The ethnic eateries topping F&H’s Top 100 report are morphing with the times, moving into Power Centres and adjusting flavour profiles
In today’s recession-weary economy, fewer malls are being built, which means there are fewer food courts. Consumers are also becoming more adventurous eaters and healthier options are now more popular. The world of quick-service food — which includes the majority of the specialty chains on F&H’s 2011 Top 100 Report — is changing.“At QSR, all ethnic operators combined account for about two per cent of QSR traffic, and are growing by five per cent. Contributing to the gains are Japanese, Italian, Mexican and Thai specialists,” explains Linda Strachan, industry analyst, Foodservice at the Toronto-based NPD Group, who adds ethnic restaurants in FSR, where independents are most popular, are down three per cent in traffic.
Doom and gloom aside, many of the ethnic chain leaders appearing on this year’s report are keeping ahead by feeding into trends, which include introducing eat-in restaurants, healthier menu items and new food choices. While some have faced challenges over the past year with an ever-widening list of competitors, not to mention a recession that’s left less money in diners’ pockets, there have been high points, too — from new markets to new milestones.
So where does that leave the companies — new and old — that specialize in ethnic food? Patrick Gibbons, for one, maintains a positive outlook. “At the end of the day, if you have fresh, quality, flavourful food in a warm and customer-friendly environment, people will reciprocate accordingly,” he says.
Gibbons is president and CEO of the Greek-food chain Opa! Souvlaki, which ties with Sunset Grill for 85th place on the F&H report. Opa showed growth over the last fiscal year, with 13 new stores and one closing (a lease expiry), leaving it 12 ahead. In fact, it’s growing 20 to 22 per cent annually, and business has doubled over the past three years with sales of $35-million last year. At press time, Opa had 81 locations, largely in Western Canada, with a burgeoning business in Ontario and a partnership deal recently inked with Access Quebec Enterprises to expand into Quebec.
It’s a changing market, says Gibbons, speaking of the operation, right down to the format of the stores. While traditionally food courts have been the company’s main domain, many of Opa’s new locations are stand-alone restaurants, situated in power centres rather than traditional shopping malls. “We’re going to get into every mall we can … but primarily they’re not building malls anymore so the power-centre concept is the way of the future,” says Gibbons.
Another trend that’s proven positive for Opa is the focus on healthy living that’s enveloping the country, as obesity rates climb and consumers look for quick, convenient, healthier options. The Opa menu holds up against its competitors when it comes to offering healthier options, Gibbons says, and the chain is currently in discussions with the Heart and Stroke Foundation to position its Health Check program in Opa stores, with certain modifications to meet the organization’s health-based requirements.
Edo Japan, too, is well placed for the healthy options trend and has been for its 31 years in business, says Tom Donaldson, president and CEO of the Calgary-based chain. The company posted $65-million in sales in 2010, a seven-per-cent jump over 2009, and grew from 92 to 98 units in the last fiscal year. “Our brand has a healthy halo around it. We cook fresh and use fresh ingredients. We feel we’re in a very good spot to capitalize on that,” he says, adding that its meals are made fresh to order — with fresh beef, chicken, seafood and vegetables. Its sushi is made daily from fresh ingredients at every restaurant.
Like Gibbons, Donaldson has seen mall growth slowing and replaced by stand-alone restaurants: 37 of the chain’s 100 locations are storefront or power-centre units with 30 to 50 seats in a space that averages between 1,200 and 1,600 square feet. The investment in those locations is generally higher because they’re bigger and have more staff requirements. Conversely, the costs are made up for in sales, which tend to be higher.
The proliferation of small-format restaurants is also proving to be a challenge, with new chains opening and saturating the market. They’re not all in the ethnic segment but enhance competition — not only for diners but for prime real estate as well. “All of these other concepts have come into the market,” says Donaldson. “I’m not sure there’s room for them all, and I’m not sure they’re up to the standards consumers expect.”
As with other parts of the market, the recession has impacted the ethnic sector, even though it hasn’t been as bad in Canada as in the United States. Kelvin Chen, president and CEO with the Chinese-food brand Manchu Wok, knows that all too well as he had to close U.S. stores.
But Nick Veloce, president and COO of Teriyaki Experience, has a different perspective on the recession. “Fast-food generally fares better during poor economic times,” he says. “Asian foods tend to be in the ‘quick-service’ category and the trading down that happens during a recession actually helped our category.”
Teriyaki Experience now has more than 135 stores worldwide, including 31 locations in the U.S., Europe, South and Central America, the Caribbean and the Middle East. Responding to new customer demand for bolder and spicier flavours, the company introduced a hot and spicy pork dish last spring, following that with a hot and spicy chicken dish more recently. “Sales indicate this meal could deserve a permanent place on our menu board,” says Veloce, of the chain, which posted $42 million in sales in the last fiscal, a modest increase over 2009.
Meanwhile, at Manchu Wok, Chen and his team responded to increased demands for new flavours, too. The team spent much of last year planning the launch of Sense-Asian, a new brand promoting Asian-fusion food, which debuted in Toronto earlier this year. During its first three weeks of business, the first location was already showing double-digit growth over a Manchu Wok in the same location a year earlier. “We feel the market in Canada over the last few years has become more open to different types of food,” Chen says. “People are a lot more knowledgeable and willing to try new things.”