One to watch: Fresh Italy

This fast-food chain has found a gap in the market for value food based on authentic Italian recipes.

It is lunchtime and Fresh Italy is getting busy. A lengthy queue is forming at the counter and the chatter of diners is drowning out the shrill hiss of the coffee machine. The cafe, on King William Street in the heart of the City, has been open for only three weeks, but already has plenty of regulars.

Overseeing the bustle is founder Tom Allchurch. A former marketer at Unilever and Amazon, he went solo in 2002, before launching the first Fresh Italy a year later with a outlet in nearby Ludgate Hill. Last year, he took the concept to the Lakeside shopping centre in Essex. The King William Street outlet is the chain's third.

Allchurch is an admirer of rivals Pret A Manger, Starbucks, Pizza Express and Caffe Nero, but believes he has found a gap these operators have missed.

The concept behind Fresh Italy, he says, is fast food that is 'tasty, hot, healthy, quick and excellent value for money'. It offers a range of pasta dishes and risottos for between £3 and £4. They are served within a couple of minutes of being ordered in an insulated pack originally designed as a coffee cup, so the food stays warm and is easily portable.

Unlike most fast food, Fresh Italy has genuine foodie credentials. As all the dishes use authentic Italian recipes, ingredients such as pasta, arborio rice, Parmigiano Reggiano and olive oil are imported from Italy. The company has even developed a process that measures the pasta's cooking time to the second, ensuring it is always perfectly al dente.

The City outlets' target market is the lunchtime crowd. Allchurch estimates that within 300 metres of both there are 30,000 office workers. His marketing has focused on generating word of mouth among this group. The stores run occasional discount promotions for local offices to drive footfall, then rely on the quality of their food to do the rest.

It seems to be working. Each store is serving 500 to 600 customers a day and Allchurch plans to open between three and six more, all in the City, next year. In the long term, he plans to move into other business-heavy areas and, building on the Lakeside experience, consumer-focused venues such as railway stations and shopping centres.

But Fresh Italy has not been without its teething problems. In 2003, it was decided that the portions were too small. They were made bigger, but prices rose by 30%. Sales duly slumped 50% because, according to Allchurch, the market is extremely price-sensitive. With so many businesses vying to feed the City's hungry workers, even a small price rise can divert customers to the competition. Fresh Italy had to cut prices by 15% to recover the lost trade.

Since then, the chain has focused on building loyalty. Last year, it launched a reward card offering holders free size upgrades and a coffee for 50p before noon. The scheme's popularity has exceeded expectations - the chain expected to distribute 400 cards, but the total has surpassed 2500.

The reward card carries a phone number and email address for customers to contact Allchurch. He is eager for feedback, and regularly acts on the basis of customer comments. When several regulars began asking about the health values of its meals, Fresh Italy decided to adopt the 'traffic light' food-labelling scheme proposed by the Food Standards Agency. All meals are now coded green, amber or red, depending on their nutritional content.

Feedback is crucial to Fresh Italy because it has developed largely through trial and error, launching products or services and seeing whether they sink or swim. It has experimented with selling antipastos and crisps, then ditched them when sales were poor. The company is still tinkering with its dessert range.

Allchurch insists there is still plenty of room for improvement. Next on his list is an e-commerce system that will allow regulars to send an order from their desk straight to the kitchen, then collect it from the store without queueing.

And after that? 'You can always be faster or better value, have a better menu or store design,' says Allchurch. 'You just have to get on and do it.'

TIMELINE

Apr 1999: Tom Allchurch has the idea for Fresh Italy while in the US studying business opportunities in the food sector for Unilever.

Feb 2000: Leaves Unilever to join Amazon.com as marketing director.

Jan 2002: Leaves Amazon to launch Fresh Italy.

Oct 2002: Secures funding from a family of private investors.

Jul 2003: Opens first store, in Ludgate Hill.

Jun 2004: Opens second store, at Lakeside.

Nov 2004: Launches reward card and reduces price of coffee to below that of its rivals. Coffee business takes off.

Feb 2005: Introduces 'traffic light' labelling system. Wins Best New Concept prize at the Retailers' Retailer of the Year Awards.

Nov 2005: Opens third store, in King William Street. Agrees funding package for expansion in 2006.

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