Casual dining is having a tough break.
In 2015, just three years ago, the casual dining industry in the UK was worth over 5.9bn. A sector that has ensured a family-favourite, affordable restaurant on nearly every high street up and down the country, casual dining chains are big business in the UK.
Yet, the saturated market has since been bearing the brunt of increasing pressures coming from all directions. 2018 is now quite a different picture: the casual dining crunch is in full swing, and 1 in the 3 of the top 100 restaurant chains in the UK are loss making, according to a recent study by UHY Hacker Young.
In January, burger chain Byron announced the closure of 1/3 of their restaurants. Jamie’s Italian reported a pre-tax loss of £9.9m in 2016, and in February of this year announced they were closing 12 restaurants. The group’s London flagship steakhouses Barbecoa has also fallen into administration. Prezzo is the latest to crumble under the pressure, announcing the closure of 1/3 of their outlets just over a month ago, including all 33 of their Mexican chain Chimichanga.
As part of a report on the sector by Deloitte at the end of last year, partner Sarah Humphreys sums up the situation well in one sentence: “We expect challenging times ahead for casual dining operators impacted by cost pressures at the same time as consumers face a squeeze on disposable incomes.” To add to this already sticky situation, the new players on the block; food delivery services such as Deliveroo and Just Eat, have shaken up the industry and stolen a large share.
Yet despite this turbulent and testing time for the casual dining industry, there are chains that are fighting against the current and still going strong.
Piri Piri chicken master Nando’s is one of the strongest players in the UK; reporting an increase in revenue and gross profit in the year to Feb 2017. Popular with famous music artists from Beyoncé to Drake, and the inspiration for the pop culture classic “The Nando’s Skank” from Ed Sheeran & Example, Nando’s is seemingly capitalising on its celebrity popularity. It even just opened a professional recording studio in the middle of its Soho restaurant this January. It’s free to use, and Nando’s have been so overwhelmed with submissions they have no free appointments for the next several months.
This launch supports their less well-known global initiative, the Nando’s Music Exchange, which brings together emerging and established musicians for mentoring, workshops, collaborations and events. Innovations in customer experience like this help maintain a buzz and keep the brand front of mind, which is key when consumers are overwhelmed with choice.
Wagamama’s profit is also rising as well as their number of restaurants, having opened 6 new locations in the UK and 8 overseas including 2 in the US; a notoriously difficult market for UK restaurant chains to crack. The business isn’t the only thing the Japanese noodle chain is expanding, this January they added a new entirely vegan section to the menu being one of the first fast-casual UK chains to really grasp this emerging trend with both hands.
Vapiano is a smaller but significant success story; an Italian chain from Germany, their expansion in the UK has been a slow and steady process. There’s currently only 6 restaurants in the UK, but they’re now set to reach 9 this year, with 3 new London openings. Their unique restaurant experience stands out from the crowd and strong example of what great fast-casual dining should be. Upon entry, every customer is handed a card, and all items ordered are loaded onto that card to be paid at the end upon leaving. It’s an ingenious innovation that allows you to order what you what, and means you never have to worry about splitting the bill with friends which can be a more than tedious task at the end of the meal after a few glasses of wine. It doesn’t stop there; everything, from pizza to salad to wine, is ordered from a different counter, which you then take back to your shared table. Pasta dishes are made fresh right in front of you, allowing customisation of the dish from the type of pasta down to the amount of garlic.
Vapanio have really stopped and thought about how to address common pain points in the dining and experience, and reassure customers on quality as well as speed and price so that they keep coming back.
So, what can we learn from these restaurants that are bucking the trend?
Innovation, innovation, innovation. Whether it’s in menu or dining experience, it’s imperative that restaurants evolve to stay ahead of the curve in consumer wants and bring new solutions to address their needs. But it’s also about knowing what you’re good for and not losing site of that. Nandos = chicken, and just because veganism is rising, they’re not going to succumb and drop chicken from the menu overnight. Successful chains need to dedicate time and attention to understand what lies at the heart of their experience, which will differ by local market, and innovate in a way that improves the execution of their brand and offering.