Food and Drink Chain Struggles in 2018

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Food and drink chain struggles in 2018

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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%). sidetracked from what really a restaurant, bar or pub should into contact with that waiter will their favourite food and matters to their customers? never take customer service enjoy their experience, they will drink venues, we asked our How does this measure up to At odds with the consumer Rather than focusing on for granted, and our research retain fond memories of your consumer panel to tell us their with what professionals in the food and drink service industry perspective is the focus providing them with something confirms that it is a core factor business and will make repeat favourite food and drink chain. believe? on a unique experience - different, perhaps businesses of customer satisfaction. A visits. The most popular response professionals ranked this as the should be aiming to juice up well-trained waiter will speak was TGI Friday’s, followed It’s reassuring to see that the third most important feature for their menus and train staff to to customers politely - and in a Are these choices closely by Wagamama and professionals understand the consumers (54%) before having provide the experience that style that reflects the business reflected in then Zizzi - though it should be importance of their menus and a great staff - less than half will keep customers coming brand. They go out of their consumers’ favourite noted that an equal number of food quality, though when we identified this as a key need back for more? way to provide them with a restaurant chains? people claimed to dislike or not asked them what consumers (46%) for customers choosing special service and might even Testing the needs and have a favourite chain, as those look for in a place to eat, food where to eat. remember customers that visit that selected TGI Friday’s.

12 Food and drink chain struggles 2018 Food and drink chain struggles 2018 13 What is it about these brands that appeals?

14 Food and drink chain struggles 2018 Food and drink chain struggles 2018 15 What is it about these brands that appeals? What is it about these brands that appeals?

Latest Results

The Azzuri group owns Zizzi, it saw a 10% increase in turnover to £249.3m for the 53 weeks to 2 July 2017, compared to the 52-week period the year before (running up to 26 June 2016).

Great vegan and gluten free menus High-street locations Good quality ingredients Refurbished sites Proactive to consumer trends

20 Food and drink chain struggles 2018 Food and drink chain struggles 2018 21 On technology

On technology 70% of consumers want restaurants to take their money, not aggregators

Consumers love convenience. The truth is revealed This is key. It shows that with It’s clear that with costs simple education, consumers It may not be a huge surprise abounding, food and drink that aggregators come out establishments need to do on top (though not by much) - everything they can to boost their convenience is clear, but their revenues and trim their do consumers know that many fat. With more businesses aggregator sites take a cut of investing in mobile and the revenue from each of the online ordering technologies orders? What’s more, do they - whether it’s through an care? aggregator platform, or an own branded app - we decided We filled our panel in on this to explore this technology’s information and then asked impact on food and drink whether they’d still prefer to chains’ bottom lines. would be willing to change use an aggregator platform; their ordering habits. It also 70% now said they’d rather We started by consulting demonstrates that they do order direct, preferring that consumers on their use of care and want to support their their money goes straight digital ordering platforms. A favourite brands. Given how to the restaurant, not a third significant 74% told us that they much revenue some venues party. Only 15% said they didn’t order food online or through lose to third party platforms, really care how much money a mobile app. Breaking this this finding could be significant. the restaurant received from down further, 30% said they Let’s look closer. their order. use aggregators while 23% go straight to the restaurant to order - 21% will look at both options and decide at the time.

22 Food and drink chain struggles 2018 Food and drink chain struggles 2018 23 On technology On technology

How much is too Breaking free At Preoday, we can offer guidance on making a move much? Their thoughts align with those to your own branded ordering We asked our professional of the consumers. So, if a app or web portal. We have a panel whether they were business is paying around 20% marketing team that is expert already offering their customers per order, and they think that in helping clients make their the option to place an order is too high, and its customers platform a success, and a online or via a mobile app; 44% would rather place their spend customer support team primed said they were and 27% were with the business direct - then to support businesses through using a third party service or a we have to ask: why not cut every step of their journey. combination of third party and out that middleman? Why not owned. use a technology that doesn’t stand in the way financially, or Of those that offer an owned, or in regards to customer data (a third party, service, more than point we will come onto in the two thirds (68%) are paying next section of this report)? some form of commission - 25% are paying more than 20% As 38% of our professionals per order! said, once you’ve started using a third-party ordering We then asked what they technology, it’s difficult to thought of the fee they were break away. The same number charged - 82% said it was too admitted they would rather If you’re one of the pubs, high (33% said far too high and their business had its own bars or restaurants looking to not worth the cost). Only 12% ordering website/app than use break away from its third party said it was about right, and 4% a third-party provider. In fact, provider and set up its own claimed their fee was cheap. only 14% thought that it’s better platform - without any pesky for a brand to have a third party commission fees - get in touch app than use its own order or for help and advice, now. delivery app.

24 Food and drink chain struggles 2018 Food and drink chain struggles 2018 25 On data analysis 71% of restaurants/pubs/bars with access to customer data, use it to improve their marketing.

The final part of our Data and marketing professional survey dealt with We next asked those that do the use of customer data. have access, what they are using the gathered data for, and Of those that offer customers were pleased to note that 71% an online or mobile ordering are making use of it to improve service - whether own branded, their marketing. or through a through an Knowing how to enhance aggregator, a significant 44% marketing through data is do not have access to their important; data provides customers’ data. a measure of how your customers think, feel and This is concerning. Capturing behave. If you want to know customer data is the first step how well your customer base in the process of engaging has taken to a new dish, you with them, and the long path to just need to check the data. generating loyalty and repeat If they haven’t picked up on business. At a time when the it, you can decide whether to wider market is struggling, ditch it or put extra marketing superior marketing and a emphasis behind it. And that’s personalised service can play the point. Data tells you about a significant role in customer your business and helps you loyalty, and therefore, revenue. make informed business

decisions with greater ease.

26 Food and drink chain struggles 2018 27 On data analysis On data analysis

Data and loyalty There are many applications for Something every person at insight gained from customer Preoday is passionate about is As 46% of our respondents data, but at its most basic, that data; we are proud of the data have realised, data can also play a significant role data helps a business get to we help our clients gather on in the success of a loyalty know its audience and build a their customers and how our programme. In addition to relationship based on exactly technology lets them analyse it getting a better understanding what the customer wants. It for use. Unlike online ordering of who each customer is should be no surprise then companies that keep customer and how they spend money, that 43% of our professionals data from their clients, we aggregated data can also help said they believe third party see it as an essential part you run a loyalty scheme more apps - many of which withhold of our service and believe efficiently. For instance, if you customer data - interfere with it helps grow successful see that one of your locations the direct relationship between businesses. Without it, how can has a drop in sales every a restaurant/bar and its a restaurant, bar, event venue, Monday, you can offer your customers theatre or stadium get to know loyal customers a discount for its customers better and - than half (57%) said it was the While data can help you that particular location at that Data and menus therefore - grow its takings? variety while 44% referred to optimise your menu content, specific time of week. Marketing aside, 48% of the the descriptions used and 26% it isn’t the only way to make respondents said they use their were drawn in by the format it appeal. There’s a wealth data to improve their menus and appearance. of psychology behind menu and operations, 46% apply it to success, and it’s a topic we their loyalty programmes and Data can be used to decipher have discussed before. If you’re 23% make use of it for stock the most popular items on a interested in how you can used control and forecasting. menu, the average spend for psychology to enhance your customers per course and even menu, read this article from our Casting your mind back to how choices change according Chief Operating Officer, Matt earlier parts of our research, to the season and around Graywood. you will recall that 91% of events. It’s great that 48% are consumers look for a great using their data in this way, but menu when choosing where it means 52% are not and could to eat out. At that time we also be losing customers - most asked them what it was about of whom, we’ve shown, are a menu that appealed. More judging them by their menu.

28 Food and drink chain struggles 2018 Food and drink chain struggles 2018 29 The truth of food and drink chain struggles

From the insights gathered specifically labour costs, may up in the media as the main The rise of online and their money (rather than such as mobile ordering during our research, it is clear well be. While the price of attraction for a number of new mobile platforms for food aggregators), there is strong is important to modern that the question of the UK’s labour is going up, and cannot and successful businesses, ordering and delivery, such argument for businesses consumers, chains need to food and drink chain struggles be avoided, businesses need to may not be so significant for as Just Eat and Deliveroo, to explore the benefits of get their basics spot on - cannot be solved with a focus on off-setting the impact the wider market. And, while has been well documented their own branded platform. promoting singular customer single answer. Nonetheless, by giving customers enough of the customer is still keen to in the press and is helping The data that is collected service values and menus that readers may note a divergence what they want to bring them be given special treatment chains fulfil more orders, through owned platforms (but attract the right audiences. To between where consumer back to their tables - especially by staff, there’s a concern but are these technologies often withheld by third-party survive, businesses need to interests lie, and where chains in this time of low consumer that this knowledge been lost helping or hindering business aggregators) can also enhance keep these goals in sight and believe them to be. confidence. We cannot assume or forgotten by those in the profitability? With high the aspect of the dining not be distracted by novelty customer loyalty or count on industry. Thankfully, both parties commission fees, businesses journey most appreciated by concepts - and they should One thing we can say is that the frequency of their custom, understand the important of could be losing out on customers - the menu. make the most of the data Brexit is not the industry we must engineer it. food quality and the menu - the substantial income. And, given gathered by their technologies destroyer we’ve sometimes question is, how to make that consumers would prefer their To conclude, while moving to help them do so. been led to believe by the How to do that? The unique menu reflect exactly what the favourite brands took home forward with new technologies press. Costs in general - and experience, so often played customer wants.

30 Food and drink chain struggles 2018 Food and drink chain struggles 2018 31 Preoday’s report reflects the Reasons for choosing anonymised responses of 476 Preoday: consumers and 205 professional • Have total control over customer respondents based in the UK. service including delivery deals This report does not document and menu creation the thoughts of every food or drink chain in the country, but the • Never pay excessive costs. Preoday is 0% commission and size of the study, along with the charges a flat monthly fee variety of respondents, results in a representative view of industry trends. • Acquire new customers and make existing ones more loyal Preoday is a robust digital ordering • Reinforce your brand identity platform that helps food and retail businesses around the world open • Gain complete access to new revenue streams and improve customer data relationships with customers.

Preoday enables businesses to Want to know more? offer branded online and mobile Check our Resources page pre-ordering facilities to customers regularly to access fresh and purchasing food, drink and useful content. About Preoday’s merchandise. It provides a white-label service to businesses ranging from To ask us a question, arrange restaurants and cafes to corporate a demo or get a quote for your food and drink caterers, theatres and stadiums. project please get in touch and a member of our team will be Preoday works both directly with in touch very shortly. businesses and partners including chain research resellers, technology providers and For more information, visit ticketing agencies. www.preoday.com

32 Food and drink chain struggles 2018 Food and drink chain struggles 2018