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Freshii rides fast-casual trend, embraces 'healthy eating'

In an ever-growing landscape of new dining entrants, Freshii — a healthy fast-casual restaurant — has opened its first 100 locations at a pace faster than Subway, McDonald's and Starbucks.

The casual-dining sector has become a hot slice of the market, creating what some analysts call the "Chipotle effect." The National Restaurant Association estimates casual-dining sales at $709 billion for 2015. Last year, consumers spent an estimated $21 billion at eateries like Freshii, which offer healthier menus and convenient service.

It took only nine years for Freshii locations to crack triple digits, versus 13 years for Subway, 19 for the Golden Arches and 20 for Starbucks. Freshii founder Matthew Corrin attributes its growth to being at the intersection of three global trends — health and wellness, millennial consumer demand and entrepreneurship opportunities.

"The definition of healthy eating has evolved from 'fresh as opposed to fried,' to something very different," he told CNBC. "As long as we continue to execute over time, Freshii can meet a growing healthy demand."

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Freshii was started in 2005, and by the end of this year plans to operate 200 units in 80 cities and 15 countries. Global expansion is important, Corrin said, as the restaurant seeks to be able to adapt to new cultures in a changing marketplace. The strategy seeks to suit the needs of consumers.

"You're seeing the mass population understand the importance of healthy eating," he said. "You can't eat burgers, fries and pizza everyday."

Fast-casual visits have increased by 5 to 9 percent each year over the past five years, according to NPD Group, a market research firm. Nearly half of fast casual meals occurs at lunch, while 33 percent are at dinner.

Bonnie Riggs, a restaurant group analyst at NPD, said there's still a growing market for consumers wanting lightly prepared meals with fresh ingredients in a fast-casual setting.

"Their check size is quite higher and because these concepts are meeting customer expectations, they're willing to pay the price," she told CNBC.

Freshii
Source: Freshii

Being a new entrant in a hot sector has stoked speculation about Freshii's prospects, as recent reports say the chain is exploring going public as soon as next year. In a note to CNBC, a company representative declined to comment on a potential initial public offering.

Regardless, over the coming years, fast casual is expected to see double-digit growth, whereas the industry as a whole is expected to grow at just half a percent a year — not even keeping pace with population growth.

However, it still remains a small portion. Fast food accounts for 78 percent of the industry restaurant visits, while fast casual is only 5 percent, according to NPD. Meanwhile, the average visits a millennial makes per year is only 12 compared with 177 for traditional fast food.

Millennials have been the largest age group driving the increase in visits to fast casual, while simultaneously cutting back on their visits to other restaurants.

"Since the recession, millennials cut back dramatically visiting other types of restaurants, but they started to go more to fast casual," NPD's Riggs said.

Still, the very characteristics fueling Freshii's growth may eventually prove to be its undoing.

"Millennials are known to get bored very easily and move on to the next thing," Freshi's Corrin said, admitting that the younger demographic was part of his desire to keep evolving. "Unless we're thinking of the triple bottom line — people, profits and planet — I actually think we won't be relevant to millennials."