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From Chipotle’s downturn to Shake Shack going public, 2015 held a lot of surprises for the fast-casual world. The former darling of the industry lost $8B in one quarter alone while another tripled in value.
So what can we expect from the high-growth sector as we head into 2016? Will we see more players on the scene? Or will the industry cool down? Bisnow spoke to two experts about industry trends, the latest for fast-casual giants and their real estate expansions for the year.
Chipotle
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2015 was a brutal year for Chipotle, capped off by a 40% stock drop last quarter that wiped out a whopping $8B in market value from September to January. The former darling of the fast-casual industry, Chipotle's tough year led to widespread speculation about stores closing in 2016.
Ryan Erenstein, a consultant with Hospitality House, a food and beverage firm with expertise in restaurant real estate, tells us the brand has taken a hit, which could lead to closing.
"While I think the brand will try to weather the storm to the best of its ability in Q1, I can foresee that stores in certain markets may have to close as the year progresses,” he says.
Meanwhile, Paul Fetscher, the president of Great American Brokerage, which specializes in the food and beverage industry, says Chipotle won't close up yet—although growth likely has tapered off.
“The managers want to keep the stores open even though there’s a slowdown in cash flow,” Fetscher says. “I would, however, expect that the pace of new store openings would slow down considerably until the fast-casual restaurant fully recovers.”
Shake Shack
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Shake Shack and Wingstop, on the other hand, came out on top in 2015.
Since Shake Shack went public last year, its stock has tripled while year-over-year revenue growth clocked in at 78% in Q3 '15. The figures have industry insiders predicting 2016 could be the chain’s best year yet.
Erenstein thinks this growth will translate to continued expansion in 2016, with the brand looking primarily to “California and Texas as part of their nationwide ramp-up.”
Wingstop
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Wingstop isn’t far behind, posting rock-solid numbers on the back of an aggressive retail growth strategy that saw the chain increase its number of stores by 20% last year.
Fetscher thinks that fast-paced growth still has room to run, noting that “one of the biggest trends over the last decade” is consumers moving away from eating three major meals a day to six or seven smaller meals. That trend could give finger food chains like Wingstop a strong tailwind going into the new year.
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