Entrepreneurs driving restaurant and pub openings in competitive market

Casual dining restaurants and food-led pubs continue to open up around the country – a trend being led largely by a crop of ambitious, aspiring branded chains.

Latest figures from Market Growth Monitor, the quarterly measure of GB pub, bar and restaurant openings and closures produced by AlixPartners and CGA Peach, show that this growth in entrepreneurial food-driven businesses – as well as the continued conversion of drink-led pubs to food establishments by major pub groups – is helping to offset the on-going decline in marginal sites, in particular community pubs.

The latest Monitor shows a slight dip in overall numbers. As of March this year the country had 123,732 licensed premises - 0.5% fewer than the same time last year, but 4.4% fewer than five years ago.

“This is a relatively small year-on-year fall, and may only be a blip, as it contrasts with the last three quarterly reports, all of which showed the country’s stock of licensed premises in net growth over the previous 12 months. But it does reflect a general slowing down in the eating out sector on both the business and consumer side over the last six months or so,” said CGA Peach’s vice president Peter Martin.

Britain’s stock of pubs and bars fell by 2.7% in the last year, and by 9.9% over the last five years. Net closures totalled 5,778 over those five years. Restaurants have made up much of this shortfall, and there are now 0.6% more than there were a year ago, and 21.3% more than five years ago. The trend is even larger in the food-led branded pub sector, where stock is up by 17.1% over the 12 months to March, and by 46.6% in the last five years. A lot of these additions have been conversions of drink-led locals into eating-focused pubs.

“Although the last quarter may have seen a tightening of market conditions both in terms of site numbers and sales growth, this does not appear to have dampened the flow of new entrants to the market. There is no let up at the smaller chain end of the market,” added Martin.

Over the past three years, restaurant groups with between five and 25 sites have grown site numbers by 39%, or around a net 500 new openings, while growth among established brands with over 100 sites was a more modest 13%, or just under 300 net new openings.

“Perhaps unsurprisingly net site supply in the pub and restaurant market is now trending more in line with the movement in demand – which has proved relatively flat so far in 2016,” said AlixPartners managing director Paul Hemming.

“This is of course at the macro level. The overall picture masks a three-tier world. At the top we see strong performance being reported by both a selection of established operators and exciting newcomers. Businesses like Wagamama, Las Iguanas and Blanc Brasserie or Red’s True Barbecue, The Botanist and Leon are showing there is plenty of growth for well-run offers that fit a target market.

“We then see the bulk of the market producing flat-to-plus-three like-for-like sales, with a tail of offerings, including the likes of Frankie & Benny’s, finding the current competitive market conditions challenging after years of success. As the competitive nature of the market becomes more pronounced, so are the experiences of the winning concepts versus the rest.”

Peter Martin concluded: “The figures illustrate the incredible success story of casual dining in this country over the last few years – and the spread of new restaurants around the country has been fairly even. With consumers being given more choice than ever, competition will only increase, sales growth is going to be hard won.”

The AlixPartners and CGA Peach MarketGrowthMonitor is compiled quarterly from data supplied by CGA’s Outlet Index, a continually updated database of all licensed premises. For more information, contact CGA Peach business unit director Jamie Campbell at jamie.campbell@cgapeach.co.uk.
The Monitor is delivered in partnershipwith AlixPartners, the leading global financial advisory firm. Contact managing director Paul Hemming at phemming@alixpartners.com.