With revenues expected to rise by no more than 2 percent annually from now until 2010, the US food service industry is starved for growth.¹ For some players, the prospects are even slimmer. Fast-food chains, such as McDonald’s, and companies in the full-service restaurant business, such as Applebee’s International, together account for some 60 percent of this $400 billion market. They are now suffering because more consumers are demanding what neither can profitably offer: fresh food served quickly in a distinctive, casual environment. For the burger joints, "fresh" is an operational challenge, while traditional full-serves, which do have the fresh food consumers crave, lack the operational expertise to be efficient at scale.

Our research indicates that growth will come in the middle ground: the "fast-casual" area, in industry parlance. This market, we believe, will be worth $35 billion annually by the end of the present decade and could account for more than half of all food service growth over the period. To maximize profits, operators should concentrate on dinner, already the consumer’s favorite meal prepared outside the home. And the gap between it and other meals is widening: by 2005, when measured by total occasions, dinner will surpass...