Food and Drink Chain Struggles in 2018
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Food and drink chain struggles in 2018 Mobile ordering, powered by 1 Index 4-5 Note from Preoday 6-9 On restaurant struggles 10-21 On what customers want 22-25 On technology 26-29 On data analysis 30-31 The truth of food and drink chain struggles 32-33 About Preoday’s food and drink chain research 2 3 Note from Preoday “If the earth rumbled beneath With each announcement in the feet of the British restaurant the media, the story behind industry in 2017, in 2018, it the closures has seemed to started to shake. evolve. From Brexit to property prices and then customer The first quarter of the year confidence, the different views saw a host of chain brands have led us to question the publicly admit their struggles. truth behind the headlines and The Italian restaurants seemed carefully prepared company hardest hit with Jamie’s Italian, statements. We know what’s Carluccio’s, Prezzo and Strada being said publicly, but could all announcing diminishing insiders within the industry profits and venue closures. shed a brighter light on the Outside of the Italian segment, difficulties? At Preoday, we Byron Burger and Chimichanga set out to investigate, asking (owned by the same company professionals in the food and as Prezzo) threw up their hands drink service industries for their in distress; in fact, every one of opinions while also conducting Chimichanga’s locations shut a comparative consumer survey. up shop in April. So is this the The results are revealed in the end of the crisis? If not, which following report and may not be brand will be next to announce quite what you expect....” closures? If the reports are anything to go by, it could be The Restaurant Group, which Nick Hucker, owns Frankie & Benny’s, CEO, Preoday Garfunkels and Chiquito. 4 Food and drink chain struggles 2018 5 On food chain struggles 69% of food and drink service professionals say Brexit is ‘more of an excuse than a reason’ for chain struggles The shadow of Brexit As the full extent of the woes of other brands too? restaurant chain’s issues We decided to ask Total pre-tax profits at the top became clear in 2018, Jon professionals from the food 100 restaurant chains fell by Knight, CEO of the Jamie and drink service industry what 64% in the past year, from Oliver Restaurant Group said they think the truth is - and then £345m to £125m. In early that the chain had become compared this to the opinion of 2017, Jamie’s Italian blamed “complacent” and failed to consumers. rising costs, partly as a result of innovate in the decade since its Brexit, for the closure of six of launch. We started by asking the its branches. professionals if they agree that So which was it? Brexit, or a Brexit is ‘more of an excuse Oliver’s statement was backed lack of innovation? Or, indeed, than a reason’ for the struggles by accountancy firm, Moore might it be poor property of chain restaurants, pubs Stephens, which claimed in choices, as discussed in The and bars: 69% said they did. As every restaurant late 2017 that 20% of the UK’s Guardian and suggested by Consumers concurred; just 18% restaurants were at risk of owner knows, this is a Simon Stenning of the MCA believe Brexit the main reason closure thanks to Brexit. “tough market and, post- at The Casual Dining Show in for restaurant struggles. But then the message began February this year? Given that Brexit, the pressures and to change. Jamie’s Italian wasn’t alone in With their position clear, we unknowns have made it its worries, could the issues that delved further. had impacted it be behind the even harder.” 6 Food and drink chain struggles 2018 Food and drink chain struggles 2018 7 On restuarant struggles On restuarant struggles Tough competition The price of labour market analysis manager Peter including kitchen staff, in lieu Linden. “If we think back to the of a wage increase. This idea, What did the professionals see The problem of increasing inflation rate of 2.7%, what this perhaps unsurprisingly, hasn’t as the number one reason for operation costs (including effectively means is negative been taken well. But given the general struggles of chain labour) is compounded by its volume growth.” the evidence, it is likely that restaurants, pubs and bars? occurance in a market where TGI Friday is simply looking More than a third (38%) said consumer confidence is In short, if the annual growth in to avoid falling into the same the biggest problem was that purportedly low. UK consumer consumer spend has reduced, traps that others have already there’s too much competition. spending dropped to its but the cost of running a food succumbed to. Other reasons scored much lowest level in over five years or drink business has gone up, lower. In second place were during the first quarter of profit rates are bound to fall. Do labour costs lie at the not having an understanding of 2018 according to Visa’s UK heart of the problems faced customers (9%) and increasing consumer spending index; Some chains have been trying by the industry? Perhaps, but rent (9%). Poor property household spending was down of sites risked outstripping while consumer confidence to offset the issue. TGI Friday the blame doesn’t lie there decisions received just 3% of 2.1% compared with a year demand. It seems that was selected by 35%. proposed redistributing 40% alone. Before drawing final the vote. earlier. prediction is reaching fruition. of service charge payments conclusions, we want to share What does this tell us? Well, paid on credit and debit cards some further results from our Competition is certainly high, From April 2018, 2 million While competition is seen aside from the fact that Brexit to back-of-house employees, consumer panel. in late 2017 it was reported British workers received a pay as the major problem of the is not nearly as concerning that since 2012 a net average rise of at least 4.4%, increasing industry as a whole, we found to food and drink service of 743 new units have opened the minimum wage from £7.50 our respondents’ answers professionals as early reports per year, and that in the per hour to £7.83 for over-25s. changed slightly when we led us to believe, not all preceding 12 months that The increase amounted to asked them to reflect upon businesses associate their figure had nearly doubled more than £600 per year per their own businesses. We biggest issues with the to 1,333, an increase of 44%. full-time worker on basic pay - asked them to voice their own rest of the market. Just 5% Prime pitches in key locations that includes most waiting and key concerns for the coming identified the cost of labour such as Liverpool One and kitchen staff in the industry. year and found that the cost as the number one reason for Birmingham’s Bullring can now of labour scored highest, with struggles in the wider industry, command huge rents, up to “The market has slowed down 58% expecting to be troubled yet it was the most popular and beyond £55 per square this year, this subdued growth by it in the coming year. response when considering ft. At the time of the study, the coming as the industry faces Industry competition was still their own business. MCA warned that the number multiple headwinds,” says MCA cited by 56% of respondents 8 Food and drink chain struggles 2018 Food and drink chain struggles 2018 9 On what customers really want… More than half of restaurants think customers are looking for a unique experience - they’re wrong Experience is But is it really what bars and one reason for selecting a everything - or is it? restaurants need to do to venue, staff gathered just 3% attract spenders during a time of the vote, behind price (5%) The rise of the ‘experience of market crisis? and a place they frequent economy’ is frequently and trust (5%). The menu referred to as one of the most We asked consumers what remained the most important important, current, global elements they look for when feature with a huge 42% of trends in marketing. Everyone choosing where to eat out and respondents choosing it. from retailers to restaurants found that a great menu (91%) have been listening to this and came out on top. The menu What of the unique experience looking to offer something was followed by a closely that has been gaining so much ‘different’ to attract customers. related factor - the quality of attention? Just 21% look for Whether it’s a robot waiter, the food (85%). Placed third this when deciding where to interactive dining tables or a was the presence of friendly eat, though 29% would like a kooky menu, the sense that a and helpful staff (66%). place with an ‘independent brand needs to stand out from feel’. A tiny 2% identified it as the crowd in order to beat off Despite this, when we asked the most important aspect of the competition is pervasive. them to identify the number their choice. 10 Food and drink chain struggles 2018 Food and drink chain struggles 2018 11 On what customers really want On what customers really want What do the quality (69%) scored higher Could restaurants be getting It should go without saying that regularly. Customers that come demands of customers against professionals think? than the menu itself (63%).