Branded outlets are impacting on independents, reports says
Branded restaurants are eating away at pubs’ and independent restaurants’ share of the dining out market – according to a report from investment bank Panmure Gordon & Co.
The firm has said that a blurring of the lines between different segments of the eating and drinking market could have negative implications that will be felt by the wider pub and restaurant sector.
The report highlighted four key reasons casual dining growth could impact on pubs and independent restaurants – the potential for casual dining chains to increase “food expectations” among consumers by offering premium quality; chain restaurants’ ability to offer “arguably higher quality dining” at an equivalent price; changing consumer tastes forcing pub and restaurant operators to offer continuous menu innovation to retain and attract customers; and the well invested estates held by many chains, which provides them with “well positioned, stylish restaurants” capable of attracting consumers.
A spokeswoman for Panmure Gordon & Co said the dining out sector is going through a “period of unprecedented change with robust consumer demand driving increasing supply and convergence across categories”.
“As we stand, we believe branded restaurants are taking share from pubs and independents and the winners and losers will depend on balancing site expansion with constant menu and brand re-development,” she said.
The report says that food as a proportion of sales has grown significantly in recent years.
It adds: “Eating out has shown continued growth since summer 2014, while drinking out has only recently shown signs of recovery.”
Quoting figures produced by Greene King, the report says the average household spend on eating out was £86.71 in May, up 4% on the same period in 2014, while drinking out was up by 6% to £46.05, but points out that the latter figure was influenced by bank holidays and weather.
The report continues with this warning: “Whilst the initial impact from the growth in casual dining chains and convergence of all-day dining may seem to be isolated to the restaurant sector, we feel the implications could be felt in the wider pub and restaurant sector.”
Malcolm Duck, owner of Ducks at Kilspindie House in East Lothian,
said it can be difficult for smaller businesses to compete with the chains benefitting from economies of scale.
“There is a raft of work that’s nothing to do with cooking food and the bigger boys can put that all under one umbrella which takes a massive cost out,” said Duck.
Ryan James, chairman of the Glasgow Restaurant Association, agreed that there are “real negatives” for independent operators competing with branded chain restaurants.
“They’ve got the whole head office
to look after them,” said James. “It really is economies of scale and also buying power. They’ve got huge
buying power and can get goods for cheaper.”
