Dynamic new restaurant brands offset unprofitable closures by big-name chains

Wahaca Cardiff

Dynamic new restaurant operators are continuing to expand and disrupt Britain’s eating out sector despite a host of tough challenges facing the market, according to the latest Market Growth Monitor from AlixPartners and CGA.

Analysis of the market (taken for the month of June) show that the total number of licensed premises stood at just under 123,000, slightly morethan the three months previously but 0.3%fewer than in June 2016.

The net fall is largely down to the long-term trend of closures of drink-led pubs, especially in the leased sector. Pubs and bars in CGA’s community and local category have now fallen in number by more than 19% in the last five years, and circuit bars have declined in many British towns too. Independent, one-site restaurants have also seen a steady decrease in number.

By contrast, food-led licensed premises have enjoyed a stellar few years, the report noted.

The Market Growth Monitor shows that the number of restaurants has increased by nearly 22%in just five years, but by a more modest 1.8%since June 2016. And of these, it is small and medium sized multi-site operators that have blazed the trail.

CGA research shows that small groups– classified as those with fewer than 25sites – have enjoyed a 32.0% net increase in premises in the last three years alone.

Medium-sized operators – those with between 25 and 99 locations – have grown even faster, by 47.7%. In stark contrast, the number of premises run by large companies those with 100 or more venues– has increased by only 7.6%.

CGA said this shows how the majority of new openings lately have come from brands that are bursting through from the fringes of eating-out to the mainstream.

Wahaca, Honest Burgers, Pho and BistrotPierre are among the brands now pushing the 25 mark in estate size, while the likes of Franco Manca, Las Iguanas and Byron feature in the next tier of medium-sized operators with ambitions to get even bigger.

Some of Britain’s biggest eating-out brands, like Nando’s and Wagamama, have been expanding relentlessly too. But many others have seen their strategies disrupted by this new generation of brands. This is especially the case in London, where the concentration of new concepts has been heaviest.

In the capital, small multi-site players have increased their number of premises by 37.8% since June2014, and medium-sized groups by 67.8% –while large operators have seen a 4.3% fall.

Alix Partners noted that regardless of size, all brands in the ultra-competitive landscape of casual dining are likely to face strengthening headwinds as 2017 wears on.

Property costs, including significant rates increases in many places, continue to vex operators. High inflation in food costs – reaching 8.8%in June, according to the Foodservice Price Index from CGA and Prestige Purchasing – are storing up more headaches for the future.

Brexit negotiations, and their knock-on effect on European labour movement and consumer confidence, add worrying elements of uncertainty into the mix, the reported added.

These and other factors have led many leading operators to sound notes of caution about future sales, and in a few cases to issue warnings that profits are likely to fall short of expectations.

“Several big brands have scaled back their programmes of new openings, or closed some of their unprofitable locations,” the report said. “It means that after an extensive period of expansion, growth in the number of food-led licensed premises as measured by the Market Growth Monitor is likely to slow in coming months. But with so many ambitious new brands entering the market all the time, Britain’s eating and drinking out sectors will remain vibrant, diverse and innovative.”

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