RESTAURANTS - Christie & Co
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RESTAURANTS
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NAVIGATE, INNOVATE, ACCELERATE
While the restaurant sector featured heavily in the news
during 2018, independent and smaller operators can be
cautiously optimistic as we enter 2019 and innovation,
new concepts and technology come to the fore,
strengthening the sector as a whole.
SIMON CHAPLIN
Senior Director, Corporate THE HIGH STREET and organic growth to reach its current
Pubs & Restaurants portfolio of 130 plus UK sites. Its Asian style
During 2018 more high profile operators used
menu is seen as healthy and affordable,
CVAs (Company Voluntary Arrangements) to
maintaining a wide appeal with consumers.
restructure a business, primarily to manage
While future growth opportunities in the
underperforming sites and reduce rent costs
UK are limited, they are actively expanding
for a period of time. While a viable solution in
Consultancy many cases, CVAs can also be a precursor to
administration.
internationally. We wait to see if their
acquisition by The Restaurant Group, the
owner of Frankie & Benny’s and others, will see
Prime candidates likely to turn towards CVAs this growth accelerate.
are multi-site operators who expanded quickly
Nando’s and Wagamama are two prime
over the last three years in the race for growth.
examples of operators who continue to
In 2015, the growth in casual dining looked
succeed despite high street casualties, having
unstoppable and private equity pushed for
established a unique signature offering that
expansion, which sometimes extended into
has withstood the test of time with its target
areas where the brand style didn’t fit or where
audience. Operators seeking to introduce new
competition saw rents escalate. Considering
concepts and customer experiences must
these factors, further casualties on the high
also caution against straying too far from their
street are inevitable.
principle offering. Menu expansion opposed
Funding for to a complete change in menu will prove to be
In the first half of 2019, we expect at least
restaurants is three larger corporate operators will resort far more effective. For example, Nando’s has
still forthcoming to CVAs, the only viable defence for many introduced a breakfast offering, which does
operators in the current market, and this not put the principle offering at risk.
despite the number could double during the rest of 2019
headlines. FUNDING
if consumer confidence does not improve.
Funding for restaurants is still forthcoming
BRAND despite the headlines, but the sources are
Out of the top 10 brands, Nando’s remains wide ranging. Traditional high street banks
the only one still actively seeking new sites. have never been suitable from a start-up point
Having carefully expanded over 25 years of view, as in most cases there is only the
throughout the UK, Nando’s has become the leasehold property as security. Crowdfunding
restaurant consumers most want to see on and emerging challenger banks, keen to back
their street. The brand is more up-market than the next trend, have also become popular
a fast food chain and has clever promotions, avenues for an ambitious existing operator
including discounts to the likes of NHS and are seen as a catalyst to achieving
workers and the infamous ‘Black Card,’ which success.
attracts music and sports stars while still
Private equity comes in all shapes and sizes,
promoting the brand.
with some of the best focused on small
Wagamama has also been performing well, emerging chains, who then cleverly sell out
remaining top of their class with measured when the group has grown to around 30
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NAVIGATE, INNOVATE, ACCELERATE
strong. For example, private equity firm, Piper grow over the next two years. Operators such
sold Be At One, whose portfolio had grown as Flight Club and the indoor golf operator,
from 11 to 33, and continues to support a Swingers, have successfully combined the bar
number of burgeoning hospitality businesses. and dining with an activity.
The premier players in private equity are more The growth of casual dining started in mid-
aggressive, pushing for growth, which can market all-encompassing chains, which had
result in mistakes, but if an operator finds the the benefit of appealing to a wide audience.
right strategy, the rewards can be great, as The casual dining offering has now become
with Bridgepoint’s sale of Pret a Manger to JAB increasingly diverse, ranging from street food
Holding for £1.5 billion last spring. to steak houses.
DEVELOPMENT AND EXPANSION TECHNOLOGY
As national brand operators begin to retreat The consumer has become lazy whilst
from secondary markets, independent and also becoming more demanding. In the
smaller operators are able to benefit from the instantaneous world we live in, it is not
emergence of better deals. Smaller operators surprising that ‘Grab & Go’ is one of the fastest
Consumer seek to acquire one to two new sites a year, growing sectors. Additionally, the rapid
preferences continue expanding from cashflow, however a small expansion of delivery services, not just from
team will be self-limiting in an attempt to grow. your local curry house but also from most high
to shift towards more Unconstrained by brand image, most small street brands via Deliveroo and Uber Eats, is
imaginative dining and independent operators are able to adapt causing concern amongst operators trying to
their offering to the local consumer and can
experiences. be more nimble with workforce and suppliers.
improve margins. While street food is a great
source of food innovation, changes on the
The likes of pubs and small family businesses high street are mainly driven by technology
are increasingly recognised for the excellence and customer experience, as operators try to
of their food, as opposed to the formality of extract more money from every visit.
service. Conversely, multi-site operators can
look to create individual menus for each site Most restaurant operators have now
to include locally sourced products and tailor embraced the web, but more could also utilise
their local offering. social media to drive customers through the
door and promote the business to a wider
Independent and smaller operators can look audience. Many operators turn to technology
forward to great opportunities to capture to make ordering and paying even simpler,
customer interest, as consumer preferences such as going cashless, using apps or table
continue to shift towards more imaginative top technology, while some utilise technology
dining experiences. Unconstrained by brand to train staff via video games, which replicate
image, most small and independent operators scenarios with customers. The ability to
are able to adapt their offering to the local monitor customer behaviour to the finest
consumer. of detail has allowed operators to maximise
factors, such as table layout and menu
INNOVATION
placement, and understand customer peaks
The popularity of new concepts has seen and flows, which can be used to improve staff
many establish numerous pitches at street rotas, subsequently mitigating wage costs.
food markets, pop ups and box parks. New
concepts could also create larger, multi-use OPERATOR COSTS
spaces by taking advantage of the prevalence
Whilst the voucher culture has somewhat
of space on the high street, where landlords
disappeared, discounting culture has not,
are also beginning to offer new benefits and
which independent operators are unable to
incentives, such as deals on rents, nil ingoing
compete with. Sensitivity around pricing is
premium cost, planning permission and
unlikely to change in 2019. While operators
reduced ingoing costs. This trend is certain to
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NAVIGATE, INNOVATE, ACCELERATEwill attempt to absorb costs, many will need The 2018 Autumn Budget announced some
to pass on costs to the consumer in 2019. rate relief for small businesses, and rents
Many operators will still need to invest heavily are set to stabilise at worst and will reduce
in the fit out of their space and if customer significantly in many areas. With retail high
experience is enhanced or improved, then streets failing, pubs and restaurants are not
cost should not become as problematic in the in a position to rescue them unless rent costs
mid-market. stabilise with the support of local authorities
CASE STUDY and landlords.
Former Prezzo, Surrey Tipping remains contentious, as the
market becomes increasingly cashless and BREXIT
Acting on behalf of the owner contactless, and is not seen as an effective
of the freehold investment, route to reward staff. Minimum wage has With 3,000 restaurants having opened in
Christie & Co was contracted helped, and we will see HMRC become three years, good staff were in high demand
to find a new tenant for a involved to ensure the Tronc system can and equally hard to find. Whilst Brexit concerns
building in Reigate town centre, operate more smoothly. Customers can have meant the influx of new EU staff has
formerly occupied by Prezzo expect to see service charges on the bill more slowed, the number of restaurant closures
prior to their CVA in early 2018. often, but in combination with rising menu has seen fewer people seeking new positions.
Eager to maintain covenant prices, the cost of a night out will increase and Leading software platform, Fourth Analytics,
strength, the leasehold was effectively decrease the number of restaurant reported that EU nationals composed 40%
quickly brought to the market visits as a result. of the UK’s hospitality workforce as of June
and let to Nando’s, who sought 2018, pressuring operators to become less
to increase their presence in RATES AND RENTS dependent on talented migrant chefs and
the busy Surrey town, on a new simplify menus, as the influx of new EU
Unlike retail shops, pub and restaurant staff slows. Should food import costs rise
lease. operators need to invest heavily in the fit out depending on the Brexit deal that is agreed,
of their space. Short leases, specifically those better menu creation and sourcing more
with sub five years remaining, restrict the time ingredients from the UK or outside the EU
available to generate return, although many will keep costs to a minimum. There has also
will seek a tenant break clause at five or 10 been a drive to encourage UK residents into
years in case situations grow worse. Longer the industry, which could be achieved through
leases also have value when goodwill can be increased minimum wage and clear career
attached for any exit in the future. development.
As national brand While street food is a
operators begin to
retreat from secondary
great source of food
markets, independent innovation, changes
and smaller operators on the high street
are able to benefit are mainly driven
from the emergence of by technology and
better deals.
customer experience
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NAVIGATE, INNOVATE, ACCELERATECASE STUDY CASE STUDY
Bronte Restaurant and Bar, Churche’s Mansion, Cheshire
London
In September, Christie & Co sold
Bronte Restaurant and Bar, a modern Churche’s Mansion, a former antique
and elegant restaurant overlooking showroom in Nantwich, Cheshire, to
Trafalgar Square in London was sold an independent operator, with plans
to Saudi Delta Group, a Middle East to convert the space and open a new,
based operator, through Christie & Co. quality seafood restaurant. Occupying
The group sought to acquire a prime a Grade I listed landmark building,
location site in the capital city for their the site previously traded as a tea
first restaurant in the UK. The site was room and restaurant from 1930 to
sold off an asking price of £850,000 1986, attracting numerous famous
for the leasehold interest and has now visitors and established a renowned
reopened as the Blue Garden. reputation.
MARKET PREDICTIONS
Further causalities of We will see growth Competition in the
high street restaurant in the number of delivery market
brands are expected in independent, multi-site will heat up with
the first half of 2019. operators as landlords increasing benefits for
seek alternative restaurants.
tenants.
2016 14.1%
2014 11.1%
2015 9.9%
EU nationals
composed
40% of
the UK’s
hospitality
workforce as
of June 2018 Movement in average
prices, year on year
2017 -3.4%
2018 -1.3%
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