Veggie-Burger Kings

Fast food for fitness fans.

By Donna Fenn |  @donnafenn   | 
 

60-second business plan

THE PITCH: Americans spent $112 billion on fast food last year, including an average of $53 million a month on McDonald's Happy Meals. The total fat count alone -- never mind all those plastic toys rattling around under car seats -- is enough to make Gary Hirshberg cringe. Hirshberg is betting that a significant percentage of American consumers share his disdain for typical takeout fare. Hence O'Naturals, a proposed chain of natural/organic fast-food restaurants aiming for a share of the nearly $20-billion natural-foods market.

Hirshberg, president and CEO of Stonyfield Farm, a Londonderry, N.H., yogurt company, conceived of O'Naturals four years ago on a family drive up the Pacific Coast. He had assumed that health-conscious California would offer meal choices beyond greasy burgers and fries. Wrong. "We were hostages to limited choices on the road," he says.

Now Hirshberg, who is O'Naturals' chairman, and a cadre of private investors are set to expand the fast-food universe with three or four O'Naturals restaurants in wealthy New England locales in the next three years. The first O'Naturals opened its doors last May in tony Falmouth, Maine, a town near Portland that typifies the target demographic: on-the-go, highly educated, upper-income families craving fast, tasty, healthful food. The Falmouth store is already posting daily average revenues of $2,000 to $3,000, roughly on par with the typical Burger King.

"I don't think anyone has tried to put together something that is family-friendly, tasty, natural, and organic fast-food," says O'Naturals cofounder and president Mac McCabe. D'Lites, a chain of restaurants that stressed low-fat, reduced-calorie offerings, bombed in the 1980s partly because it didn't deliver on taste. McCabe promises that O'Naturals won't make the same mistake. The restaurant offers flat-bread sandwiches (made with bread baked on the premises), Asian-style noodles, soups, and salads, as well as macaroni and cheese, baked chicken nuggets, and tortilla dogs for the kids. And it's leveraging Stonyfield's brand recognition with fruit and yogurt shakes. The average register ring is between $5 and $8 -- higher than the big chains' but well within the typical range for premium fast food.

For now Hirshberg and McCabe are sticking to a grassroots marketing strategy. They're lining up environmental groups, youth museums, and other nonprofits to run on-site programs for children and adults. And they're playing up the restaurant's environmental mission big-time: according to the company's job application, even kitchen assistants are expected to "become passionate around the recycling program of O'Naturals."

McCabe says those values -- along with the company's $7-an-hour starting wage -- are attracting topflight employees. "We're getting extraordinary kids from the best high schools," he says. Hirshberg is optimistic that the softer real estate market will ease the company's planned move into other Northeast locations. Once those restaurants are operating, O'Naturals will roll out the concept nationwide. But Hirshberg is in no hurry. "We're trying to find that fine line between seizing the opportunity and not growing so fast that we burn ourselves out."

The Quick Once-Over

Formal Projections: $1.5 million in sales from one store, net loss in 2001; $4 million in sales from two stores, net loss in 2002; $7 million in sales from three or four stores, breakeven in 2003

Daily Revenues: $2,000 to $3,000 per store

Total Capital Raised: $2.3 million from 12 investors and personal savings from cofounders

Biggest Expense: Capital investment for renovations, equipment, and architecture. "The total is a moving target," says Hirsh- berg.

First-Year Total Expenses: $2 million (cost of goods sold, restaurant overhead, corporate overhead)

The Weigh-in: Our Panel Rates the Plan

Healthy Start or Fat Chance?

WHO: Scott Van Winkle, specialty-food and beverage analyst at Adams, Harkness & Hill, a Boston-based investment-banking firm

RATING: 8 (on a scale of 1 to 10, with 10 being the highest)

"The organic market is growing 20% annually and the natural one is growing 10%, so [O'Naturals is] positioned in a rapidly growing category with good demographics. Research tells you it should be successful, but in the food industry taste does matter. The kids aren't going to take you to O'Naturals, so the core success of the business will depend on whether they can demonstrate to parents that the products are good enough to justify a price premium. They have to appeal to parents, but they have to deliver to kids. [Hirshberg] should stay regional until he's proved the concept.

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    • Donna Fenn

    Inc. contributing editor Donna Fenn is the author of Upstarts! How GenY Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success (McGraw-Hill, 2009). Both this blog and the book examine the ways in which GenY is changing the entrepreneurial landscape with new approaches to starting, growing, and managing their companies. Learn more at http://www.upstartsrock.com/.


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