Marketgrowthmonitor Issue 9 September 2017 Fresh Brands Drive Restaurant Openings
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Quarterly review of GB pub, bar and restaurant supply MarketGrowthMonitor Issue 9 September 2017 Fresh brands drive restaurant openings By Peter Martin – those with 100 or more venues Regardless of size, all brands – has increased by only 7.6%. in the ultra-competitive landscape Dynamic new restaurant operators continue This shows how the majority of casual dining are likely to to expand and disrupt Britain’s eating out of new openings lately have come 1.8% face strengthening headwinds sector despite a host of tough from brands that are Net increase in as 2017 wears on. Property challenges, reveals the latest bursting through openings of restaurants costs, including significant rates Market Growth Monitor from from the fringes of in last 12 months increases in many places, continue AlixPartners and CGA. 122,916 eating-out to the to vex operators. High inflation It shows that Britain’s total Number of licensed mainstream. Wahaca, in food costs – reaching 8.8% number of licensed premises Honest Burgers, Pho and Bistrot in June, according to the Foodservice Price stood at just under 123,000 at premises in Britain at Pierre, now all pushing the 25 Index from CGA and Prestige Purchasing – June 2017 – slightly more than June 2017 mark in estate size, are just four of are storing up more headaches for the future. at the time of the last Market the many examples of energetic Brexit negotiations, and their knock-on effect Growth Monitor three months ago, but 0.3% operators that have expanded on European labour movement and consumer fewer than in June 2016. rapidly in the last few years. confidence, add worrying The net fall is largely down to the long-term Franco Manca, Las Iguanas and elements of uncertainty into the trend of closures of drink-led pubs, especially Byron are among the brands that mix. in the leased sector. Pubs and bars in CGA’s have meanwhile moved to the next These and other factors have community and local category have now tier of medium-sized operators, 47.7% led many leading operators to fallen in number by more than 19% in the with ambitions to get even bigger. Net increase in sound notes of caution about last five years, and circuit bars Some of Britain’s restaurants from future sales, and in a few have declined in many British biggest eating-out medium-sized groups cases to issue warnings that towns too. Independent, one-site brands, like Nando’s in last three years profits are likely to fall short restaurants have also seen a 0.3% and Wagamama, of expectations. Several big steady decrease in number. Net decline in all have been expanding brands have scaled back their relentlessly too. But many programmes of new openings, or closed some By contrast, food-led licensed licensed premises in premises have enjoyed a stellar others have seen their strategies of their unprofitable locations. few years. The Market Growth Britain in last year disrupted by this new generation It means that after an extensive period of Monitor shows that the number of brands. This is especially expansion, growth in the number of food- of restaurants has increased by nearly 22% the case in London, where the concentration led licensed premises as measured by the in just five years, but by a more modest 1.8% of new concepts has been heaviest. Here, Market Growth Monitor is likely to slow in since June 2016. And of these, it is small and small multi-site players have increased their coming months. But with so many ambitious medium sized multi-site operators that have number of premises by 37.8% since June new brands entering the market all the time, blazed the trail. 2014, and medium-sized groups by 67.8% – Britain’s eating and drinking out sectors will CGA research shows that small groups while large operators have seen a 4.3% fall. remain vibrant, diverse and innovative. – classified as those with fewer than 25 sites – have enjoyed a 32.0% net increase in premises in the last three years alone. AlixPartners view Medium-sized operators – those with between 25 and 99 locations – have grown By Paul Hemming negative headwinds, small and growing even faster, by 47.7%. In stark contrast, the Managing Director, AlixPartners innovative businesses continue to thrive number of premises run by large companies across the country. From a transaction “2017 has already proved to be a challenging perspective, the freehold pub market (in year for operators. The last twelve months contrast to casual dining) has seen a raft of Sunny south coast have left the industry battling unprecedented recent M&A activity as investors search for Some of the brightest spots for new levels of competition, unrelenting price lower risk freehold-backed yield. We expect restaurant openings in the last year have pressures, and an evolving retail market. the move towards pub assets to continue. been found along England’s south coast. As a result, casual dining chains have seen Although it is clear the casual dining market Southampton, Plymouth and Exeter have all relatively little new investment activity, has matured, the reality is tired offerings been targets for expanding brands, thanks with many operators instead focusing on that fail to evolve will have a limited shelf in large parts to ambitious new retail and trimming tail sites from their estates. Quoted life in any environment. For emerging leisure developments like Westquay in UK operators have operators with Southampton and Princesshay in Exeter. also been feeling the a differentiated, Bournemouth, and its BH2 development, pinch, judging from consistent product, has been the next stop along the coast for the recent string of there will still be some growing operators. See page 3 for profit warnings. ample room to more analysis. “Despite these blossom.” 1 Location focus: High street ONCE LARGELY THE PRESERVE OF RETAILERS AND DRINKING PUBS, MANY HIGH STREETS HAVE EVOLVED INTO MAJOR DESTINATIONS FOR MEALS OUT High street openings hit new heights As Britain’s casual dining sector new openings from the likes HIGH STREET GROWTH BY REGION continues to expand, albeit at of JD Wetherspoon, or from % change in numbers of licensed premises since June 2016 slowing pace, it is clear where the conversion of pubs once the focus of growth has been: dominated by drink into food- Region Total sites Change in Change in Change in the high street. led brands. total sites food-led drink-led Data for this edition of As the two tables on this sites sites the Market Growth Monitor page show, growth has been London 11,223 0.1% 1.4% -3.0% reveals a 0.2% increase in pretty even across Britain, with Scotland 3,613 0.2% 1.3% -1.0% licensed premises on the sharpest pace of North England 10,237 0.6% 2.8% -1.2% high streets in the 12 openings, at 2.8%, to months to June 2017. It be found in the north Central / Wales 6,274 -0.1% 2.0% -1.8% is not exactly growth 5.2% of England. The fact South England 10,046 0.1% 1.8% -2.1% that sets the pulse increase in high that the list of ten All 41,393 0.2% 1.9% -1.9% racing, but against street sites in the cities with the biggest a national decline growth in licensed NET OPENINGS AND CLOSURES IN THE LAST YEAR BY REGION of 0.3% (see page 1) five years premises in the last it is a welcome sign year stretches all the Region Total sites Food-led sites Drink-led sites of life in the market. And the way from Newcastle in the Anglia -0.7% -0.2% -1.3% high street is outstripping both north east to Exeter in the south Central -0.6% 0.9% -1.7% suburban areas, where the west shows that new openings Granada 0.0% 2.3% -1.6% number of licensed premises fell have been spread far and wide by 0.9% in the year to June; and round Britain. London -0.6% 0.4% -2.2% rural Britain, where numbers What is making high streets Meridian -0.2% -0.1% -0.9% are flat. so attractive to expanding Scotland 0.2% 1.6% -1.3% The trend is even starker on restaurant operators? It is Tyne Tees 0.9% 3.7% -0.5% a five-year measure. Since June largely a reflection of general 2012, the number of consumer trends. Wales 0.0% -0.2% -0.7% licensed premises in In both retail and Westward 0.2% 1.7% -1.4% suburban areas has leisure, there has been Yorkshire -0.6% 0.6% -1.7% fallen by 6.8%, and in a gradual drift away rural areas by 2.3%. 6.8% from the suburbs to Net decline in independent suburban economies. A more enlightened But high streets have the centres of cities restaurants in particular. approach from some councils to seen a 5.2% increase in suburban sites in and towns – especially But the trend also illustrates change of use has helped with numbers over the same last five years in major regional the changing nature of the this transition, though there are period – equivalent to hubs like Manchester, British high street. Once largely still complaints that authorities more than one net new Birmingham, Cardiff the preserve of retailers and are not doing enough to opening a day. The shift is clear. and Leeds. A succession of drinking pubs, many high encourage the rejuvenation of The dynamics behind this central retail complexes, like streets have evolved into major high streets that restaurant trend on the high street are Grand Central in Birmingham destinations for meals out – a operators are leading.