The UK has one of the most diverse eating out markets in the world, with over 23,500 restaurants serving cuisine from across the globe, and the emerging trends reflect this diversity.
Millennial consumers driving growth
The overall value of the UK restaurant industry continues to grow, predominantly underpinned by millennial consumers (those born between the early 1980s and early 2000s) eating out with increasing frequency, albeit spending less each visit. It is estimated that 40% of the average UK individual’s leisure spend now goes on eating out, with 31% of the population choosing to eat out at least once a week. These younger consumers are not confined to eating only at traditional meal times, and those restaurants that are able to successfully offer all-day dining seek to benefit.
Pub operators steal food-share
Pubs are taking an ever-increasing share of the eating out market, as operators continue to move from wet-led models to either mixed or food-led offers. In fact, it is estimated that 30% of the casual dining market is driven by Pubs, and sites continue to be targeted by individual chefs and branded restaurants, such as Wildwood and Pesto, alike. The line between pub and restaurant is becoming increasingly blurred and former brewers such as Mitchells & Butlers and Whitbread now refer to themselves frequently as restaurant chains. Customers continue to demand quality, diversity and value, resulting in a wealth of opportunities for businesses of all types, from street food vendors to casual and fine dining.
A healthy appetite for independents
70% of the 23,500 restaurants in the UK are independently operated, and while the strength of brands has been discussed at length in recent years, many individual restaurants have remained popular with consumers throughout this time due to their ability to provide a familiar and reliable customer experience. For this reason, the market for individual restaurant sites has remained steady, and 82% of our restaurant sales are now on behalf of private vendors.
Private equity seek the next big thing
Fast-growing brands have continued to attract private equity investment over the last 4 years in order to finance expansion. In 2015, this included the Las Iguanas and la Tasca brands by Apollo-backed Casual Dining Group, and Yo Sushi by Mayfair Capital. In 2016, we saw Gaucho, New World Trading Company, Giraffe, GBK and Ed’s Easy Diner change hands. We continue to see private equity invest in a number of smaller brands as they look to find the next big thing.
Cosmopolitan coffee culture
With over 1.7 billion cups of coffee sold over the counter each year, coffee shops have become big business. There are currently 18,000 such shops in the UK, and this is predicted to grow to 21,000 by 2020, leading some commentators to suggest that the cosmopolitan coffee shop has replaced the role of the local pub in British culture. In particular, competition for high footfall sites in town and city centres is becoming increasingly fierce, with rents increasing accordingly.
With innovation running high, and eating out on the rise, the level of competition for restaurant sites has grown significantly in London and primary cities such as Manchester and Leeds, in turn driving up rents and lease premiums. As a result, many operators have sought to reduce risk and increase profitability by focusing on the UK’s secondary and tertiary cities and market towns to fulfil their growth ambitions, in turn driving up competition and rents in those locations.
For more of our views and detail on the Restaurant market, including Price Indices, download our Business Outlook 2017 publication.