Food and beverage in the regions

You have an idea for a new restaurant. You set it up, it goes down well, you roll out the concept or trend across the country. Easy, right? Well, not exactly. Not everyone likes the same sort of food. So how do you navigate regional tastes? Fulham Shore, which owns Neapolitan pizza restaurant brand Franco Manca, has expanded from three restaurants to 38 in just six years (see below). “When you are building a restaurant brand, you’ve got to be prepared to adapt and constantly evolve,” says Fulham Shore chairman David Page, whose credentials include having been chief executive of PizzaExpress and founder of Clapham House Group. The expansion of Franco Manca comes at a time when some high-profile brands have chosen to slim down their portfolios. For example, Jamie Oliver announced it was to close six Jamie’s Italian restaurants earlier this year, joining The Restaurant Group, which was offloading 33 restaurants in its portfolio. Rising wages and the rising cost of importing ingredients due to the fall in the value of sterling have put pressure on margins.  Recipe for success For Page, the secret to a successful roll-out is good old-fashioned business acumen. With so much capital sloshing around the sector, many brands have spread their wings too quickly, taking sites that don’t stack up, and have failed to understand local markets. Kate Taylor from Davis Coffer Lyons says: “The cookie-cutter approach isn’t going to work. When you look at locations beyond your home market, you need to explore dining habits and ask whether the audience, behaviour and demographic is right. Is your offer appropriate for that market?” For brands that have enjoyed meteoric growth in London, it is tempting to think this growth can be easily replicated across the UK. The city’s affluent multinational catchment has created a melting pot in which niche offers with multiple price points can thrive. Ross Kirton, head of UK leisure agency at Colliers International, says: “Yet London’s multi-culture isn’t replicated in other areas and there are huge variations across the UK, not necessarily in palate, but dining out trends.” For many Londoners, eating out is simply refuelling rather than the treat it tends to be elsewhere. According to the NPD Group, casual dining has a disproportionate penetration in London, where it accounts for nearly 8% of total out-of-home traffic, compared with 4% in the rest of Britain. In areas of the country where diner volumes are not as great, there may also be challenges for brands presenting niche cuisine, limited menus, or an experience that is perceived as not offering value for money. Yet as competition across London intensifies – there were 200 F&B openings in the capital last year compared with 176 in 2015, according to Hardens – and costs soar, more operators are looking to the regions to secure growth. Much of that focus is on the North. In the latest AxisPartners CGA Peach Market Growth Monitor, between them Manchester and Liverpool saw 53 new licensed premises open in the year to March 2017, many of which were casual dining restaurants. Some argue that as well as offering better value for money, the regions might also promise greater longevity. Amy Counsell, leasing agent at Shelley Sandzer, says: “Brands in the regions are more heavily reliant on return business and it has also been shown that outside London, customers tend to be more brand-loyal.” Andrew McVicker, sales director at FSP, adds: “We are launching a segmenting system to look at how demand differs across the UK in a more detailed way. Brands need to work harder at understanding local markets and ensuring their offer matches the opportunities available.” How F&B landlords keep it fresh F&B is an integral element in any successful retail scheme, but how do landlords find a tenant mix that meets local demands while keeping that offer fresh? The challenge facing landlords is hitting on the right mix of operators for a location and complementing national brands with local fledgling operators. Alice Keown, F&B manager at British Land, which has 50 retail schemes across the UK, says: “We are constantly exploring new concepts and testing different regional markets by bringing in pop-ups and food events. For instance, our Eats from the Street summer tour involves taking a double-decker bus around the country to test the appeal of different artisan street foods.” At its Broadgate Centre in London, British Land has invested in shipping containers to house five independent street food operators while the centre is being refurbished. Continually integrating new concepts and remaining regionally relevant is tough for landlords where tenant turnover is low. Cain Hoy leasing director Neil Barber says: “A lot of operators still want minimum 10- to 15-year leases because of high fit-out costs and we have to balance that requirement against the need to refresh the offer.” Barber is currently leasing space at mixed-use development Islington Square and knows the challenges landlords face. For Barber, the goal is to mix major brands on traditional terms with smaller independents on shorter leases that may require some capital contributions and rent-free periods. Beyond that, landlords are increasingly looking to introduce variety through food halls and use farmers’ markets and street food operators to ensure their customers have access to an ever-changing mix of offers. All this costs time and money. Paul Wright, asset manager at NewRiver Retail, says: “Ever more discerning consumers expect much greater choice of F&B and the cycle of change is now shorter. For shopping centres, that requires more intensive asset management, but as landlords we have no choice but to innovate.” Honest Burgers: use local flavours Honest Burgers has 21 outlets across London and in April began its push into the regions, opening in Cambridge. The university city, with its affluent international catchment, offered Honest Burgers a soft landing as it ventured out of the capital. Yet the operator has been careful to tailor its offer. Co-founder Tom Barton says: “Although the core menu is the same, we don’t want to be seen as London-centric and are keen to work with local producers. We are working with a guy from down the road in Cambridge on some amazing milkshakes. We are also teaming up with the Cambridge Cheese Shop and have created the Cambridge burger.” It intends to take the same approach in other regional centres and is looking for local producers and suppliers in the run up to the opening of its Reading restaurant later this year. Barton says: “There is so much talent and passion out there and if you can use local ingredients and make it relevant, I think we could make this work anywhere.” Franco Manca: tune in to local markets Fulham Shore, operator of restaurant brands Franco Manca and The Real Greek, is undertaking an ambitious expansion programme. “In the past six to 12 months a lot of names have gone bust or closed restaurants because they have made some poor decisions,” says Fulham Shore chairman David Page. “They have paid big rents and premiums on large units and driven costs far too high.” Page has been extremely selective on his London sites, taking smaller, more affordable units. As the brands have expanded into the regions, he and his team have spent time getting to know the local area – not just relying on local agents. They have negotiated hard on leases and exploited the appetite of landlords for vibrant F&B brands. Current locations include the Oracle in Reading, WestQuay in Southampton and, soon, George Street in Oxford. Page says: “Our regional restaurants perform better than the London ones. Costs are lower, you are not competing with foreign buyers, and landlords are prepared to do some great deals to get us into their schemes.” Mowgli: to open in London or not? Indian street food restaurant Mowgli is extending its reach beyond the North West and expanding nationally. How can it manage that growth successfully and will London prove a step too far? Founded in 2014 by former barrister Nisha Katona, Mowgli has two sites in Liverpool and one in Manchester’s Corn Exchange. Katona is now committed to rolling out the brand across the UK. Mowgli will open at Hammerson’s Grand Central in Birmingham in September, with a restaurant opening in Trinity Leeds in the winter. A further four outlets will be added in 2018. “The question now is whether I open in London,” says Katona. “Many have told me not to go there. Rents are so expensive and for a young brand the costs involved can be the end of you. Yet I have learned that if food is addictive and honest, it can work anywhere. You have just got to choose the right location and the right landlord to work with.” She adds: “It is a hugely competitive market and I wouldn’t go there selling burgers or Italian. Yet I am offering something unique and it would be timid of me not to give it a go.” Living Ventures: take nothing for granted Knutsford-based leisure operator Living Ventures has managed to roll out an array of acclaimed brands, including Artisan, Gusto and The Alchemist, making its mark in London in the process. Living Ventures currently has 38 sites across the UK, from Glasgow down to Chislehurst in Kent. Group chief executive Jeremy Roberts says: “We know that when we venture out of our North West heartland, we cannot afford to be arrogant and take success for granted.” For Roberts, the key is understanding local markets, adapting the message accordingly and engaging with the local business community. Although the group is well established in London, where it owns two units, Roberts much prefers operating in the regions. He says: “Given the property costs in London it is better to operate outside the city, but if you want to build brands you need to prove they work in the capital. You have to dig out good deals and make sure you are not paying too much.” For other operators looking to expand their reach, Roberts advises: “If you are in Manchester and there is a problem in Brighton, you are not going to be able to react quickly enough. Make sure you have enough local resources in place and wherever possible cluster units to make everything more manageable.”