Issue 48, Number 4
Despite fierce competition and escalating costs, the sun continues to shine on Canada’s foodservice sector. Statistics indicate the industry has seen an upward trajectory during the last five years. In fact, according to data from Toronto-based Restaurants Canada, business has grown from $61 billion in 2010 to $71.8 billion in 2014, representing four per cent of Canada’s GDP. And, regardless of economic and market conditions, there’s no sign of slowing down — the association is forecasting 3.6-per-cent growth this year, with quick-service restaurants (QSRs) leading the pack with approximately 5.8-per-cent sales growth in 2014 over 2013 and $25.5 billion in sales last year.
Indeed, Oakville, Ont.-based Tim Hortons, Toronto-based McDonald’s Restaurants of Canada and Milford, Conn.-based Subway have maintained their podium finishes on F&H’s “Top 100 Report,” which accounted for $28.1 billion in foodservice sales last year. But there’s been some movement within the rank and file. Pita Pit inched its way up two spots this year to number 22, thanks in part to an additional 96 units and total sales of $226 million worldwide. An estimated 136 new locations are expected to open this year, including the first Pita Pit outlets in Saudi Arabia and Singapore.
Kevin Pressburger, president of Pita Pit Canada, based in Kingston, Ont., says the stores’ refreshed esthetics have resonated with customers and invigorated franchisees. The new softer palette, hardwood and other natural elements appeal to adults, professionals and families alike, he says. “When we started in 1995 our core demographic — and it’s still a really important demographic for us — was the student,” he says, adding that Pita Pit is now seeing an increase in the numbers of busy families on the go. “That’s the direction we really want to focus on going forward. Pita Pit is trying to be a small but important part in the lives of Canadians who are trying to live that healthy, active lifestyle,” Pressburger adds.
The fast-casual segment has whittled away at QSR profits for several years. According to research from the Toronto-based NPD Group, the segment grew by eight per cent between 2012 and 2013 in the United States, while spending increased by 10 per cent. In Canada, visits to fast-casual restaurants increased by seven per cent and spending increased by nine per cent. “Customers tend to like the non-formality of [fast-casual], so they’re getting great quality, innovative products that probably aren’t so formal and maybe not at such a high price point,” says Luc Erjavec, VP, Atlantic for Restaurants Canada, of the expanding segment. “And from the other end people are concerned about health, about local food. It’s about bringing the local, premium type of products into the quick-service market and upping them,” he adds.
Pressburger agrees that Canadians are much more mindful of what they’re eating, so his company is focused on procurement. Earlier this year, Pita Pit introduced Royal Swedish Snowballs — whipped vanilla morsels coated in chocolate and coconut. The 73-calorie dessert, which is gluten-free and made with natural ingredients, is the first specialized dessert option in the company’s 20-year history. Pita Pita also sources premium juices and frozen yogurt for use in its smoothies. “The competition continues to get more intense, and it seems the whole healthy concept has become table stakes now, where every concept has healthy offerings,” states Pressburger. “Back in 1995 [when Pita Pit was founded] that was a new thing, and it’s not really a new thing anymore. That’s why … we’ve tried to diversify the menu and offer other options that customers would find value from.” Most recently, Pita Pit introduced a spicy black-bean filling, and is currently rolling out toasters to all locations so it can produce hot sandwiches. In response to consumer demand, the company also launched gluten-free pitas this past May, following nearly two years of testing bread consistencies.
The Chopped Leaf, now owned by Oakville, Ont.-based Innovative Food Brands (IFB), introduces new menu items every three months to drive guest frequency and marketing opportunities. “Customers like to see change,” says Nick Veloce, president and COO of IFB. “You might have a customer that comes in once a week for a specific meal, but if you have another item that you can get them excited about, that frequency can maybe go to twice a week.” Veloce concedes it’s unrealistic that customers will dine at The Chopped Leaf daily, but could he squeeze that to perhaps twice a week? “Possibly, if you’ve got the right menu offerings,” he says.
In 2014, The Chopped Leaf grew to 18 units from 14 the previous year and increased sales by 21 per cent to $11 million. The chain currently sits at number 26 on F&H’s next 30 list within the “Top 100 Report.” The fast-casual concept offers fresh, made-to-order salads, wraps, soups and rice bowls at its locations across B.C., Alberta and Saskatchewan. In October, IFB purchased The Chopped Leaf for an undisclosed amount from Surrey, B.C.-based Box Concepts Food Group. “We looked at this concept, and we felt it had all the same attributes that we have [with Teriyaki Experience] except a different menu,” Veloce says. “We felt it was a nice integration into what
we do, and we also thought there was a big opportunity to take this brand across the country and abroad.”
There are currently 12 locations in the pipeline and 15 units opening over the next 12 months. And, although the brand is expanding rapidly in Western Canada, the first Ontario location is expected to open this October in Mississauga. Veloce, however, is looking at opportunities throughout the Greater Toronto Area, Montreal, Halifax, New Brunswick and even in the U.S., Central America and the Middle East.
Since taking over the fast-casual concept, IFB has launched several initiatives to build loyalty, increase units, drive innovation and streamline operations. On the technology front, it has introduced a new integrated loyalty program, an integrated POS and is testing online ordering. “[The new POS] is providing us with real-time information that is invaluable in our business,” notes Veloce. Franchisees have access to data and sales figures instantly and can now manage their purchasing, payroll and payments.
That said, a solid relationship with franchisees is the foundation for growth, and experts believe the key to success is finding people who share their company’s vision and values. “Of course we’re going to work on our menu and on our execution in the restaurants, but it’s about having the right people with the right mindset; they want to achieve at a high level, and they want to perform within the opportunity envelope that a brand gives them rather than go out and fight it out on the corner and be their own man or woman,” says Bruce Fox, COO and VP of Development for Browns Socialhouse in Vancouver. “We’re growing at 50 per cent a year, three years in a row; I don’t see why that should stop as long as we can find the right people.”
Browns Socialhouse has moved up 15 spots on F&H’s “Top 100” and currently sits at number 53, with total sales of $69.7 million across 32 units last year. Fox says existing franchisees have realized the potential of the brand and are fuelling growth; nearly all the new restaurants are owned by current franchisees. The company opened 11 new units in 2014, with an additional 15 in the pipeline this year, marking three consecutive years at nearly 50-per-cent growth.
Although rooted in Western Canada, Browns Socialhouse opened its first eastern outpost in Oakville, Ont. last June. The corporate-owned outlet is expected to spark further development in Central and Eastern Canada. It operates as a test kitchen and dedicated training centre for franchisees from the east, complementing the company’s western training facility in Langley, B.C. “We anticipate growing quicker than we did in the west, so we’ll need a facility in the market to keep up with demand,” Fox says. “The whole purpose of our training is making sure the guest experience is completely understood by our operators. We have very strong metrics on lighting levels, sound levels and speed of service. Everybody talks about food quality; that you can train for in a vacuum. But you can’t train an operating experience in a vacuum. You need a real working situation where you’ve got real live guests, and it’s like a movie set: lights, sound, action, roll the camera.”
After all, isn’t every dining experience a well-orchestrated performance?