Despite high-profile closures, casual dining operators are still expanding with signs of a stronger focus on lower-cost sites away from London
London, September 4th 2018 – Latest figures from global information company The NPD Group show casual dining continues to grow in Britain. Many operators – especially newer, challenger brands – are continuing to focus on expansion despite high-profile closures and re-structuring that some have described as the ‘Casual Dining Crunch’.
For the year ending (YE) June 2018, visits to British casual dining outlets were up nearly
7%, equivalent to an extra 35 million visits compared to the previous 12 months. Casual dining now accounts for 5% of visits in Britain’s eat-out or out-of-home (OOH) foodservice industry. While the overall OOH market suffered a decline of 43 million visits in the year to June 2018, casual dining chains grew visits by 34 million. Britons spent some £6 billion on casual dining in YE June 2018, around 11% of total OOH spend. Over the same period, spending on casual dining restaurants grew four times faster than the total market.
Dominic Allport, Insights Director with The NPD Group, said: “Casual dining restaurants remain one of the key growth stories in Britain’s OOH foodservice market, despite the high-profile closures, rescues and restructuring seen in this sector in recent months. But while the market is expanding, success is not guaranteed. One of the problems has been the tendency for some operators to scale up too quickly, with ‘quantity of sites’ outweighing ‘quality of sites’. Some of the newer brands are also failing to set themselves apart from competitors, leaving consumers with the sense they are getting similar menus, similar venues and similar customer experiences. But the biggest issue is the pressure on profit margins with business rates, rent, food and labour all costing more in an over-supplied market.“
Escaping London’s high costs
One way to address margin pressures is to seek lower-cost sites, and there are signs that the push to expand casual dining is now less inclined to focus on London, where the 2017 business rates revaluation has had a sharp impact on many operators. For YE June 2018, there were only an additional 3 million casual dining visits in the capital versus the previous year, compared to 23 million more in the southeast and southwest of England.
Recipes for success
The casual dining sector is also using a variety of strategies to expand. Delivery continues to grow strongly across the casual dining market (up 9% YoY), order ahead/click and collect visits are also up (25% YoY), as are visits using meal deals or promotion (up 16% YoY). Casual dining restaurants are also benefiting from consumer recommendations with visits driven by positive comments on a word-of-mouth basis, on social media, or via review sites up 38% YoY, more than three times faster than for the wider market. Some casual dining restaurants are trying to expand beyond dinner into other opportunities such as breakfast (up 24% YoY within the casual sector), and snacking (also up 24% YoY). The growth rate casual dining operators are enjoying with breakfast is 10 times greater than breakfast growth in the wider OOH market.
Families, young adults and millennials
Casual dining has a strong following in the family segment. Family visits grew by 11% for YE June 2018, almost three times faster than family visits across the overall OOH market. Consumers generally are going to casual dining restaurants because they want ‘something different’ and are attracted by the ‘quality of the food’. Both of these motivators are more pronounced among casual dining customers than for the OOH market as a whole.
Young adults/millennials are also loyal fans of casual dining restaurants. Visits from 16-24s are up 15% YoY, and 9% among 25-34s. Visits by both groups to casual dining restaurants are growing faster than with other OOH outlets such as quick-service restaurants.
NPD’s Dominic Allport added: “The continued growth of casual dining in Britain is good news for our foodservice industry. The ability of delivery platforms to reduce barriers to entry has particularly helped small brands to expand. Operators can support further growth by building strong consumer awareness, maximizing automation to reduce costs, maintaining prudent supply chain management, and driving off-peak visits through flexible pricing. But growth brings the risk of saturation and for that reason it is likely the casual dining boom will see further closures and rescues. Casual dining chains are most at risk from the ‘perfect storm’ of oversupply, lack of differentiation and sharp exposure to inflation, particularly labour costs. A chain that deals with this by cutting prices to boost visits will be the one that’s most at risk.”