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Business in the ‘burbs

20 May 2011 by
Business in the ‘burbs

Why do casual dining restaurants in suburbia seem to have the edge over city centre operations?Rosalind Mullenfinds out

When casual dining company Loungers entered recession in 2008, it had nine Lounge restaurant-bars. By the end of this year it will have at least 18, plus two Cosy Club café-bars. Let's face it, not many concepts can boast such strong growth in such a flaccid economic climate, but what's perhaps more remarkable is that all these restaurants are in suburban locations in the South West, Midlands and Wales.

In fact, as managing director and co-founder Alex Reilley explains, Loungers is successful precisely because it targets the suburbs. The first site opened in the Bedminster area of Bristol in 2002 in response to a lack of F&B outlets on secondary high streets.

"There had been a housing boom and the area was the second or third choice for professionals, who were spending a fortune on a two-bedroom house. People needed somewhere to go and we realised they would be loyal to an operation that would improve the area and suit their lifestyle," he says.

What makes these neighbourhood restaurants successful is the fact they are informal one-stop-shops offering breakfast, coffee, lunch, drinks and dinner at reasonable prices. This also makes staffing easier as there are two teams working two straight eight-hour shifts.

The format is also arguably more resistant to recession than those in city centres. The advantage is that the suburbs offer a smaller catchment area where locals are within walking distance. Instead of going into town, they can save money on taxis or train fares. And as the concepts are family friendly, they can often feed the children more cost-effectively than paying babysitters.

"In the recession, people thought they should tighten their belts even if they didn't have to," says Reilley. "There was a school of thought that F&B would be hit, but since the last recession in the 1990s eating out has become engrained in people's habits. For the past nine years we have been clear that we offer value for money and we have resisted discounting. We worked hard on the business and have been seeking the opportunity to grow."

The facts speak for themselves. In the year to April 2009, the company had 10 Lounge ee es and turned over £5.4m; this year the company has 17 sites and turnover is £11m; and in 2012 the forecast is to have 24 sites turning over £17.5m.

"We felt a small hit on like-for-like sales from November 2008 to April 2009, but there has been steady growth since then," says Reilley.

Of course, Loungers is not alone. Chef Malcolm John is concentrating his Fish & Grill, Le Cassoulet and Le Vacherin restaurants in Greater London sites such as Croydon, Sutton and Chiswick, and a new opening in Putney. Meanwhile, the Manchester-based Individual Restaurant Company targets affluent small towns with brands such as Piccolino, in 22 sites including Hale, Bramhall and Knutsford, and the 11-strong Restaurant Bar & Grill, where locations include the well-heeled Alderley Edge, Harrogate and Tunbridge Wells. A recent share offer for the company values the group at £5.67m.

Even traditionally city-centric chains are seeing the business benefits of heading to the suburbs. Italian casual dining chain San Carlo made its first foray into suburbia in February, taking over the Flying Pizza in a district of Leeds.

"We have previously concentrated on city centre locations which to date has been very successful for us," says co-owner Marcello Di Stefano. "However, the suburban restaurant scene has changed over the past few years and we have seen a growth in this sector."

He adds that the bar-restaurant formula has already proved successful, boosting the unit's turnover by 50%, although it's currently closed for refurbishment to bring it in line with the San Carlo brand.

"The image will be slightly different to the city centre locations in that it will look more relaxed and casual as well as offering afternoon tea," he explains.

Di Stefano also hints it won't be the brand's last suburban site as he believes bar-restaurants are now fulfilling the role of local boozers - a trend confirmed by property experts, such as Ross Kirton at Colliers International (see page 31).

Clearly, there is more footfall in a city centre, but there are also higher rents and stiffer competition. In secondary locations, the rents are "dramatically lower" and operators say they are confident of high turnover in recession, whereas on the high street they would be losing money.

As recession saw retailers fail and city centre restaurants curb growth, some suburban chains, such as Loungers, seized an opportunity. "Landlords were keen for deals with tenants with good covenant and we negotiated lower rents. Some of the larger units we acquired included a Woolworths [in Bournemouth], which was cheap for its size," says Reilley. "We agree on retail units or A2 and then apply for change of use. It's straightforward in suburbia."

The company is certainly ramping up its growth and aims to have 32 units by 2013. Its first Cosy Club, a concept specific to market towns, opened in Taunton in September and the second will open in Bath in June, followed by Exeter and Stamford. Lounge is also being rolled out, with a second Southampton and Bournemouth site earmarked and a third in Birmingham.

As Reilley explains: "Another advantage of moving into the suburbs is that if you grow your business, as we have, you can open multiple sites in the same city. We have five sites in Bristol - more than Pizza Express, for example."

The hottest suburbs what the expert says

Ross Kirton, associate director at property agent Colliers International, says London and the South East remain the most in-demand areas for casual dining operations. In particular, London commuter/M25 orbital towns continue to provide resilient trading environments.

While incentivised deals are available, this remains a competitive market, with small restaurant brands such as Wildwood, Tasty and Brasserie Blanc acquiring pub premises where traditional high street restaurants are not available.

Kirton says: "Suburban sites are, as a whole, holding up. This has been fuelled by the change in licensing laws allowing neighbourhood pubs to open later, typically to midnight or 1am."

He adds that he has also seen a number of occupiers improve their food offer, which has led to dining out being preferred to a pub or bar when socialising with friends. As well as the fall in popularity of the wet-led market during the recession, it is clear the casual dining trade is filling a vacuum left by the demise of the local pub.

"A number of occupiers remain acquisitive for suburban sites. In particular, Mitchells & Butlers is seeking further sites for its highly successful Harvester and Toby Carvery formats as well as its protégé steakhouse concept Miller & Carter.

"Outside the South East, in Cheshire, the Living Room founder Tim Bacon is seeking premises in upmarket suburban locations for his Red Door concept; while Oakham Inns & Restaurants seeks further expansion across the Home Counties," adds Kirton.

How to make a success of suburbia

â- Devise a concept that is a community focal point and occupies the role once held by the local boozer
â- Consider opening for breakfast through to dinner
â- Offer value for money - or at least price for your local catchment area
â- Make sure parking is not an issue and that your target customers live within walking distance

over in Ireland…

In the middle class Cork suburb of Glanmire, hospitality consultant James Grimes says the busiest restaurants tend to be pubs with dining areas. He points out that besides free parking and a perceived safer environment than late night city centres, these venues are popular because they provide a sense of community.

Main courses tend to be priced similarly to those in the city centre, but starters and puddings are cheaper and drinks can be up to 50% cheaper.

Grimes reckons city dining has waned considerably: "The drink-driving legislation and the narrow limits have had a huge effect on city centre wet sales in restaurants, and a taxi will cost about €20 to travel from city centre to anywhere within a radius of 10km. We don't have night buses and suburban services are limited to one an hour after 6pm."

In short, Grimes estimates that with taxis, babysitters and public transport, a night out in the city averages €125 for two, while local venues provide a night out for the family for €80. For many diners, it's a no-brainer.

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