Thinking of Buying a Fast-Casual Franchise? Read this report first.

Ones to Watch | By Lynne Miller

Menu item from Vapiano, a high-end fast-casual restaurant brand.

Americans are finally getting a taste of Vapiano, an up-and-coming European chain that’s won praise for mixing high style, sexy atmosphere, innovative technology, and freshly made meals with a distinct Italian flavor.

Vapiano, which specializes in freshly made pasta, pizza, and salads, opened its first stores in the U.S. in the Washington area in 2007. The company’s founders plan to expand throughout the states as well as build new restaurants abroad.

Open food preparation, high-end design, and chip-card technology make Vapiano unique among other fast-casual brands. Employees greet customers as they enter the restaurant and explain how the chip card is used to order food and drinks. The restaurants feature a series of open-cooking stations, each staffed with a cook who prepares pasta, pizza, and hand-tossed salads according to customer specifications. When their food is ready, diners load up their trays and grab a table.

“It’s interactive cooking,” says Kent Hahne, president of Vapiano. “The customer interacts with the cook.”

Using the chip cards, customers can also order alcoholic drinks at the bar. While Vapiano emphasizes self-service, diners also can place drink orders with staff that provide table service.

The restaurants, which range in size from 4,000 to 8,000 square feet, seat a minimum of 140 diners. The company enlisted Matteo Thun, a highly regarded architect and designer from Milan, Italy, to give Vapiano a sophisticated and upscale look. The restaurants’ décor includes contemporary oak furnishings, natural stone, and soft earth-toned leather. Lounge music plays in the bar area, which is spotted with stylish and comfortable red furniture. A fireplace and bar encourage customers to sit and enjoy a dessert, coffee, or cocktail. Beer, wine, liqueurs, cognacs, and martinis are available.

Chip cards are used widely in Europe, but American customers are not used to the technology. Teaching Americans how to use the card has been a challenge.

“It takes a little educating at the beginning,” Hahne says. “People are a little overwhelmed. We have a lot of employees at the entrance to explain how ordering works.”

Before launching Vapiano, Hahne operated a number of restaurants and nightclubs in Germany and the Washington, D.C. area. He was the first McDonald’s franchisee in Germany. At the peak of his career with McDonald’s, Hahne ran 18 restaurants. He says the experience taught him a lot about employee training, management, and inventory control. Equally important, he learned what people don’t like about typical fast food.

Vapiano specializes in made-from-scratch dishes that rely on healthy ingredients. Restaurants offer only fresh pasta and ravioli, made in house daily, in eight shapes. The tomato sauce is also made from scratch. For dinner, the top-selling entrées are penne arrabiata, carbonara, Bolognese pasta and fire-roasted pizzas topped with prosciutto, salami, and mushrooms. During the dinner and lunch rush, the restaurants keep 14 to 16 cooking stations open. Most business comes from dine-in sales. The average check ranges from $14.50 to $22, depending on whether it’s lunch or dinner, Hahne says.

“The biggest thing we hope sets us apart is the food quality,” he says.

Hahne and his partners intend to expand the Vapiano brand with additional corporate and franchised stores. By the end of 2008, there should be 20 to 25 new stores operating in 17 to 18 countries, he says. The brand operates in nine countries now. The franchise fee is $45,000 while start-up costs range from $1.18 million to just less than $2 million. The costs cover everything from materials to employee training to the sound and lighting systems.

President: Kent Hahne
HQ: McLean, Virginia
Year Started: 2002
Annual Sales: $200 million
Total Units: 32
Franchise Units: 10

“It’s high end,” Hahne says. “We use authentic materials. We have real olive trees and real herb gardens. We’re constantly working on bringing those costs down.”

Despite the high cost of entry, Vapiano is already being called “the future of fast casual” in Europe.

“In the beginning our competitors didn’t think we could make money,” Hahne says. “We implemented [cost] control systems. We wanted to put money into food quality and employees.”

The company tries to cultivate a fun and nurturing atmosphere for workers. When it hires cooks, the company looks for “characters” who can strike up a conversation with customers while preparing their meals. “We call it a show kitchen,” Hahne says. “It’s a stage. They should interact with customers, not try to hide from them.”