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Morning Briefing for pub, restaurant and food wervice operators

Tue 1st Nov 2016 - Horizons – the sector has seen a slowdown in new brands activity in past six months
Horizons – the sector has seen a slowdown in new brands activity in past six months: A decline in the number of new eating out brands qualifying for the latest Horizons Ones To Watch research, along with a slower rate of expansion for more established ones, points to a slowdown in entrepreneurial activity in the foodservice sector over the past six months. Horizons’ biannual Ones To Watch research tracks the emergence and growth of new eating out brands once they reach five units through their period of critical growth to 25 outlets. Brands qualify for inclusion if they’ve shown growth of at least 20% over the previous three years combined. “Foodservice is traditionally a sector that attracts a great deal of entrepreneurial activity,” said Horizons analyst Nicola Knight. “Some of these concepts will inevitably fail in the longer term, but others go on to become the next big high street brands such as Bill’s, Byron, Jamie’s, Tossed and Leon. Overall there is still growth in the number of new concepts included in Ones To Watch but at just seven new brands, a total of 190, this is fewer than we have seen in its five-year history. In April 2016 the research revealed 12 new concepts, a total of 183, while this time last year 30 additional brands met the criteria.” Ones To Watch also tracks when the fledgling brands reach a critical mass of over 25 outlets, after which they are no longer included in the survey. In the most recent research [October 2016] just one brand had grown too large to be included, compared with eight brands that grew too large in April’s survey, and four in November 2015. “This slowing of entrepreneurial activity may be the beginning of a more general slowdown in the foodservice sector, even a short recession across the economy with Brexit being the key reason behind the uncertainty,” said Knight. “It shows that fledgling operators are currently being more cautious in their expansion plans.” Dessert cafe Kaspa’s emerged as one of the fastest growing brands in Ones To Watch. The franchise concept, specialising in ice creams, gelatos, waffles, crêpes, milkshakes, smoothies and sundaes, grew from just two sites in 2013 to 25 in 2016. Another dessert café, Treatz Dessert Parlour, made the list of fastest growing Ones To Watch brands, expanding from one outlet in 2013 to seven in 2016. “Dessert cafes are a relatively new addition to our high streets but have expanded rapidly through franchising. The US-style concept looks set to grow in the UK, attracting millennials as an alternative to coffee bars as places to meet and hang out with friends. One of last year’s top performers was Creams, another dessert cafe, which now has 39 outlets,” said Knight. For the third consecutive report coffee shop operators dominate the table of expanding small brands with Bobs and Berts, Grind and Co, and Red Kiosk showing the fastest growth. However, while the coffee sector remains dynamic, the proportion of new coffee concepts in the Ones To Watch research has slipped from about 11% last year to 9.8%, which could mean the market is reaching its peak. A straw poll of entrepreneurs responding to the survey [total 28] found that while optimism for future growth remained high, their perceived challenges had changed since the last Ones To Watch survey [April 2016] to revolve around staffing and property costs as well as future food costs. In a previous straw poll property availability was mentioned by 68% as the biggest challenge, but this dropped to 19% in October 2016. Instead staffing concerns, named by just 12% as a major concern in October 2015, were mentioned by 35% of respondents, and property costs were mentioned by 23%, up from 16%. For the first time food costs were also named as a key business challenge for the future. 

Fastest growing Ones to Watch brands by new site openings: 1. Kaspa’s (from two to 25 outlets*); 2. Red Kiosk Company (zero to 20); 3. Burger Shack (zero to 18); 4. CAU (three to 20); 5. T2 (zero to 15); 6= The Stable (four to 17); 6= Chatime (zero to 13); 8= Wahaca (11 to 23); 8= Coast to Coast (nine to 21); 8= Joe and the Juice (five to 17) 8= Chozen Noodle (four to 16). * Number of outlets in 2013 compared with October 2016. 

Fastest growing Ones to Watch brands by percentage growth: 1. Kaspa’s (from two to 25 outlets*); 2. Chicken Shop (one to ten); 3. Bobs and Berts (one to nine); 4= Dunkin’ Donuts (one to eight); 4= Toro’s Steakhouse (one to eight); 4= Red’s True Barbeque (one to eight); 4= Churchill’s Fish & Chips (one to eight); 7= Treatz Dessert Parlour (one to seven); 7= Palm Sugar (one to seven); 7= Grind & Co (one to seven) * Number of outlets in 2013 compared with Oct 2016

To qualify for inclusion in Ones To Watch a restaurant or quick-service concept must have between five and 25 outlets and a growth in outlet numbers of at least 20% over the past three years combined. Brands with fewer than five sites but the potential to expand rapidly are listed in the survey as Bubbling Under brands. All statistics correct at the time the survey was collated.

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