From Chipotle to Cava to Panda Express, more and more large restaurant chains are expanding into America’s small towns – NBC 6 South Florida

• Small-town residents are craving new dining options, and Chipotle’s recipe for success is leading the chain and other fast-casual restaurant chains like Cava and Panda Express to eye more locations in rural America.
• Covid dealt a death blow to independent restaurant operators and created an opportunity for national operators in cities where a Subway or a burger franchise hidden in a gas station was the only branded option.
• Lower costs help companies offset lower sales.

Bennington has a population of 15,000 and is known for its fall foliage, the lush backdrop of the Green Mountains and the laid-back Vermont vibe. There’s no major university here (Bennington College has over 700 students and calls the namesake town home) and the nearest freeway is 40 miles away. But none of that stopped Chipotle, long a fixture of the suburbs, airports and freeways, from opening in this small Vermont town last month.

Stuart Hurd has been city manager for 32 years, and while he laments the loss of the family-run restaurants that once fed the bustling downtown crowds, he is excited about the arrival of Chipotle.

“This is an award for us; it’s good for the whole community,” Hurd said, adding that a Starbucks will soon open next to Chipotle, which opened its doors in July. These restaurants help fill a void in Bennington.

“Most of the old family restaurants are gone. They’ve gotten too old. Their kids don’t want to do that kind of work anymore,” Hurd said, noting that downtown Bennington used to have three good family restaurants. “But they’re gone, and that kind of restaurant doesn’t seem to be coming back,” he added.

The same scene repeats itself in one small town after another (where Chipotle defines communities with fewer than 20,000 residents).

Bennington, Somerset, Pennsylvania, population 15,000, recently welcomed its first Chipotle to town with a ceremonial ribbon cutting, balloons and local dignitaries.

Aggressive fast-casual expansion strategy

Chipotle is one of the most aggressive fast-casual chains, opening locations in towns that once had only a Subway or a burger joint in a gas station. But the reasons for Chipotle’s expansion in small towns have as much to do with changing food preferences as economics, experts say. Burgers and fries have long been a staple in small towns, but now small-town diners are increasingly looking for healthier alternatives.

“In general, people’s eating habits and their understanding of what’s good for them have evolved toward real, unprocessed foods, not fried things,” said Chris Brandt, Chipotle’s chief brand officer.

Other fast-casual chains like Sweetgreen and Cava are trying to replicate Chipotle’s concept, but Eric Gonzalez, a restaurant analyst at KeyBanc Capital Markets, says other chains will struggle to replicate its success in small towns.

“There are a few things that make Chipotle unique,” Gonzalez said. Chipotle’s cuisine is widely accepted and loved; its size allows the company to keep prices low – the price of a meal at Chipotle is comparable to that of one of the major fast-food chains. And its “Chipotlane” – a digital pickup business – provides another revenue stream.

“Chipotlane opens up these small towns for them,” Gonzalez said. He also says cheaper land and cheaper labor in small towns means lower expenses, which often offset what may be lower revenues than in suburbs.

“A brand like Cava might have a little harder time,” Gonzalez says, since people aren’t as familiar with the Mediterranean dishes it sells. But Cava is trying to do what Chipotle did for the Mediterranean category for south-of-the-border cuisine. With over 300 restaurants, Cava is bringing its Mediterranean menu to small towns for the same reasons as Chipotle, and says that over time, the restaurant will gain the same level of acceptance for Mediterranean cuisine as it has for Mexican.

“These markets have been underserved from the start as people crave more interesting foods, become more educated about their diets and have a growing understanding of what they eat and how it impacts their health,” says Brett Schulman, co-founder and CEO of Cava.

The trend has led Cava to locate its stores in smaller cities like Lancaster, Pennsylvania and Lynchburg, Virginia. However, Schulman says Cava still has plenty of room to grow and expand to set up shop in even smaller cities in the future. He added that the comparison between Cava and Chipotle isn’t quite accurate because the number of restaurants and years of existence are different. (Cava opened its first fast-casual chain in 2011, and compared to its 300 restaurants, Chipotle, which was founded in the 1990s, now has over 3,500 locations.)

Chipotle’s Brandt says that not all small towns are the same. Whether a small town is a suitable location for Chipotle depends on revenue and other intangible factors.

“We look at proximity to the freeway and whether it’s a commercial hub in the area,” Brandt said, adding that while there may be larger cities nearby, they aren’t as attractive if they don’t have a Walmart or Target to help absorb traffic. “We want to be in a town with a lot of stores.” Bennington meets those requirements, with a Walmart Supercenter and Home Depot, to name a few of the city’s retail giants. “Small towns with a college are also good choices,” he added.

Brandt says Chipotle still has plenty of room to grow in small towns across the U.S. Chipotle plans to open another 3,500 stores in the coming years, a significant portion of them in small towns.

“We’re looking for places where we can differentiate ourselves, and we’re looking for food deserts where there’s a community that wants what we have,” he said.

The impact of the pandemic on local restaurants

Mike Esposito, co-managing director at Franchise Equity Partners, a private investment firm that builds long-term partnerships with franchisees, has noticed the trend of popular fast-casual restaurants opening in small towns and says that a confluence of factors is responsible for this.

“There’s a general saturation of restaurant concepts in the U.S., especially with large chains looking for opportunities for incremental growth,” Esposito said. But while cities and suburbs are saturated with restaurants, Covid has dealt a blow to independent restaurants and small chains that were already struggling, leaving a gap for better-capitalized chains (think Chipotle) ​​to move into, while those that haven’t yet moved in are looking positively at small markets.

“These chains now see ‘white space’ for development in smaller markets to fill the gap created by the Covid closures,” Esposito said.

Panda Express, a staple in malls and airports, is now opening stores in smaller towns. Last month, it opened in Auburn, Indiana, which has a population of 12,000 even though Interstate 69 runs right past the town.

“We are focused over the next few years on growing in underserved markets, many of which are small cities in the U.S.,” said Fabiola Del Rio, a spokeswoman for the Panda Group, which owns Panda Express. The chain has about 2,500 stores in the U.S.

While Cava is popularizing tahini and tzatziki in small-town America, Panda Express has the advantage that people are generally already familiar with General Tso’s chicken and egg rolls.

Del Rio says many of the larger urban and suburban areas are saturated and that smaller cities offer a different level of service. “The untapped potential in smaller cities allows us to introduce our American-Chinese comfort food to new audiences that may not have had easy access to what we offer before,” she said.

However, smaller cities also pose different risks than larger cities for established brands like Panda Express. While the high recognition of the Panda Express brand is an advantage in metropolitan areas, Del Rio said there is a need for greater community engagement in smaller cities. The chain makes it a point to reach out and work with local chambers of commerce and philanthropic organizations. “We can connect with our guests on a more personal level, understand their preferences and tailor our community-based programs to their needs,” Del Rio said.

In Bennington, Hurd wonders what other big names will come next. But for now, at least, residents are enjoying their chips and guacamole. And if Cava has his way, even more residents of smaller towns will be ordering mezze salad and harissa avocado in the near future.