There is considerable change taking place in the UK food sector today, as in many others. Consumers currently face pressure on disposable income that is making this an increasingly competitive market. Technology is changing the way that consumers interact with brands and customer tastes are moving on too. Much of the growth across the sector in recent years has been driven by swift, large-scale restaurant brand roll-outs and chains have been largely responsible for the sector remaining relatively buoyant.
Chains have evolved to cater to different requirements
Chain restaurants, or casual dining brands, have increased significantly in numbers over the past decade. Consumer preferences for cheaper, on-the-go food have been sustained and the industry has responded by growth in casual dining brands, such as Wagamamma and Nandos. However, consumer tastes have also been evolving and, while price and convenience remain key factors, there has also been a need for casual dining restaurants to respond to an increased interest in wellness. The result has been that many chain restaurants have introduced new options to cater to customers looking for healthier meals, from low sugar and fat options, to healthier choices that contain less salt.
Even small chains are growing
Even within the chain restaurant market itself there is change to consider – while big multinational chains are what most people would associate with a casual dining brand, small chains are on the rise. In London in particular, the local restaurant scene is experiencing the “age of the small chain.”
A recent report by AlixPartners and CGA found that small chains, with fewer than 25 restaurants, grew their site numbers by 32% in the last three years. Medium sized chains experienced growth of 47.7%. Wahaca, Honest Burgers, and Pho, as well as Franco Manca and Pizza Pilgrims, are typical of the types of restaurants that are currently enjoying a period of expansion.
Growth has slowed for larger chain restaurants
For larger chains, growth has significantly slowed. Wahaca co-owner Mark Selby told Eater London that he believes the better growth experienced by smaller chains is because these businesses don’t view themselves as chains. He said, “every restaurant is a new market, a new challenge and for us a completely new design and think.” Many of the concerns that have arisen over unsustainable scaling in the UK’s chain restaurant sector are also directly mostly at larger brands.
According to a report by PWC, these concerns are that “chains have focused on numbers of restaurants rather than the quality of individual sites, opting for scale before introducing the right infrastructure and rolling out their offering before appropriate processes are in place to cope with the expansion.” However, many of the most successful smaller chains have avoided this – Mark Selby, for example, said Wahaca “could have grown a lot more quickly than we did but we are determined to keep hold of what makes us different and will do everything we can to protect that.”
Considerations for restaurant chains in the future
For all chains there are currently a number of pressures to consider, from the challenges of cost and availability of workforce – particularly post-Brexit – to increased import costs that have affected many food categories. Consumer confidence and squeezed household incomes could also mean chains have to become even more competitive to appeal to customers who have less to spend. As a result, the next decade could be as interesting for chain restaurants in the UK as the last one.
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