The D.C. Fast Casual Problem: Will this Segment Get the Distinction It Deserves?

Washington, D.C. is a hotbed of fast casual restaurants. ShopHouse, Sweetgreen, and Cava Grill are a few of the many that got their start in the nation’s capital.

Other concepts like &pizza, Nando’s, Cava Mezze, and Beefsteak have gained traction in DC, but it hasn’t been as easy in this city compared to other markets. That’s because they suffer from strict regulations.

Although we are well- aware that fast casual concepts are much different from quick-serve establishments in terms of the restaurant model, the Board of Zoning Adjustment is classifying them as fast food.

Currently, restaurants in the area are being categorized as fast food if they have drive-through windows, if the meals are served with disposable plates and flatware and or if the guests pay prior to receiving their food. And being deemed in this category means that these restaurants have been slapped with multiple restrictions prohibiting them from residential areas.

But after a long fight by D.C. fast casual operators, new zoning regulations will be going into effect September 6.

What has been the impact of these regulations on local operators in the past and what do consumers think about the segmentation?

Fast Food Versus Fast Casual

From an operator stand point, the differences between fast casual and fast food/quick-serve restaurants are extremely evident.

The fast casual format usually features…

  • a higher quality food product.

  • an ambience similar to casual dining.

  • some table side service.

  • a customizable menu.

  • a reasonable price point at around $8-13 per meal.

  • a beer and wine menu.

  • fast service with meals ready under 10 minutes.

While the fast food format usually features…

  • frozen and processed foods.

  • no table side service.

  • a price point that can’t be beat at anywhere from $5-7 a meal.

  • minimal dining ambience.

  • rapid service with meals ready in a few minutes.

  • no alcoholic beverages served.

While most consumers notice there seems to be some type of difference between quick-serve and fast casual concepts, they are still not aware of how the formats should be classified in entirely different restaurant segments.

“They are technically fast food I guess, right?” said a D.C. woman about comparing concepts like Chipotle and Sweetgreen to McDonald’s and BurgerKing.

“When you think about it, it really is kind of the same. They are both fast food, but the aesthetics of the places are way different. You feel like you are in a classier fast food place like when you are in Chipotle, but I would still consider Chipotle fast food,” said a D.C. man about this topic.  

So have the strict regulations by the Board of Zoning Adjustment been influenced by the fact that not all consumers recognize that the segments are quite different? So in an effort to keep residents happy, fast casuals have been lumped in with fast food and are not allowed to set up shop in residential areas.

The D.C. Fast Casual Problem

The D.C. Zoning Commission placed its first restrictions on fast food restaurants in 1985. This is when fast food restaurants were spreading through the city like wildfire, but residents and Advisory Neighborhood Commissions did not approve of these establishments in their residential neighborhoods. The restaurants brought car and foot traffic, late-night pedestrians causing disturbance, gaudy signs and an influx of litter on the streets.

After years of amendments on the fast food rules, the D.C. Zoning Commission determined the official fast-food rules in 2007. A restaurant only had to meet one of these three definitions: the restaurant has a drive-through, has the guest pay up front, or uses disposable dishware.

But, this means fast casual fell into this category. So, what has been the effect on fast casual operators?

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Well, first it limited where they could set up stores. They have been forced in areas where all fast food joints were allowed. Not to mention, making sure the fast casual restaurant incorporates the fast food rules is a whole other complicated problem.

“You can’t operate a fast casual restaurant under the current restaurant guidelines. It won’t be successful. The space isn’t designed to sit a lot of people. So if I am only able to see 15 to 20 people and they have to eat here and I can’t do all my food to go, I am not going to meet my margins,” said Chef Marjorie Meek-Bradley, owner of Smoked and Stacked in DC.

And every fast casual operator knows that those margins are particularly tight and being able to serve major numbers will make or break the restaurant.

Even when the restaurant tried to set up a store through an exemption process, it was time consuming, expensive and so much of a hassle.

For example, Nando’s struggled opening a store in Woodley Park. The exemption process involved the Advisory Neighborhood Commissions (ANC) and the Nando’s was eventually granted the exemption for five years. But, only being guaranteed five years in business in that area was not worth the investment. Not to mention, the restaurant intended to sign a 10-year lease, so Nando’s backed out.

Interestingly enough, the residents had a mini-uproar and the ANC reconsidered and the brand received a 10-year exemption. The store is projected to open by the end of August.

Ultimately, this cost $50,000 to $100,000 in legal fees.

Why D.C. Still Has Been a Fast Casual Incubator

Although D.C. fast casual restaurants experience challenges from the zoning regulations, many concepts have selected D.C. as a great city to expand their business.

The city offers much more affordable real estate options than New York and a young health-conscious demographic that is willing to invest in better quality food. D.C. diners also are adventurous, with sophisticated tastes.  

Additionally, the demographic features a melting pot of all types of people from different cultures and consistent travelers from across the country and world. All of the urban and suburban environments offer different areas to test the concept. So if the concept is proven successful in D.C., it will likely be successful everywhere.

What Does the Future Hold?

After eight long years, new zoning regulations are being introduced on September 6.

There is much more flexibility with five characteristics that define a fast food restaurant and not one of them automatically defines a concept as fast food. Restaurants will be considered carefully from a DCRA zoning administrator before being placed in the fast food category.

Even though the law is more flexible, human judgement will be required to categorized restaurants. So fast casual restaurants could still be classified incorrectly. And if they are, the restaurant either has to invest in changing its entire model or the operators have to spend time and money appealing and going before the Board of Zoning Adjustment.

Foodable will be continuing to follow this story and report on the progress in September. Stay tuned, readers.