Nick Garrett

Tag: London

  • The rise of the healthy UK fast-casual chains

    The rise of the healthy fast-casual chains

    Neil Gerrard
    Thursday 02 September 2010 10:42
    ChilangoThe popularity of home-grown fast-casual chains with an emphasis on healthy food is ballooning. Neil Gerrard finds out how they ditched fries for fruit and vegetables.

    London’s Fleet Street isn’t exactly under-served when it comes to fast-casual dining outlets. A quick glance up and down the road reveals a McDonald’s, a Pret, and a Wagamama to name just a few. All are doing a healthy Tuesday lunchtime trade, but it is the brightly-coloured Mexican-style eatery Chilango which has the suited office workers queuing out the door and up the street.

    It’s a similar story with Leon a few hundred metres further down the road in Ludgate Circus, with businessmen crowding in for a quick lunchtime pow-wow over a box of Morrocan meatballs or sweet potato falafel with aioli.

    A long time has passed since fast casual dining meant being asked “do you want fries with that?” – the arrival of players like Nando’s, Pret A Manger and Wagamama several years ago saw to that.

    But the past few years have seen a growing army of popular small chain restaurants that serve up their food quickly but also attempt to be stylish, fun, and even fairly healthy.

    Most of them are home-grown businesses offering a lunchtime price point of around £6-£7 and many are London-based, although another Mexican operation – Barburrito – flies the flag for the movement in Manchester, Leeds and Liverpool.

    There’s no chance of operations like this displacing their more established rivals just yet, but there’s also no denying they are on the up. And of course, it helps that the entire sector is growing fatter off a phenomenon of the recession which has seen fast casual sales grow 5.9% at the expense of many full service restaurants which are sliding backwards (see box on page 21).

    But there’s more to it than just that. Sales at Barburrito’s mature sites are up 30% year on year. Chilango’s Fleet Street branch saw like-for-like sales for the past 12 months up 20% on the year before, which were themselves up 44% on the year before that.

    Stephen Wall, who co-founded Vietnamese street food restaurant Pho which opened its fifth restaurant in Soho this week, puts the success of businesses like his down to changing tastes. “People are seeing and tasting the world quite a bit more and they are looking for alternatives to burgers and sandwiches. If you can deliver something that is a bit different then you have a good shot at success,” he says.

    Health is also a much bigger consideration than it used to be, as Vincent McKevitt, founder of healthy eating and salad concept Tossed explains. “If you look at all the research on who the healthy eaters are, they will tell you it’s women, people who are into sports, and men of an older age who are concerned about their cholesterol,” he says. “But it’s all a load of nonsense because everyone has woken up to it and they are eating a lot more healthily.”

    It was a gap in the market that Henry Dimbleby, co-founder of the renowned Leon group of restaurants, was quick to spot. “When we started, healthy food was synonymous with mung bean salads and a kind of wet and woolly, slightly soft service style. So there was a kind of association with healthy food as involving some kind of sacrifice,” he points out.

    The ultimate aim then, is to pull in customers not because the food is healthy, but because they are hungry and fancy eating a tasty dish that isn’t going to plague them with calorie-guilt for the rest of the day.


    VARIOUS APPROACHES

    But it also has to be fast. Various operators have various approaches but Leon, with its multi-channel chute system and menu boards behind the counter most closely resembles the likes of McDonald’s and Burger King. To get that speed and efficiency right, Dimbleby says that he and co-founder John Vincent worked in fast food restaurants to examine the system they used. What they found was that they admired the standards of health and safety and speed of service, but not the food. “We asked ourselves what is it about this system that delivers food quickly but food that is unappetising, or even if it is appetising makes you fall asleep and feel a bit fatter?”

    Chilango has gone for a slightly different approach – burritos and other dishes are made up for customers on the spot in a Subway-style service line, but walled off to the side behind a glass partition is a full service kitchen, with chefs pumping out freshly made ingredients from scratch. All the salsa and guacamole is made that morning, and they take their time over the meats used – the pork shoulder that is offered as one of the options, for example, is braised for seven hours before it is served.

    Of course, that level of attention to detail comes at a price. Vincent McKevitt admits that Tossed’s commitment to quality ingredients means that margins are around 5% lower than he’d like them to be. “Everyone thinks we make loads of money, but carbohydrates are cheap whereas fresh fruit and veg are expensive especially in this country. That is why salad-led businesses predominantly never worked over here. But I am keen to prove it can work. What I have learned is it is better to have the best product out there and charge a little bit more,” he says.
    FOOD COSTS

    Meanwhile, Dimbleby points out that Leon’s aim to use what he terms “good carbs” and no “bad fats” means that food costs at his business are also “slightly higher”. Then again, both businesses offset these extra costs with lower wage costs – Tossed packs about 500 people a day into its outlets, mostly at lunchtime. For Leon, it’s about 800 throughout the day.

    The way in which the restaurants are branded is also key to their success or failure. Barburrito co-founder Morgan Davies says that his company spent a lot of time and effort making sure that the branding was fun – through the medium of the chain’s mascot Derek the Donkey – but also communicated the quality of its food and its healthier properties. “We spent a lot of effort on the interior of the restaurants, making it a comfortable place to sit, suitable for fast service, and we put a big emphasis on food quality to make sure it speaks to the health-conscious generation,” he explains.

    It was a lesson that half American, half Norwegian founder of Chilango Eric Partaker learned early. Before the concept first appeared in its current guise in 2008, Partaker called it Mucho Mas and operated the Upper Street store in Angel Islington. It was a moderate success, with sales of about £12,000 a week. But when, in 2008, he switched it to the brightly-coloured Chilango branding, adorned with cartoonish masked Mexican wrestler characters and started making more of a noise about the food’s value and healthier properties, sales shot up to more than £20,000 a week. “Only two things changed – the brand and our marketing efforts,” the former employee of internet telephone brand Skype explains. “If that doesn’t convince someone to believe in the power of branding and marketing, they must be insane.”
    POPULAR PHENOMENON

    And while branding undoubtedly helps, Mexican food itself seems to be a popular phenomenon at the moment. Partaker likens its potential to the stratoshpheric growth experienced by coffee chains such as Starbucks and Costa in the 1990s. “We’re right at the beginning of a boom in Mexican food,” he claims.

    Peter Martin, founder of hospitality industry analysts Peach Factory, agrees: “The big growth is in the Chilango-Tortilla end of the market. The two hottest home-grown chains at the moment are probably Mexican,” he adds.

    But it isn’t Mexican food per se that is the secret to its success, according to Martin. Instead, he sees what they are doing as an extension of what made Nando’s successful – simple, hot and spicy food, aimed at a metropolitan market. And the competition is going to be stiff, with American giant Chipotle parking its tanks on the home-grown chains’ lawn with a store in Charing Cross. Still, both Davies and Partaker welcome the arrival, claiming it will have an educative effect on the British public, many of whom still don’t know their tacos from their totopos.

    Regardless of what style of food they are serving, though, a fast-casual chain worthy of the name needs finance – often in the form of venture capital or investment from wealthy individuals who share the enthusiasm for the concept of its founders. Otherwise, there are few chances to enter the kinds of spaces – prestigious shopping centres and city centre locations surrounded by office blocks – that make the concepts lucrative.

    Stephen Wall at Pho was lucky enough to attract investment from pub entrepreneurs and regulars at his first restaurant in Clerkenwell, Tom and Ed Martin. Others, such as Tossed’s Vincent McKevitt, did their best to muddle along on their own, pushing the concept to see if it worked and paying suppliers as late as possible, until he managed to attract interest from private equity firm Beringea in April this year.

    Meanwhile Barburrito, which already has private equity backing (see box on page 22), is now seeking a second round of funding of between £5m-£10m to bankroll its expansion further south.
    BOLD EXPANSION

    The fact that companies in this sector of the market are considering such bold expansion – Leon will have hit 10 sites by next year with new openings in Old Compton Street and Brent Cross shopping centre – shows that there are few signs of the fast-casual market slowing down any time soon.

    Stephen Wall has been surprised that since he and Juliette Wall wrote the business plan for Pho six years ago, the market has not evolved faster and more direct competition has not emerged. But he adds: “All I can see is it continuing to grow and the quality of the offerings improve and increase, with more emphasis on healthy food. The UK is still in its infancy, as far as fast casual is concerned. I see the market over the next five years growing quite rapidly.” All of which means plenty more queues down the high street for the latest big thing.
    TAKW-AWAYS VS EATING IN

    The ratio of take-away sales to eat-in sales varies massively not just across each fast casual chain but also across their individual sites.

    Barburrito’s Piccadilly Gardens site in Manchester sees 80% of customers sitting in, but its Deansgate site in the same city, is about 70% takeaway, as its office-working customer base scurry back to their desks to eat lunch.

    Meanwhile, Leon co-founder Henry Dimbleby finds that his restaurants have become popular meeting places for the type of businesspeople who would rarely have considered a fast-casual outlet previously. “The recession has taken the stigma out of being frugal, or even made it a bit cool,” he says.

    Pho also does take-away but is predominantly sit-in across most of its sites. Despite that, Stephen Wall sees huge potential. “We believe there are real opportunities for us to focus a little more on an operation that might allow us to push take-away and really go for it in a much more high volume manner,” he says.
    INSPIRATION AND ADMIRATION

    Stephen Wall: I think Henry Dimbleby is fantastic and I admire what he has achieved with Leon. Retrospectively, I also admire Wagamama – they almost single-handedly evolved the fast-casual dining sector in London in the 1990s.

    Henry Dimbleby: I love Byron and I love Wahaca. They have similar customers to ours but on a different occasion. What Byron has done, which is to resolutely focus on a good burger, is great. It is so simple.

    Vincent McKevitt: I like Itsu. It’s a slick operation and the quality of the sushi is good. The burrito boys are interesting too. They are quite natural and fresh and if you miss out the cheese, they are not too bad for you at all.

    Morgan Davies: I have a lot of admiration for Pret. As a company they have some good values and their level of service is second to none, even though I am not a massive fan of their product. I also like the guys at Leon. They have an attractive brand and they put a lot of effort into making their stores individual.
    TEN FAST-CASUAL BRANDS TO WATCH

    Company Barburrito
    Food syle Mexican
    Number of outlets 6
    Founders Morgan Davies & Paul Kilpatrick
    Year founded 2005
    Main investors Cenkos – rapid realisation fund

    Company Byron
    Food style Burgers
    Number of outlets 10
    Founders Tom Byng
    Year founded 2007
    Main investors Gondola Holdings

    Company     Chilango
    Food style Mexican
    Number of outlets 4
    Founders Eric Partaker & Dan Houghton
    Year founded 2008
    Main investors Venrax /Ambient Sound Investments

    Company Fine Burger Co
    Food style British burgers
    Number of outlets 4
    Founders Robert Tame
    Year founded 2003
    Main investors Unknown

    Company     Leon
    Food style Various fresh fast food
    Number of outlets  8
    Founders Henry Dimbleby & John Vincent
    Year founded 2005
    Main investors Active /Vivian Imerman

    Company     Pho 2005
    Food style Vietnamese
    Number of outlets 5
    Founders Juliette & Stephen Wall
    Year founded Juliette & Stephen Wall
    Main investorsTom and Ed Martin

    Company     Rosa’s
    Food style Thai
    Number of outlets 2
    Founders Alex & Saiphin Moore
    Year founded 2008
    Main investors Various private individuals

    Company     Tampopo Pan-Asian
    Food styleVarious private individuals
    Number of outlets 5
    Founders Nick Jeffrey & David Fox
    Year founded  1997
    Main investors Various private individuals

    Company     Tortilla
    Food style Mexican
    Number of outlets 4
    Founders Brandon Stephens
    Year founded 2007
    Main investors Paul Campbell (Clapham House chief executive)

    Company     Tossed
    Food style Healthy eating /salads
    Number of outlets 6
    Founders Vincent McKevitt
    Year founded 2005
    Main investors Beringea


    THE GROWNTH IN UK FAST-CASUAL DINING

    TRAFFIC

    Year to June 2009  Year to June 2010  Change
     Total OOH  12,209,360,000  11,821,970,000  -3.2%
     Fast Casual  1,473,768,600  1,543,419,600  +4.7%

    SALES

    Year to June 2009  Year to June 2010  Change
     Total OOH  £45,663,590,000  £44,583,990,000  -2.4%
     Fast Casual  £6,410,425,000  £6,790,315,000  +5.8%

    Source: NPD Crest

  • UK Fast food chains prosper 2011-12

    Fast food chains prosper as cash-strapped consumers shun retailers

    US fast food chains Subway and McDonald’s announced plans to open hundreds of new stores creating more than 8,000 job

    McDonalds London

    McDonald’s fast food restaurant in, central London, the US chain has announced store expansion plans in the UK creating 2,500 jobs. Photograph Graham Turner

    Mealtimes used to revolve around the kitchen table, but the fast-food boom is changing Britain and its high streets, as US food chains Subway,Starbucks and McDonald’s set out to conquer a recession-weary nation still hungry for instant gratification.

    Last week, sandwich chain Subway trumpeted plans to open 600 new stores over the next three years, creating up to 6,000 jobs, while McDonald’s said it would create 2,500 jobs this year through new outlets and 24-hour burger flipping.

    Starbucks, with 300 branches and 5,000 jobs said to be in the pipeline over the next five years, is also in the midst of a high street bun fight that is pitting US imports against flourishing domestic chains such as Greggsand Costa Coffee.

    With more than 1,400 stores in the UK, Subway is already five times the size it was in 2004, but its founder and self-styled “sandwich king” Fred DeLuca, who was in London to speak at a franchisee conference last week, was bullish: “Everybody eats three times a day; it’s only a question of where they choose to eat. The longer-term trends are that people eat out more often.”

    His upbeat attitude is at odds with the gloomy atmosphere among high-street retailers who face painful and costly restructuring to shed stores that are no longer economic as shoppers pull in their horns.

    Analysts say firms like Subway and Greggs, which both offer £3 lunch deals, are weathering the storm because they appeal to hard-pressed consumers who are seeking out affordable treats, like burgers and crème brûlée macchiatos, rather than splashing out on new outfits and video games.

    DeLuca said like-for-like sales at British Subway stores had jumped 10% over the last three months while the success of doughnut-maker Krispy Kreme in 2011 will see it push north into Scotland this year.

    The coalition’s hopes that the private sector will create enough new jobs to soak up the thousands of workers laid off by the public sector has meant that the expansion plans of McDonald’s and co have met with ministerial gushing.

    Nick Clegg toured the burger chain’s UK training centre last Wednesday and said the big jobs number – with half the new positions earmarked for the under 25s – was “fantastic news” not least because the unemployment rate, at 8.4%, is at its highest level since 1995, with young people hit hardest.

    But like other developed nations, Britain has a well-documented weight problem. Analysts also question whether the economic pain will soon shift to coffee shops and fast-food outlets if the industry – which is shoehorning outlets into stations, hospitals and petrol stations and seeking franchise partners to reach smaller towns and cities – fulfils such high octane expansion plans.

    It is not only the service that is fast in the food-on-the-go sector, as research by the Local Data Company (LDC) shows. In the past five years McDonald’s has been overtaken by Subway, only for Greggs, which has 1,500 stores, and in some parts of London two bakeries on the same street, to become the largest chain.

    DeLuca says Subway is not at risk of over-expanding: “When we get to 2,000 stores, we’ll have about one store for every 30,000 people (in the UK). That’s actually quite low density for us. In the US we have one store for every 12,000 people.”

    There are more than 47,000 takeaway food outlets in the UK, according to LDC, but less than a third are operated by the big brands and given the tough economic backdrop their success is expected to come at the expense of independent bakers and coffee shop owners.

    LDC director Matthew Hopkinson questions the need for Greggs and Subway to build huge store networks at a time when others are desperate to shake off costly leases: “I find it difficult to understand how everyone is going to make money from massive expansion. It suggests that no one ever buys food and eats at home and we know from the success of the supermarkets that’s not true.”

    Despite the economic downturn, office workers still march to work armed with lattes, while on the domestic front there has been a technological race to create the most seductively shaped (read expensive) coffee machine for kitchen worktops.

    Jeffrey Young, managing director of research firm Allegra Strategies, which recently published a report examining the growth of branded coffee chains in the UK, said they had shown “incredible resilience” throughout the financial crisis. The report said sales at the big coffee chains rose 10% to £2.1bn last year with around 11m cups of coffee drunk in, or carried out, each week.

    Coffee shops offer Britons a respite from the “feeling of austerity” in the current economy, explains Young: “Coffee shops continue to be important to consumers who visit as part of their desire to socialise and have a regular affordable treat.”

    He cautioned, however, that those consumers were already showing signs of cutting back each time they pop in for a pick me up with roughly £3.18 spent per visit last year, compared with £3.50 in 2009.

    With more than one in seven high street stores already lying empty, property experts do not expect the rapacious growth of food chains to fill that void. Indeed some food chains could find themselves marooned, as it is estimated that about 50% of the UK’s shop leases will expire over the next seven years, threatening to accelerate the pace of high street change.

    “People want to do a bit of window shopping and have a frothy coffee and a sandwich,” adds Hopkinson. Take the window shopping out of the equation, and Britain’s appetite for fast food might be lost rapidly.