Salad shops are the new Starbucks, and Freshii has led the way. It boasts nearly two dozen locations in Toronto's downtown core, outnumbering McDonald’s and giving a run to Tim Hortons. Across the GTA there are more than 60. (Photo by Thomas Van Der Zaag)

Features | From Pivot Magazine

Have we hit peak lettuce? 

Salad shops are the new Starbucks, and Freshii has led the way. Now the market is getting crowded. Can this green revolution be sustained?

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As food fights go, it’s hard to imagine one healthier than the war underway near the bustling downtown Toronto intersection of King and Yonge. It’s a battle of the salad bowls, and the weapons of choice are kale and quinoa.

With all the salad spots packed into this area there are more leafy greens than a farmer’s field. To the north, a Fast Fresh Foods restaurant attempts to lure customers to one of its eight downtown locations with customizable spinach, quinoa and spring mix salads. To the east, B.Good, a Boston-based chain with five spots in the city, counters with its marinated kale, carrot and brussels sprouts power bowls. A nearby iQ Food Co., one of seven in Toronto, pitches a seasonal rotating salad menu to passersby. And if salad fans needed still more options, there’s a Flock Rotisserie + Greens, a Hopscotch, a Kupfert & Kim, a La Prep and a Salad Days, all vying for their healthy-minded dollars.

And it’s not the only front in the salad skirmish. In cities across Canada, healthful fast-casual chains and mom-and-pop shops are squaring off. In Calgary, restaurants like Dirtbelly, a homegrown chain known for its seasonal mix-and-match salads, and Fork and Salad are facing off against Seed N Salt and larger chains like the Chopped Leaf, which was founded in the Okanagan and has more than 30 locations, mostly in the west but in Ontario as well. Meanwhile, in downtown Vancouver, restaurant-goers on a kale quest have a multitude of options, with names like Chop and Toss, SaladLoop, Green Leaf, GreenDay, Leafy Box and Tractor Foods. 

But in this avocado arms race, there’s a Goliath among the Davids. Back in Toronto, within a five-minute walk of King and Yonge, there are eight Freshii restaurants beckoning customers with limited-time kale Caesar salads and wraps. Just beyond those, there’s another ring of Freshii restaurants. And just past them. . .well, you get the picture.

Freshii’s founder once told the CEO of McDonald’s, “Your growth days are over. Partner with us. Save the world, and help yourselves.”

Freshii boasts nearly two dozen locations in the downtown core, outnumbering McDonald’s and giving a run to Tim Hortons. Across the GTA there are more than 60. In central Canada and further west, Freshii has 16 locations in Winnipeg, more than 20 in Calgary, another 16 in Edmonton and more than 30 across B.C.’s lower mainland, and many points in between. 

It’s been 13 years since Matthew Corrin, then a 23-year-old media studies grad with no food-service experience, opened his first salad shop in Toronto, then called Lettuce Eatery, catering to an emerging wave of nutrition-conscious diners who wanted fresh, healthy meals served quickly. It was a shrewd move that gave Corrin an early advantage for the sweeping changes reshaping our notion of fast food. “Fresh is the most bankable word in food service,” observes restaurant consultant Aaron Allen. 

Today, few can match Freshii for the sheer reach of its superfood-slinging outlets, which, in addition to its customizable salads, offer everything from wraps and burritos to soups and juices. As of July, the company had 421 total locations, almost all of them franchises, with more than 160 of them in 16 countries worldwide, mostly in the U.S., but also in the U.K., Ireland, Sweden, Austria, Mexico, Peru and Colombia. Even Dubai and Riyadh. Each week an average of two new Freshiis are added to the mix, with another 185 stores in the process of being opened right now.

At the same time, Freshii is pushing well beyond its traditional restaurants. Fuelling up the car? Freshii salads and wraps are now rolling out in Ontario Shell gas stations. Taking a flight? Freshii has landed on Air Canada menus, with items like an avocado smash box, its spin on avocado toast. Got a kid at school? Freshii just launched an in-school lunch program. More so-called “omni-channel” expansions are in the works. “Just think of your day-to-day routines, where else can we make our mission come to life?” asks Adam Corrin, Freshii’s chief operating officer (and brother to Matthew, who was unavailable for interviews). 

This Freshii-everywhere ethos has helped make it a homegrown success story, that rare example of a Canadian company pushing beyond the comfortable confines of the country’s borders. Yet Freshii’s remarkable growth story has started to wilt lately. For one thing, that bruising glut of salad chains around Yonge and King, all fighting for the same choice real estate locations and customers, is a phenomenon playing out in cities around the world, making it harder for Freshii to expand and raising the obvious question of whether we’re seeing the formation of a salad-bowl bubble that’s about to burst. 

But Freshii has also suffered from several self-inflicted wounds. When the company went public on the Toronto Stock Exchange in early 2017, it touted its hyper-growth story to investors, only to backtrack on some of its promises within months. Investors have responded by driving Freshii’s shares down sharply.

Freshii has more than 250 locations in Canada (Getty Images)

The company now faces an important test. Freshii must win back the confidence of its shareholders while also staying ahead of fast-moving rivals. The coming months will be crucial, starting with the company’s third quarter results, which are set to be released in early November. “They haven’t lived up to the promises in the IPO,” says John Zamparo, an analyst with CIBC World Markets, who maintains a “hold” recommendation on the stock. “But if you disregard the stock for a moment, does the idea of a national or international healthy food chain make sense? I think it does. It’s their communication and execution that’s an issue.”

Matthew Corrin didn’t start out with ambitions to reshape the way people eat fast food. Born and raised in Winnipeg, he attended Western University in London, Ont., where he studied media, information and technoculture before heading to New York with his then-girlfriend (now wife) Kate. After an internship at the Late Show with David Letterman, he went on to a marketing job at fashion house Oscar de la Renta.

It was while in New York that Corrin got his first inkling of an opportunity in the food business. At the mom-and-pop delis that populate the city, Corrin watched as customers lined up for salad counters and other fresh foods. The branding was boring and the service poor. Yet New Yorkers clearly wanted what these delis were selling. Done right, a restaurant offering quick, healthy eats was a concept he felt could work back in Canada. And so, after returning to his home country, he borrowed from his family and the bank to open his first location under the name Lettuce Eatery, leaving no doubt as to what diners would find behind its doors.

The moment was ideal. A few years earlier the book Fast Food Nation had prompted a lot of people to ask questions about where their fast food came from. Around the same time, Morgan Spurlock nearly did himself in with his McDonald’s-only diet in the film Super Size Me. Fast-casual restaurant chains such as Chipotle Mexican Grill were already capitalizing on this unease by pitching themselves as alternatives to the heavily processed food at Taco Bell and McDonald’s, which had repeatedly tried and mostly failed to introduce healthy choices to its own menu. (Remember the seaweed-infused, low-fat McLean Deluxe burger from the 1990s?)

Set on doing with salad what Starbucks CEO Howard Schultz accomplished with coffee, Corrin opened another eight stores over the next two years. In 2007 he pulled up roots and moved with his then-pregnant wife to Chicago, the first leg of his global expansion. It was in Chicago that Lettuce Eatery got rebranded as Freshii. Other international outlets, along with further expansion in Canada, soon followed, and by 2014 the chain could boast 100 locations. And boast Corrin did, regularly telling reporters: “We opened our first 100 shops faster than Starbucks, Subway and McDonald’s.”

Freshii has capitalized on the strong demographic winds at its back. By the early 2010s, millennials were entering the job market in full force, bringing with them a particular set of tastes and dining preferences. More health conscious than generations before them, millennials want to know what’s in the food they’re eating, and that it’s environmentally and socially sustainable. According to Nielsen’s Generational Lifestyles Survey, 81 per cent of millennials are willing to pay more for food with health benefits, compared to 67 per cent of boomers, while an International Food Information Council survey found seven out of 10 millennials think about whether their food and beverages are produced in an environmentally sustainable way. Millennials eschew the one-size-fits-all menu items that were the basis of so many fast-food empires, preferring customizable meals. And their hectic schedules and social lives mean convenience is a priority. 

While restaurants have to do more to win millennials over, it pays off. A recent report from industry association Restaurants Canada noted that last year was a particularly strong one for the industry, with overall annual sales climbing 5.1 per cent annually. Millennials were responsible for three-quarters of that increase. 

It has outlets in Dubai and Riyadh, deals with Shell gas stations and Air Canada. One investor calls the growth strategy “discombobulated.”

Freshii, a company run by millennials with millennial franchisees, naturally evolved around those priorities, with its transparent ingredient lists, customizable salad and grain bowls, and a meal plan service that packs a full day of meals—breakfast, lunch, dinner and two snacks—into each box, doing away with the need to shop or cook. It’s all part of what Freshii describes as its mission: “to help citizens of the world live better by making healthy food convenient and affordable.” (It should be noted that almost every fast-casual chain built around salads and healthy eating has some form of change-the-world manifesto on its website. The “food ethos” at fast-growing Washington, D.C.-based Sweetgreen is “to be a positive force in the world and on the food system,” while B.Good’s “grow good” pledge is that it wants its food to be “the roots that connect community and inspire good.”)

To keep things fresh, Adam Corrin says the company is constantly on the lookout for new items and food concepts it can incorporate into its menu. He calls Freshii the “Zara of health casual” referring to the Spanish fast-fashion chain. “Every 30 or 40 days Zara takes the latest trends from the fashion world and mass-produces them,” he says. “We do the same with health-food trends. Our secret sauce is the menu is always rotating.” 

In a crowded restaurant scene, where getting noticed can make all the difference between success and failure, Freshii’s cocksure CEO proved he was brilliant at garnering international media attention for Freshii at the expense of its greasy old-school rivals. In 2015, Matthew Corrin fired off an open letter to Steve Easterbrook, the CEO of McDonald’s, a company he had earlier derided as “dying a slow death . . . they are failing in a serious way.” Corrin was only slightly more diplomatic in his letter to Easterbrook. “The reality is that McDonald’s is stagnating and your growth days are over,” he wrote, calling on the burger giant to team with Freshii to sell its healthier meals in its restaurants. “Partner with us. Save the world, and help yourselves.”

Other taunting letters followed, to struggling Subway, which has been forced to close hundreds of under-performing stores in recent years—“Subway has overdeveloped its retail base . . . Let’s explore a partnership in which we together convert select Subway stores to Freshii restaurants”—as well as penning a “froyo to Freshii” letter aimed at franchisees of frozen yogurt chains, urging them to switch brands: “I challenge you to make your restaurant relevant again.” (That last letter earned Freshii a $10-million trademark lawsuit over the denigration of the term “froyo.”) 

The letters worked, insofar as they drew a bounty of press coverage from journalists only too happy to see one CEO snipe at another in public. And they helped fuel speculation as to what Freshii had planned for its own future—specifically whether the company would go public and give investors an opportunity to join in its grand mission. 

They got their chance in January 2017, when Freshii listed its shares on the Toronto Stock Exchange, raising $125.4 million. As Freshii shares climbed more than six per cent on their first day of trading, the company released a statement from its CEO about the good things to come. “We are in the earliest days of what I see possible for the Freshii brand,” Matthew Corrin said in the release. “I believe we will continue to be one of the most compelling growth stories and stocks in North America.”

Monday mornings at Freshii’s Toronto head office always start with a huddle. The first order of business is always the same. “Our attitude is, bad stuff first, good stuff last,” says Adam. “We already know the good stuff. We want to know what’s keeping you up at night.”

The past year has offered plenty to keep Freshii execs from sleeping soundly. In September 2017, eight months after going public, the company stunned investors with two rounds of bad news. Two years earlier Freshii had teamed up with U.S. retail giant Target to put outlets into 18 of its stores. At the time, Corrin said the deal would allow Freshii to bring “health and wellness to the masses.” However, after two years of testing, both companies agreed to part ways. Investors felt blindsided, but it was nothing compared to the other shoe to drop that day.

One of the biggest draws for investors was Freshii’s remarkable ability to open store after store after store, at a pace rarely seen in the industry. When it went public, the company had forecast it would open up to 160 new locations by the end of 2017, bringing its total store count to around 440, and that by the end of 2019 there would be as many as 840 locations worldwide. Yet eight months later Freshii dramatically scaled back its total store forecast to 376 in 2017, and 760 by 2019. That would mean a deep 22 per cent cut to Freshii’s estimated revenue for 2019, to US$285 million from $365 million.

Freshii Founder Matthew Corrin (CP Images)

Freshii called the slower growth “extremely disappointing” and blamed the logistics of its ambitious expansion plan for causing delays. “The business fundamentals are as strong as they’ve ever been,” Matthew Corrin told BNN at the time. But in the months since, Freshii’s quarterly same-store-sales growth has tumbled, from an average of six per cent during the 2016 to 2017 period, to just 0.9 per cent in the second quarter this year.  

Remember that letter Corrin wrote to McDonald’s CEO Steve Easterbrook? It doesn’t appear Easterbrook ever wrote back, but if he were to do so today, he might point out the following two pertinent facts: McDonald’s quarterly same-store sales growth is now outpacing Freshii’s; and, since Freshii’s IPO, shares in McDonald’s are up 27 per cent, while Freshii shareholders have seen their investment plunge nearly 70 per cent as of September 2018. 

Equity research analysts are certainly more skeptical of Freshii’s claims than they were at the time of the IPO. Back then, 85 per cent of analysts covering Freshii had “buy” recommendations on the stock. Today, more than two-thirds of analysts consider it a “hold.” “It’s a challenge at this stage,” says Zamparo at CIBC. “There’s a view among a lot of investors that they don’t believe Freshii will achieve its 2019 guidance [on store openings].”  

Other company watchers are similarly disillusioned. Doug Fisher, a Toronto restaurant industry consultant and Freshii shareholder, calls the chain “discombobulated” because of its international strategy. He argues Freshii is spread too thinly around the world. For instance, there’s just one restaurant in Riyadh, two in Peru, one in Vienna, another one in Guatemala, three in the U.K. and two in Mexico. Overseeing such a mishmash of international operations is a costly distraction to management, he says. “Freshii could have 400 restaurants in Canada, or in Ontario alone, and that would be a strong brand,” he adds. “Being spread over 18 or so countries is all about ego, not the strength of the concept.”   

Adam Corrin admits Freshii has not lived up to investor expectations. “We recognize that some in the investor community have potentially lost confidence in us,” he says. “But when we see the enthusiasm of the team about what they’re working on, and how they continue to believe in our brand, that’s what gives us confidence.” 

It’s a critical moment for Freshii. What does a high-flying, fast-growing company do when it overextends itself and the competition heats up? Having learned difficult lessons from the past year or so, the company is taking several important steps to ensure its existing business stays healthy while continuing to grow.  

For one thing, Freshii has ramped up staff levels at its head office since its IPO, more than doubling the number of people there to better handle the process of opening new stores. In certain departments like real estate, design and franchise sales and development, staff levels have tripled.  

During the company’s most recent analyst call, Matthew Corrin said Freshii is also becoming more selective about which franchisees it works with in key markets. In the past, the company relied on a bidding process to decide which of its thousands of franchise applicants would get a store. Instead, for the first time this year, the company has more actively pursued multi-unit franchise operators in the U.S. and expects that to result in more store openings in 2019.

Freshii is also in discussions with non-traditional partners, along the lines of its deals with Shell and Air Canada, to carry Freshii products. Adam Corrin says the company learned a lot from its failed Target partnership that will help in the future, such as the importance of proper brand signage and controlling how Freshii is marketed to its partner’s customers.  

Here at home, the company is refocusing its attention on smaller Canadian towns—the types of places with a McDonald’s at one end, a Tim Hortons at the other, and not much in the way of quick-and-healthy meals in between. “There are 263 markets in Canada with a population between 10,000 and 100,000,” says Adam. “We’re going to get there. The question is how to get there faster.” 

Will that be enough to reassure Freshii’s beleaguered shareholders? Zamparo expects investors will wait until they see the results of these efforts, though he notes the company still has close to $30 million in the bank left over from its IPO, money Freshii could use to buy back some of its shares or issue a dividend. Either measure would placate shareholders. But when pressed about Freshii’s cash hoard, Adam Corrin repeats what he says every other time he’s asked: the company has no plans for the money yet. 

Meanwhile, the competition continues to get fiercer. Nearly every salad chain operating around that intersection at King and Yonge in Toronto, not to mention chains in Calgary, Vancouver, Ottawa and Montreal, is on the hunt for franchisees to open new locations. David Segal, the founder of the DavidsTea chain of tea shops, is bringing his Mad Radish salad-bar spinoff company to Toronto this fall. Even Costco is getting in on the act. Earlier this year the big-box chain overhauled its restaurant menu. Gone is the 970-calorie Polish hot dog combo (at least in the U.S.). In its place: acai bowls and vegan salad, among other healthy offerings.  

Are these signs of a salad-bowl bubble forming? Perhaps. But for now, Adam says Freshii is keeping its focus on the future. “We’re in this for the long term,” he says. “We know there are bumps along the way, but at the end of the day the mission is still the same, making healthy food more affordable.” 

Freshii calls itself the Zara of the health-casual restaurant industry, a reference to the Spanish retailer known for quickly bringing the latest fashion trends to the masses. Freshii aims to do the same with heathy eating trends. These are the top five ingredient trends making their way onto Freshii’s menu, according to the company’s lead nutritionist, Andie Shapira:

HEMP SEEDS

“Not only are hemp seeds an excellent source of heart-healthy fats, they also contain all the essential amino acids, making them a complete source of plant-based protein. What’s more, hemp seeds contain both soluble and insoluble fibre, which benefits digestive health.”

AVOCADO

“Aside from its rich and creamy taste, the healthy fats in avocado help enhance the body’s ability to absorb fat-soluble vitamins (i.e., vitamins A, D, E and K). Adding avocado to your salad can help to control blood sugar levels, and keep you feeling full and satisfied.”

CHICKPEAS

“Chickpeas are a legume containing a variety of vitamins and minerals, as well as protein and fibre. In addition, legumes are one of the most environmentally sustainable sources of protein available.”

KALE

“Kale is high in nutrients and low in calories, making it one of the most nutrient-dense foods on the planet. It’s loaded with powerful vitamins, minerals, antioxidants and fibre.”

QUINOA

“It’s no surprise quinoa is one of the most popular health foods—it's gluten-free, high in fibre and has a low glycemic index, which helps to regulate blood sugar. It is also very high in protein compared to most grains, making it an excellent food option for vegetarians and vegans.”