According to the market researchers at NPD Group the restaurant industry has the fast-casual dining niche to thank for its relative health these days. They found visits to fast-casual restaurants rose 8% in 2013, compared to no growth for the industry as a whole and for the quick-serve segment in which it's lumped.
With more than 16,200 fast-casual restaurants in America (up 6% from the year-ago period), diners are spending even more at the chains as spending increased by 10% in 2013 compared to just 2% growth at all restaurants.
Fast-casual doesn't have to mean fasting
Yet there are several logical reasons why consumers are flocking to fast-casual concepts.
First, the use of fresh ingredients meshes well with rising concern over health and what we're putting into our bodies, meaning it's no coincidence that fast-food chains like McDonald's (NYSE:MCD) are suffering from falling same-restaurant sales. Fast-casual chains promise higher quality of food with fewer frozen or processed ingredients.
Second, dining at a fast-casual restaurant is something of an experience, where a warm, comfortable, and clean environment is more inviting than the hurried pace and cheap atmosphere fast-food chains exhibit. You're getting the casual dining ambience but at a somewhat faster clip, and that hasn't been lost on quick-serve outlets, such as Wendy's (NASDAQ:WEN) and Burger King (UNKNOWN:BKW.DL), which began installing "lounges" several years ago to make their restaurants exude that sensibility.
Other factors influencing the choice of where people eat include friendly service and reasonable prices. The fast-casual menu may be offered at more of a premium than what you'll find elsewhere, but diners have proven willing to pay up when enjoying improved service and quality.
So, getting your money's worth is why we see fast-casual dining attracting more fast food and casual dining operators. Even fine dining establishments are trying to ride fast-casual's coattails.
But not everyone gets it right and new pretenders to the throne are entering the market every day, and knowing which chains consumers actually view as best can be volatile. Fortunately, the industry trade site FastCasual.com did the hard work for us because it was more than just about which restaurant was most profitable.
Although its annual compilation of the top 50 fast-casual restaurants did look at the numbers behind a chain -- such as unit and revenue growth -- it also applied somewhat more subjective criteria as well, including innovation, use of technology and social media, branding and marketing, and overall contribution to the industry.
It's not who you think
Perhaps the most surprising result was that Chipotle Mexican Grill (NYSE:CMG) was not the favorite. With over 1,600 restaurants, the southwest grill has become virtually synonymous with the dining trend (along with Panera Bread, another surprising nonwinner), and it's commitment to food quality remains unassailable. Yet even its commitment to sustainability wasn't enough to catapult it to the top spot: it came in second (for its part, Panera was even further down the list at No. 28).
Filling out the third through fifth positions was Fazoli's, an Italian-American restaurant that got its start as a quick-serve restaurant that rebranded itself fast-casual; Freebirds World Burrito, a 100-restaurant chain that, like Chipotle, focuses on fast-casual Mexican food; and Burger 21, which bills itself as "beyond the better burger category."
You might have been surprised by all those names, if for no other reason than they're relative ranking, but they all fell short of coming out on top of the FastCasual.com survey.
Others not making the cut, despite their rise in public prominence, include Mediterranean fare Zoe's Kitchen (No. 8), fast-casual pizza chains Pie Five (13) and PizzaRev (15) -- two restaurants that forced Chipotle to step in and say if anyone was going to be the "next Chipotle of pizza" it was Chipotle -- and burger joint Five Guys (37).
Indeed, burgermeisters seemed to fill out quite a few spots on the top 50 chains (I counted seven), and that should give us a clue as to which chain was ranked best. Got your guess?
A smashing success
If you said Smashburger, take a bow.
The better-burger-industry leader returns to the top spot it vacated last year, with a renewed focus on menu innovation. According to its new CEO, who took the helm last November, introducing new items that play off one of America's favorite food is key to its success.
It has more than 250 restaurants globally, and by the end of the year plans to have open an additional 70 to 80 units, generating revenues of $300 million in 2014 compared with $228 million last year.
Even though Smashburger has five times fewer stores as Five Guys, has only been in business since 2007, compared to 21 years for its rival, and has a 0.2% share of the limited-service hamburger market versus the 1.4% share for Five Guys, it continues to make a name for itself and was even ranked by Forbes magazine as one of the top 10 "Most Promising Companies."
A rare opportunity well done
So analysts think that despite the proliferation of better burger places, there's still unlimited potential for the best.
Smashburger will need to stay on top of its game if it wants to retain the No. 1 spot among fast-casual restaurant chains. It's fallen before, tumbling all the way down to 18th on the list last year, but its ability to recover its footing again so quickly indicates the burger joint knows it's a rare restaurant that can get the job well done.
Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide, Chipotle Mexican Grill, McDonald's, Panera Bread, and Zoe's Kitchen. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.