2018 Highlights

After a tumultuous year for the casual dining sector, MCA’s 2018 Restaurant Conference brought together the leading lights of the sector to discuss the next chapter for branded restaurants. The discussions ranged from the impact of CVAs, to the innovative ways in which concepts are being revitalised. We also addressed the evolution of the high street and took in the opinions of investors.

The 2018 Restaurant Conference addressed:

The future at Jamie Oliver

The Jamie Oliver Restaurant Group chief executive Jon Knight joined MCA’s editor James Wallin on stage to discuss the future of the chain. He shared his hopes that the group could reach 100 sites globally by the end of 2019, adding that the international market is still very vibrant for them. On the topic of CVAs, Knight described the process as “painful and insightful”, and hoped that Jamie’s Italian would be viewed as a “global brand with a bit of a problem in the UK”. He admitted that he naively thought getting approval for the CVA would give them clear blue water to get back to running the business. “No. It was just the start”, he said.

On its partnership with SSP, Knight said they were going to break into mainland Spain with them, and had their first location in the Middle East (within a Middle Eastern airport). He clarified that the partnership was going beyond Jamie’s Italian, looking at the best fit in the travel space for all Jamie Oliver brands including Jamie’s Deli, Jamie’s Diner and Jamie’s Pizzeria.

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What Five Guys have been up to

John Eckbert , CEO of Five Guys, shared a surprising statistic – even after five years in the UK, 50% of the US burger chain customers were visiting for the first time.

He described his ambitious growth plans (Five Guys secured a £100m banking facility through Goldman Sachs in October 2018) for the UK, France, Spain and Germany, before explaining that terrace seating had been an area of focus, with a redesign proving successful in improving the customer experience. The design evolved from a seemingly “cold, dark, wet and cheap” atmosphere to a “premium, warm, dry and light” feel.

He also acknowledged the challenges facing the restaurant sector, from the impact of terrorism on footfall, to inflation, as well as the positive headlines from Pret A Manger, Costa and Wagamama. On the topic of delivery, he recognised there was a large growing market, but admitted store design, technology integration and packaging were challenges to address.

The future of the high street

The role of the hospitality sector in reviving the UK’s high street was a key topic of debate, with all panellists agreeing that the sector could not rebuild it on its own. The panel featured UKHospitality chief executive Kate Nicholls , sector analyst Simon French and Rob Meadows of Davis Coffer Lyons .

The panel agreed that co-working spaces, food halls and street food markets were all likely to become as familiar in town centres as restaurant chains and the local pub. The term ‘experiential’ also kept popping up, encompassing everything from the basics of great service, to F&B offers including games and activities which cannot easily be replicated at home and could rival with the plethora of home entertainment options.

To this end, Nicholls stressed that high streets needed to become increasingly leisure-led, as well as incorporate more residential elements. She pointed out that the high street needed to offer activities outside of 9am to 5pm, with nowadays workforce moving away from these standard working hours. In her view, the hospitality sector could play a big part in revitalising town centres, though she acknowledged that Government and local authorities needed to change their way of thinking to allow that.

She pointed out that the sector could not save the high street again, like it did during the last recession by investing in empty shops, due to the constant pressure on margins caused by Government action or inaction.

Simon French added that local authorities also had their part to play, but were often constrained by their budget restrictions. He explained that parking charges were a key revenue source for councils, but that a fresh approach could have dramatic effects on town-centre footfall.

Continuing the debate, the panel agreed that fundamental reform was needed with regards to planning and licensing. Micropubs were cited as an example of re-purposing defunct spaces in town centres. However, there was a concern that the system of use classes was still stuck in a mindset of 20 years ago – with operators constrained from acting quickly as the authorities struggled to keep pace. Landlord and tenant relationships also remained key, with Nicholls saying there was still a way to go in terms of landlords offering flexibility to operators, especially on lease lengths.

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The expansion of Mitchells & Butlers (Miller & Carter)

Dennis Deare, brand operations director at Mitchells & Butlers (M&B), told delegates that the company was to slow down the rate of expansion for its Miller & Carter brand, now that it had reached the 100-site mark. He added that new openings were likely to be driven by acquisitions and that the business had earmarked 200 potential target towns, though they were not planning to open in all these locations. Deare explained the business was aiming for 10 to 12 new sites per year, as it felt a period of consolidation was needed in order to stabilise the teams.

Deare also spoke about the importance of training its people. The entire Miller & Carter management team as well as head chefs and support staff are required to attend ‘Steak School’, where they learn about steaks’ production and the best method for cooking it.

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PizzaExpress moving forward

Zoe Bowley, UK managing director at PizzaExpress, said the business had “gone back to the archives and the man who started it all” (Peter Boizot, who sadly passed away in December 2018 at the age of 89) for inspiration on where to take the brand going forward.

She explained that the brand had been listening to its customers as well, turning its focus on delivering attentive fast service and great tasting food. To this end, she explained that the company is “investing in our core”, which she defined as “people and service, environment, and food & drink”. Investments are also being made to expand their multi-channel model, which consists of their restaurants, delivery offer, retail products, e-comms and events. She also hinted at the launch of their new brand: Za (which was later announced in January 2019).

On the topic of promotions, she admitted it horrifies her that when googling PizzaExpress, words such as “voucher” and “offers” come up. She said that reducing discounting is “a slow burn. It’s a drug. You can’t turn it off overnight.”

Investments and the impact of Brexit

A panel of investors in the sector told the conference that while Brexit may bring uncertainty, it also provided opportunities for operators to scale up. Graeme Smith, of AlixPartners, hosted a panel consisting of Bridgepoint partner Jason McGibbon, Darrel Connell of Imbiba and industry veteran Robin Rowland.

When asked what he looks for in a new investment, Connell said that differentiation was key, as well as a desire to scale up. Rowland added that alignment between entrepreneur and investor was vital, saying “It’s like a marriage. If the spark isn’t there at the start, it’s going to come unstuck further along the line.”

McGibbon said Bridgepoint was “less gloomy about the market than some” due to the diversity of its investments. Talking about the company’s involvement with Azzurri Group, he said there had been various discussions about moving more into the fast casual or grab-and-go market and stressed that there were still significant opportunities.

Restaurant concepts to watch

As part of The Restaurant Conference, MCA profiled three operators who we expect to make a splash in the industry in the years to come.

Kricket: The Indian small plates concept was launched in a shipping container in Pop Brixton in 2015 by Rik Campbell and his business partner, Will Bowlby. Campbell, who worked at Deloitte before starting his own business, said a hub like Pop Brixton was the perfect place for a fledgling restaurant brand as it meant the focus was purely on the food and the execution of the product.

The group then opened “an absolute beast of a site” in Soho’s Denman Street, describing Soho as the “centre of the universe” because, arguably, “London is the capital of the world and Soho is at the centre of it”. Help had come along the way from backers, White Rabbit Fund, who Campbell said had particularly aided the group in shaping its property strategy.

BabaBoom: Founder Eve Bugler described the vision behind the concept as being “an absolute obsession with kebabs and wanting to change the way people think about them”. The brand launched in Battersea in 2016 and Bugler, an ex-Nando’s executive, described the first 20 weeks as “the hardest of my life” before the brand hit profitability. Her customers spend on average £20 a head, the bestselling dish being a slow roasted mutton shoulder and its frozen margaritas getting good traction. She then said that delivery had become a big part of the offer with “kebabs a perfect food for being delivered”.

Farmer J: Former banker Jonathan Recanati had already devised a plan for a 30-strong rollout before he had found his first site, a pitch he quickly realised was a case of running before he could walk. After two years of raising finance and perfecting the concept, Farmer J opened in Leadenhall in 2016. Recanati said the idea was to create a quick-service restaurant based on healthy food, good prices and fast service. Customers are given a “field tray” which holds a base, a main, two sides and a sauce. Everything is made on site, with customers progressing through an assembly line as their food is prepared in front of them. The meals cost c£8 and the concept attracts c800 customers a day. Their second site in King William Street in the City already marked an evolution of the concept with a stronger focus on eating in.

Opportunities and challenges at Prezzo

Prezzo executive chair Karen Jones commented on her decision to take charge of the struggling brand and “make customers love it again”. She explained that a key part of this turnaround focused on “people, customers, differentiation, environment and quality”, as well as re-establishing its core values – values which staff needed to be inspired by and become ambassadors of.

She emphasised her entrepreneurial background in driving the turnaround, insisting boldness and change were required to wrest a brand such as 18-year-old Prezzo from its malaise. “If you want to make a change you have to be bold. Not everything is going to work, but you have to be into the idea of doing things better.”

How to use AI for triggering customer behaviour

Livit’s test lab restaurant, 1889 in Stockholm, is using AI to heighten every element of the offer. Benjamin Calleja, CEO of Livit, explained that what sets the fine dining restaurant – which offers a fast-casual pizza and salad menu developed by Michelin-starred restaurant chefs – truly apart from any other, is that AI is driving operations and customer experience.

A great amount of data is collected through Bluetooth beacons, RFID tags, temperature & light sensors and wearables on staff, amongst many other devices. This enables the restaurant to track everything from the number of guests and sales patterns, to the impact on footfall from the weather and events taking place nearby. In turn, analysis of the data allows them to greatly streamline operations, minimise food waste and increase turnover.

Calleja explained that only one variable at a time is changed in the restaurant, the impact measured before conducting another test. For example, they found out that guests stay on average 11 minutes longer when slower, non-familiar music is played, resulting in a 41% increase in drink sales. Conversely, louder music with higher RPMs increases turnover at peak times.

Fresh basil scents have also been correlated with an increase in salad orders (+13%) early in the week, when people are less inclined to have pizza after indulging at the weekend. Light sensors control light levels in real time so it matches outdoor light levels. Guests can make payment without reaching for their wallet or even their mobile phone. Event-based marketing is used to run targeted promotions. Geofencing technology enables food preparation to start only when a take-away customer is exactly 3.5 minutes away from walking into the restaurant. And the list goes on…

From an operational perspective, all this data enables to automate table management, optimise sourcing and inventory, as well as predict the level of staff required at each day-part. And the best, Calleja said… “It’s all invisible to the guest”.

Key insights from MCA’s UK Restaurant Market Report 2018

Turnover decline in the restaurant sector was set to slump to its lowest point since the recession, according to the 2018 edition of MCA’s UK Restaurant Market Report , which was unveiled at the conference. The report concludes that operators must communicate exceptional, experiential value to win the battle for customers.

Steve Gotham , director of Insight at MCA , said that specialist concepts among small and medium brands were driving growth for the sector. However, a reliance on promotions was dampening spend at dinner, with 28.6% of visits at branded restaurants involving the use of a promotion, a rise of 2.5pp over the previous year.

Analysis of the competitive landscape showed that Italian and Latin/South American cuisines had both lost share of the UK restaurant market, whereas Japanese concepts had gained the most ground, followed by American and Asian. The report put the gains down to more contemporary spins on classic menu items, as well as greater appreciation of the flavours prevalent in these segments, combined with the respect for the skills required to create many of the dishes. The gourmet burger segment, despite high-profile casualties, had retained a steady share of the market, as had British food.

Italian was set to fall from a 39.2% share of outlets in 2017 to 37.1% by the end of 2018, although it remained by far the most dominant cuisine, with American the second largest, at 21.2%.

Looking at consumer behaviour, the report indicates that economic pressures and health considerations are prompting restaurant customers to reduce the number of courses ordered. The data shows that 52.5% of customers only order a main course when visiting a restaurant for dinner – compared to 50.3% the previous year. The report also shows that customers are curtailing drink orders at every day-part, especially hot drink occasions at dinner, due to a drop in dessert orders.

The full report examines the breadth of the restaurant industry, market developments, major issues, levers for growth and the future outlook, and is available to order from insight.enquiries@mca-insight.com .

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Deliveroo on dynamic pricing, delivery growth and virtual brands

Deliveroo chief operating officer Rohan Pradhan told delegates about experimenting with dynamic pricing. Consumers could get a discount during quieter periods, and conversely being charged more during bad weather, when riders are out in the rain and could be paid more. Pradhan said that use of delivery could be much more frequent, with the industry needing to make it a more compelling proposition.

Meanwhile, he said that the company’s work on virtual brands was creating an average uplift in sales of 70% for existing brands. He added that operators were given the data and insight to encourage experimentation with new concepts, cuisines and price points. “If you launch a new product, we can tell your conversion rate compared to industry average. We can tell you how many people see your menu, the frequency that people come back and order. We also help with brand, menu design and packaging.”

He disputed an assumption that a proliferation of options available for delivery was cannibalising of the restaurant sector, saying: “As long as you’re bringing a selection that is value adding to customers, you increase the size of the overall pie people are spending.”

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