIONS. • Tout healthy ingredients on your menu or create a segment of the menu dedicated to healthier options (that are well-defined, like organic ingredients, low-calorie, natural, wholesome, etc). • Accommodate popular diet restrictions and choices to demonstrate a commitment to consumer interests in wellbeing: mark items that are gluten free, dairy free, vegan, and vegetarian. • Run seasonal campaigns that speak to your establishment’s practices and philosophy around sourcing good ingredients.

“Natural” tops the charts in terms of popularity with consumers

1 Datassentials, CPP 2015

NESTLEPROFESSIONAL.COM • 1-800-288-8682 • 13 Consumer demand is high for what Fast Casual restaurants and QSRs offer: convenience and familiarity. Yet, consumers are asking for more: better service, fresh choices, and quality ingredients.

With consumer taste cravings driving traffic, consistency will keep people coming in the door and new flavors and dishes will drive growth, especially menu items that can prove their all-natural background or health benefits. It’s more important than ever to find solutions that don’t the bank while offering variety, quality, consistency, and speed.

TOP HEALTH-CONSCIOUS LATEST “INGREDIENT FORWARD” FOODS NESTLÉ PROFESSIONAL BEVERAGES PRODUCTS FROM NESTLÉ PROFESSIONAL

NESTLÉ® VITALITY® NESTEA® ICE TEAS SUNKIST JUICES NESTLÉ® NESTLÉ® GOCHUJANG FLAVOR INFUSED HARISSA SAUCE FLAVOR WATERS CONCENTRATE

LATEST “INGREDIENT FORWARD” BEVERAGES FROM NESTLÉ NEW PRODUCTS THAT ALLOW FOR FOOD PROGRAMS TO BEST FIT PROFESSIONAL BEVERAGES THE QSR/FAST CASUAL OPERATIONAL MODEL

NESTLÉ® VITALITY® NESTLÉ® NESTLÉ® ROASTED FLAVOR INFUSED WATERS LIKE PINEAPPLE GINGER, STRAWBERRY BASIL HYDROPONIC BASIL CHICKEN BROTH AND CUCUMBER MINT.* PESTO CONCENTRATE

* Infused waters have NO artificial colors, flavors, sweeteners (stevia), or preservatives. NEW INNOVATIONS THAT ALLOW FOR BEVERAGE PROGRAMS TO BEST FIT THE QSR/FAST CASUAL OPERATIONAL MODEL

Sources: Datassential CPP 2013: Segment Overviews, January 2014 Datassential CPP 2013: Upgraded Segments, January 2014 ® ® Datassenetial CCP 2015 Decision Factors NESTLÉ COOLPRO™ NESCAFÉ MILANO Datassenetial CCP 2015 Segment Reviews SPECIALTY COFFEE Datassenetial CCP 2015 Value Beyond Price COLD BEVERAGE Nestle Health & Wellness Trend Report, 2016 SOLUTION MACHINE