David Segal has a major beef with the fast food business.
The Ottawa-born founder of DavidsTea believes Canadian consumers crave much more than just burgers and fries when they dine at quick-service restaurants, but continue to be frustrated at the lack of options available to them.
“I drive the 401, and I still have to eat at Wendy’s because there’s nothing else to eat,” the 36-year-old entrepreneur said during an interview at his new downtown restaurant venture, Mad Radish.
Mr. Segal recalled a recent trip to a supplier’s farm to further illustrate what he sees as a gaping crater in North America’s culinary landscape.
“We’re parked at an intersection in Barrie, Ontario,” he said. “And there at the intersection is a McDonald’s, two doors down a Burger King, across the street an Arby’s and across the intersection a Harvey’s. That’s $10 million in burger business. Some of that needs to move towards healthy eating – if not all of it.”
A decade after launching the chain that brought specialty tea into the mainstream with stores from coast to coast, Mr. Segal is now determined to redefine Canadians’ ideas about fast food. The first two Mad Radish locations opened last month, one in the heart of downtown at the corner of Albert and Metcalfe streets, the other near Bank Street and Fifth Avenue in the Glebe.
The former tea magnate is taking his new mission seriously: Red meat is nowhere to be found on the Mad Radish menu, which features a dozen salads priced at an average of about $12.50 as well as a few soups and other dishes, all heavy on greens such as kale, spinach and cabbage, with fresh, locally sourced chicken occasionally added to the mix.
“Diet is one of the biggest health issues of our time,” he said. “Someone needs to make the investments in time, money and energy to really change the fast-food model, and we intend to do that in Canada.”
After leaving DavidsTea in early 2016 to “dedicate more of his time to exploring other entrepreneurial interests,” the graduate of Nepean High School returned to his hometown with a new sense of purpose.
He and Mad Radish co-founder Stephanie Howarth, the former head of marketing at DavidsTea, began planning the restaurant’s concept about a year ago. They bolstered their team with a deep roster of well-respected industry veterans led by executive chef Nigel Finley, who held the same post at Toronto’s renowned Chase Hospitality Group, and director of operations Adam Tomczyk, a former executive with U.S.-based Chopt Creative Salad Company.
Changing stereotypes
“We really want to have the quality of food you get in fine dining with the speed of service you get in fast cash,” Mr. Segal said. “It’s a very chef-driven concept.”
Just as DavidsTea upended an industry often stereotyped as stodgy by tagging its products with catchy names such as Jumpy Monkey, Mad Radish is hoping to entice hungry lunch-goers to feast on salads with zippy monikers like Mad Panzanella, Dill with It and Breakfast for Dinner – a particularly creative concoction that mixes blueberries, roasted beets, goat cheese and steel cut oats with the requisite spinach and kale.
The idea, Mr. Segal said, is to offer health-conscious consumers a nutritious menu that is not only tasty, but fun and filling at the same time.
“This isn’t rabbit food,” he insisted. “The idea is not that you eat this and you’re hungry again in an hour, which is often what happens with salads. These are meals.”
While the idea of retail tea outlets was a novelty when DavidsTea broke on the national scene in 2008, Mr. Segal’s newest venture is entering a well-established and much more crowded field.
Canadians spend $24 billion a year at fast-food restaurants, according to a recent study from market research firm IBISWorld.
The industry has grown at a rate of about 2.8 per cent annually since 2012, the report says, adding that products with higher profit margins, including salads, “have become more prominent at traditional fast food restaurants.” Market leaders such as McDonald’s and Wendy’s that have long been known for their burgers now offer an array of salads and other vegetarian options.
Undaunted, Mr. Segal argues that calorie-counting Canadians remain starved for quality when it comes to fast food.
“I think that the demand still far exceeds the supply,” he said. “And I think that there’s a lot of people who aren’t doing it well. There’s a lot of salad places out there … but there needs to be a level of investment with the culinary aspects of making a salad.”
Some industry experts agree the Mad Radish concept could be a massive hit if executed properly.
“People are not only eating healthier, they are seeking out that,” said Neil Lester, an Oakville-based consultant who has worked with major quick-service restaurant chains such as Tim Hortons. “I think if he keeps it focused and primarily just has an outstanding product, he could do very well by just carving away market share from other brands.”
Among those brands is Freshii, a Toronto-based chain that specializes in burritos and wraps in addition to salads and now has more than 330 restaurants around the world. Michael Mulvey, a marketing professor at the University of Ottawa’s Telfer School of Management, said having two players in a similar space could actually help both increase their market share.
“They’re kindred spirits,” he said. “Sometimes, having some near-competitors is a good thing because what you want to do is to create a sector. If they can work together to partition fresh food versus fast food, then the whole sector is going to grow and they’ll both thrive.”
Mr. Segal’s track record at DavidsTea should also serve him well because it’s helped him hone fundamental skills such as negotiating leases and understanding supply chains, Mr. Lester said.
“He’s got a running start on a lot of players because he has experience,” he said. “He knows the industry.”
Never short on ambition, Mr. Segal said he plans to open five more Mad Radish locations within the next year or so.
“It really depends on the real estate that’s available,” he added. “Our No. 1 objective right now is to make sure the customer really loves what we do.”
The serial entrepreneur said he believes his self-financed venture has the potential to be “way bigger” than DavidsTea, which now has more than 230 stores in Canada and the United States and generated revenues of $216 million in 2016.
“Everybody eats,” said Mr. Segal, whose first business was selling first-aid kits door to door as a teenager. “The market for tea is tiny; the market for salads is enormous.”
Obstacles
Nonetheless, the upstart salad chain faces a few significant obstacles, experts say.
The Ontario government’s plan to raise the minimum wage to $15 an hour over the next two years from the current rate of $11.40 is poised to boost labour costs throughout the industry in a big way, Mr. Lester said. In addition, Mad Radish’s products require a steady supply of fresh and tasty ingredients at reasonable prices – a need that’s fairly easy to meet in the height of summer but not so much in the dark days of December, he noted.
“You have to basically nail down that supply chain,” he said. “You don’t want to be shipping fresh produce hundreds and hundreds of miles.”
And since fast-food customers are generally looking to satisfy their hunger for pleasure as well as nourishment, Mad Radish’s dishes need to get food-lovers talking, Mr. Mulvey said.
“Ideally, I guess, is if you can create something that people truly crave, especially with fast food,” he said. “They need some signature salads that get people drooling when they just think about the mere possibility.”
Mr. Lester agreed a quality product that generates buzz would go a long way toward helping Mr. Segal’s business clear some of its early hurdles.
“In the early months, he’s going to have to work that local trading area, work the word of mouth and just make sure the product aligns with the expectations that consumers are going to have,” he said. “That will certainly give him a head start, for sure.”
Mr. Segal said there’s no reason Mad Radish can’t duplicate the success he achieved with DavidsTea – and then some.
“I’m all in on this,” he said. “In terms of growth, I set no limits on this. Time will tell.”
Ottawa perfect setting for Segal’s salad days
When David Segal was eyeing a place to set up his next venture after exiting DavidsTea, his hometown seemed like the perfect choice.
Married with three young children, the serial entrepreneur said the city can’t be beaten for its quality of life, calling it “a great place to raise a family.”
But he said there’s far more to the place he left for Montreal as a young adult
“I can’t think of a better place to launch what we hope will be a national salad company than here in Ottawa,” said Mr. Segal, whose parents and younger brother also live here.
“There’s a new wave of entrepreneurship in this town that is truly special. I think there’s a ton of talented people here, and I think this city, over the next 20 years, is going to experience tremendous progress.”
Since his return, Mr. Segal has struck up close friendships with the likes of Shopify chief operating officer Harley Finkelstein and others in the city’s tight-knit business circle. He said that kind of support network is a definite plus when building a new enterprise from scratch.
“It’s a small entrepreneurship community here in town. There’s a few of us, but we all know each other.”
In a sense, the McGill commerce graduate is coming full circle by entering the restaurant game: His first job was working the fryer at Wendy’s at age 14. But it was his part-time stint as a salesman at Athletes World when he was in high school that really served as his introduction to retailing.
“I love watching the cycle of retail, what emotions (consumers) look for when they buy things, the satisfaction they get from products that help them with their lives,” he said.
His experiences as an entrepreneur have taught him some key lessons about business, he said: The greatest idea in the world won’t go anywhere if consumers don’t buy in and you can never have enough top talent around you.
“I always ask myself: Why does the world need what you’re doing?” Mr. Segal said. “I really believe in the mission we’re doing. We have a real purpose here.”
