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Out of the gloom? UK casual dining surges ahead of eat-out market

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Despite the doom-mongering, casual dining continues to go from strength to strength, albeit with some notable scalps. But how long can it last? Thomas Lawrence reports

While some fast casual brands continue to buck the trend, UK headlines have been teeming with casual dining casualties in recent months. Big names like Prezzo and Byron have made swingeing cutbacks, while Jamie’s Italian was only saved thanks to a massive cash injection from its eponymous owner.

However, the overall outlook for casual dining in the UK is a surprisingly bright one. As the out-of-home (OOH) foodservice industry stagnates, casual dining outlets recorded an additional 35 million visits year on year in June 2018, according to NPD Group, with Britons spending £6 billion on casual dining overall. All this while the overall OOH sector saw a decline of 43 million visits in the same period.

Bucking the trend

How has casual dining surged as other restaurants have faltered? A strongly loyal audience among the family segment is one of the key factors. Family visits to casual dining establishments grew by 11% over the year up to June 2018, three times faster than the rest of the market.

Growth has been similarly pronounced among young adults – 15% for 16-24 year olds and 9% for 25-34 year olds, a stronger rate than that of fast-food alternatives.

Broadening menus has also brought success for some of the more innovative casual dining restaurants. With demand for breakfast and snacking options both up 24% year on year, many operators are cashing in; casual dining establishments with all new breakfast options are enjoying growth rates 10 times greater than that of the wider market.

“Casual dining restaurants remain one of the key growth stories in Britain’s OOH foodservice market,” says Dominic Allport, insights director with the NPD Group. “But while the market is expanding, success is not guaranteed.” Notional figures aside, pressures that nearly saw off Prezzo, Byron and Jamie’s will ramp up in 2019. Operators will need to be at their best to compete.

Growing pains, new opportunities

The casual dining sector faces a catch-22 dilemma – scaling up in a saturated market is the only way to remain competitive, but the market has become saturated due to the dash to scale up. Despite their best efforts, restaurants big and small are sinking beneath the tide.

“One of the problems has been the tendency for some operators to scale up too quickly, with ‘quantity of sites’ outweighing ‘quality of sites’,” says Allport. “The biggest issue is the pressure on profit margins with business rates, rent, food and labour all costing more in an over-supplied market.”

Operators need to be inventive to stay afloat. In addition to expanding menu options, many are gravitating towards lower cost sites. London may be Britain’s culinary hub, but with an additional 3 million casual dining visits in the capital in the year up to June 2018 versus 23 million in southeast and southwest, reorienting focus could be profitable.

Technology is another game changer. As Deliveroo and Uber Eats continue their British conquest, delivery has grown at a rate of 9% year on year, with click and collects visits up by 25%. On demand cuisine remains a vibrant market as the in-house foodservice industry declines, a trend sure to continue.

“The ability of delivery platforms to reduce barriers to entry has particularly helped small brands to expand,” says Allport. But risks remain on the horizon, and 2018’s wave of cutbacks and closures won’t be the last. “Casual dining chains are most at risk from the ‘perfect storm’ of oversupply, lack of differentiation and sharp exposure to inflation, particularly labour costs.”

For now casual dining is on an even footing, with the market buoyant thanks to automation and menu innovation. But recent upheavals show nothing is sacred in casual dining; foodservice consultants and their clients should make the most of it while they still can.

Thomas Lawrence