How Freshii is moving beyond QSR

The fast casual resto is driving competition in aisle, entering places like Walmart and Shell C-stores with its fresh food.

It used to be that “healthy” and “convenient” stood in sharp opposition when it came to food choices. However, with consumers consistently pushing for prepared food options that serve both demands, grocery stores and QSRs are responding.

Case in point, Toronto-based Freshii, which sells burritos, wraps, salads and bowls, has announced that it will begin selling its freshly prepared meals in 100 Walmart stores in Ontario, as well as on the retailer’s website, by the end of April. The stores will offer Freshii products including chicken wraps, bottled juices, “energii” bites, meal boxes and salads. Freshii foods and beverages will be stocked in the retailer’s fresh food section.

This new entrant could be another body blow to traditional CPG, as companies compete not only for shopping dollars, but also shrinking shelf real-estate in grocery retail.

Julia Adkerson of Krupa Consulting, a Los Angeles-based strategic PR and marketing firm that worked with Freshii to expand into the Walmart grocery space (and also works with several other health-focused food startups), tells strategy that consumers are looking for ready-to-eat meals in stores, because cooking at home isn’t nearly as convenient as grab-and-go. This demand is pushing QSRs, like Freshii, to look at grocery retail as a new place to have their products be more accessible, she says.

According to Adkerson, Freshii chose Walmart as a partner because it allows Freshii to gain a foothold in smaller geographical locales (the QSR has 18 locations in central Toronto and dozens throughout the larger GTA). Speaking to this desire to expand, the company has been entering other retail categories outside of QSR, recently signing a deal with Air Canada to have its bowls, wraps and the avocado smash box served on hundreds of flights. It also partnered with Shell Canada in June 2018, selling “healthy and convenient” meals and snacks at 25 Shell stations in the GTA.

Walmart has long offered fast-casual food items from McDonald’s in its stores – making the recent Freshii/Walmart marriage stand in stark contrast, says Professor Sylvain Charlebois, Rowe School of Business at Dalhousie University. In 2017, Walmart’s U.S. arm also flirted with healthier offerings at a Florida location, partnering with fast casual restaurant Grown to offer beet juice and customizable falafel bowls inside one of its Orlando Superstores.

“Walmart’s intention is clearly to change its image as a healthier place, [and] Freshii doesn’t have any “fast food” baggage to contend with,” Charlebois tells strategy.

Health is an important driver for consumers, says Charlebois, who expects more partnerships like this as “grocers adopt ready-to-cook solutions, another health-oriented segment.” However, he adds, “I don’t think processed foods will disappear any time soon.”

Since its founding in 2005, Freshii has opened 439 restaurants in 16 countries around the world. However, growth has come with challenges, which may explain its recent strategic retail partnerships. Freshii had to dial back its expansion plans, revising forecasts for its new openings and then scrapping the forecasts altogether, according to its CEO Matthew Corrin. In a conference call, Corrin admitted that the company experienced weakness in its U.S. stores, as well as a cohort of under-performing stores in Canada.

According to its February 2019 financial statement, Freshii opened eight net new stores in Q4 2018, a year that was comprised of 26 openings and 18 closures. Freshii reported a net loss of US$483,000 for the quarter ending Dec. 30, compared with a net loss of $620,000 for the same quarter a year earlier.