The fundamentals of Britain’s strengthening economy are favouring restaurants right now, particularly full-service restaurants and pubs. These sit-down eateries appear to be benefiting not only from improving consumer confidence and customers’ increasing willingness to spend, but also from people’s growing interest in new flavours.
In my view, full-service restaurants can keep their winning streak going by keeping up their culinary innovation and by expanding their offerings at lunchtime to better fit with British consumers’ more on-the-go lifestyles.
But first, let me share some of the tailwinds driving restaurants’ recent performance. According to the Office for National Statistics, British households increased their average expenditures for restaurants by 3.3% in the first quarter of 2015, compared with a year earlier.
Technomic’s own UK Consumer Survey for 2015 also reveals some cautious optimism among British restaurant goers. In each group of respondents covering those age 25 to 64, at least half of consumers plan to hold their number of visits to restaurants steady this year, and at least one in five respondents plan to increase their trips to restaurants.
However, many people will still be mindful of how much they spend each time they go out to eat. When asked to describe their spending habits in Technomic’s survey, 30% replied, “I am still mindful of my spending but starting to treat myself,” and 11% replied, “I am not actively saving money more than I was in the past.” But slightly more than one-fourth of consumers (27%) said, “I am on a careful budget,” while 19% responded “I am more focused on saving and have cut out more non-essentials.” Finally, 13% of British consumers reported, “I am buying only necessities.”
This macroeconomic improvement and cautiously optimistic consumer sentiment has led to a 6% increase in annual turnover for brands in the Top 100 UK Chain Restaurant Report. Interestingly, full-service chains finished last year slightly better than limited-service brands in terms of turnover and outlet growth. Full-service restaurants had annual sales growth of 6.1% and outlet growth of 4.4%, compared with 5.9% turnover growth and 4.2% outlet growth for limited-service chains.
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Even with slightly higher price points, full-service restaurants and pubs are capturing consumer traffic and spending, likely due to customers’ interest in ethnic flavours. Among Top 100 brands, collective sales growth in 2014 was 14.4% for full-service Mexican chains and 10.6% for full-service Asian brands. The bar and grill segment also reported robust turnover growth, with a 13.5% increase for 2014. The varied menus of those restaurants include bold, ethnic offerings like the Peri Peri Marinated Half Chicken at Bill’s and the Falafel Burger and Harissa-Spiced Chicken Burger at Loungers, two of the fastest-growing full-service chains in the Top 100 report.
I believe sit-down restaurants and pubs have room for more sales expansion. Beyond continued innovation around emerging ethnic flavours, opportunity exists in the lunch daypart, where full-service chains often cede market share to limited-service competitors.
But the time is right for full-service brands to develop more flavourful sandwiches and handheld items, in order to bolster their carryout business and to attract more time-pressed consumers. “Food on the go” will be an important theme in the foodservice business this year, and pubs and full-service chains have the culinary know-how to cater to customers’ on-the-go lifestyles.