FSR August 2022

First Course

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Watch last fall, it was Kura Sushi in 2019 and Fogo de Chão in 2015.) Secondly, its public offering made quite the splash, clinching a $1 billion valuation. “[Going public] really sets us up to fuel our growth,” CEO Chris Tomasso told FSR. “It allows our loyal customers ... to feel even closer to our brand.” At about 440 units, First Watch is the largest NextGen breakfast chain by far, but it’s hardly alone. Another Bro ken Egg (81 units), Eggs Up Grill (60), Keke’s Breakfast Café (52), Snooze an A.M. Eatery (50), Broken Yolk Café (35), Famous Toastery (25), The Toasted Yolk Café (22), and other regional concepts are expanding, too. First Watch and Another Broken Egg disclosed average unit volumes of about $1.8 million—that’s on par with IHOP despite the former pair being QRGP C HTCEVKQP QH VJG JQWTU 6JKU GHƂ ciency gives NexGen breakfast players an edge in an increasingly tight labor market. With fewer hours to staff, the brands can focus on hiring top can didates and paying them more. Plus, GORNQ[GGU CTG Ƃ PKUJGF YKVJ VJG YQTM day long before the dinner rush. “We’re one of the few brands ... where people can really appreciate the quality of life they can have,” Paul Macaluso, CEO of Another Broken Egg, said in June. “We’re not poached as easily by other competitors.” These breakfast concepts are dis tinguishing themselves from legacy chains through elevated beverage offerings. First Watch launched a new alcohol program in fall 2020, and last year, Another Broken Egg bolstered its full-bar menu with premium options, packaged cocktails, and at-home kits. Such initiatives could raise sales even more. Snooze, which was ahead of the game in terms of its alcohol programs, boasts AUVs of $3 million. While larger chains might try to mimic NextGen success stories, some are catching their coattails in another fashion. In May, Denny’s purchased Keke’s for $82.5 million, and with break fast’s star showing no signs of dissipat ing, more deals could follow.

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What’s Y©×¬Ã¸Ă ~à¬ÉÃģ Anyway? INFLATION has been the word on every economist’s lips, but another, adjacent term is also popping up. Shrinkflation, also known as the “grocery shrink ray,” is the process in which manufacturers downsize their products without adjusting prices. As NPR recently reported, “It’s the inflation you’re not supposed to see.” Historically, the practice has been more common in the CPG and retail world, but a recent poll conducted on behalf of inventory manage ment platform MarketMan suggests consumers anticipate shrinkflation in restaurants, too. In fact, nearly three out of four (74 percent) Ameri cans said they expect operators to cut down on portion sizes as a result of higher food prices . What’s worse, 66 percent think they’ll turn to inferior quality ingredients without telling customers. For smaller, independently owned restaurants, a better solution could be to maintain size and quality and simply raise the price. After all, 61 percent of survey respondents reported they would be more likely to accept those increases from independents than from chains.

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FSRMAGAZINE.COM

AUGUST 2022