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High Street wars – the quick-service market

27 April 2012
High Street wars – the quick-service market

Quick-service restaurants are on the rise, largely at the expense of their contract catering counterparts. But with part innovation, part imitation, business and industry operators are fighting back. Elly Earls explores what the two sectors can take from each other

The use of quick-service restaurants (QSRs) has increased by four percentage points since 2008, with these venues now accounting for half of all food eaten out of the home. But with lunch the driving force behind the expansion in the quick-service market, accounting for 72% of the sector's growth, this has been significantly to the detriment of restaurants in the workplace and education.

Indeed, Guy Fielding, director of food service for Europe at research company NPD Group, which released a report on this subject earlier this year, has witnessed a double-digit decline in workplace catering over the past three to four years. "At one point, this was as much as -12%, between quarter four 2009 and quarter four 2010," he says.

In contrast, QSRs have seen massive growth. Quick-service salad and wrap chain Tossed, for example, which prides itself on its healthy food offering, has seen double-digit like-for-like growth in recent years.

For Fielding, there are several drivers behind this undeniable trend. "Key drivers include meal deals from quick-service restaurants, which offer variety and value, and the ability to walk to a variety of other vendors if the location and quality is right," he says.

"Coffee shops are a significant draw in tempting people away from workplace caterers - they often reward regular customers with loyalty cards, and that encourages people to use their break to go for a coffee."

Moreover, QSRs are able to offer more flexibility than their contract catering counterparts. "Taking a less rigid approach to day parts and being flexible about what's on offer throughout the day are areas QSRs do particularly well," Fielding explains.

Maintaining quality is also an issue for cost-focused contract caterers, and one that Vincent McKevitt, founder of Tossed, is keen to emphasise. "Contract caterers will struggle to do what we do. When you're dealing with fresh products, you need to be able to put a decent amount of volume through, like we do every day," he remarks.

"A lot of the time, contract caterers have to compete on price just because of the nature of their food offering. In Paddington, for example, one contract caterer put stickers on all of its salads and wraps advertising that they were 50p cheaper than ours."

Yet, for consumers, price isn't everything. "Workplace catering can be very cost-driven," Fielding notes. "They may charge only 99p for a cup of coffee, but the fact is that consumers will pay £2 to £3 and they're willing to use their break to walk to other vendors if they think the offering is a better one."

Taking all this together, it has become more important than ever for contract caterers to innovate in order to present their customers with an offer commensurate with their expectations.

"The sheer volume of alternatives on the doorstep of every client is growing all the time, with everyone competing for the same breakfast, lunch and all-day market. On top of this, the likes of Tesco, M&S, Sainsbury's and Boots have developed huge lunchtime offers, often at loss-leader type pricing," confirms Phil Roker, owner and commercial director of London-based contract caterer Vacherin.

"This means we are constantly being compared with the competition for price, range and quality. We have to be constantly on our toes to make sure we reflect any new trends as they emerge and also that we are priced competitively to remain attractive."

For both Charles Beer, managing partner of the Crown Group, which provides a range of hospitality, catering and event services, and Roker, this has meant mirroring the high- street offer in the contract catering setting.

According to Fielding, branding is extremely important to consumers, yet it is not unusual for as little as 20% of a workplace to know which company provides their catering. This is certainly not so with the Crown Group's customers, who have responded extremely well to the introduction of the "Feed" concept, a café brand aimed at challenging the high street.

"Since Feed's introduction, we have had a lot of great feedback from both customers and clients who have commented on the real depth of the brand," Beer notes. "Branding itself is important, but it's the values that sit behind the brand that are far more crucial. We wanted this to be a brand with longevity so we spent a lot of time and resources on getting the research and development right."

Vacherin is similarly focused on keeping completely up-to-date with the innovations attracting customers into high-street outlets. "We undertake a unique contract review every year, during which all staff have to get out to a minimum of three relevant outlets to look for trends and inspiration," Roker says.

This has led to initiatives such as noodle pots, which, says Roker, are "bigger and better than the high street, but much cheaper", hunger pots, "a heartier range of meals in a pot aimed to be filling, healthy and great value", and a range of value meals, particularly recognising the needs of younger consumers for a simple but filling meal at a low price.

While offering a high street-type concept at a reduced price has been successful for many contract caterers, Alison Frith, managing director of UK-wide contract caterer Artizian, has found that many of her customers want their catering offer to defy, rather than emulate, the high street. "Many have asked that we please not force the high street offer on to them," she remarks.

Indeed, for Frith, the ability of contract caterers to respond directly to their customers' requirements is something that really sets them apart from their high-street competitors. "We offer all our customers the opportunity to give us their feedback, often asking for their vote on what they'd like to see on the menu. You don't get that on the high street," she adds.

Although forward-thinking caterers have managed to flourish despite the growth of the QSR market, in general terms the industry statistics speak for themselves: workplace and education restaurants' market share has shrunk by 2.6 percentage points - from 19.5% in 2008 to 16.9% in the year ending September 2011 - while the number of visitors to QSRs has risen from 5.4 billion in 2008 to 5.5 billion in 2011.

It has become abundantly clear that the only way contract caterers will be able to claw back any part of their rapidly declining market share is by following the example set by their more creative colleagues, who have successfully introduced innovation, branding, flexibility and, above all, true value for money.

Top tips to attract and retain customers

Healthy means happy Consumers are increasingly looking for healthy eating options, so consider using low GI or low calorie ingredients or superfoods

â- Go green Joining a body such as the Sustainable Restaurant Association will demonstrate to consumers that you are committed to sustainability

â- Give customers what they want Survey your customer base to make sure you're providing exactly what they're looking for

â- Build a brand Cash-conscious customers feel that branded operations offer better value for money - don't miss out on the opportunity to show them that's exactly what you can provide

â- Location, location, location Being well-situated is absolutely essential for quick-service restaurants. Customers are unlikely to go more than 10 to 15 minutes out of their way for a grab-and-go meal

â- Be flexible Tailor menus to suit the demands of your customer base and be less rigid in terms of what's on offer throughout the day

â- Make sure the price is right Whether you are a quick-service restaurant or a workplace caterer, you need to offer true value for money or customers will go elsewhere

â- Maintain consistency Make sure the quality of your products never wavers - this is the best way to build a good reputation

â- Keep your customers informed Contract caterers in particular are well placed to tell customers exactly what their food contains and where it comes from

â- Variety is the spice of life As workplace caterers have a capped market, it's essential to change the menu on a regular basis

The contract caterer that gets closer to clients

Alison Frith
Alison Frith
For Alison Frith, managing director of contract caterer Artizian, it is essential to get as close to your customers as possible, an approach which has led to the company's increased focus on provenance.

"Today's consumers expect clear messages relating to the food and drink they buy," she says. "Buying locally satisfies the growing consumer demand for value for money and fresh produce with traceability to their local community."

Health and nutrition has become another key focus for the nationwide contract caterer. "Our nutritionist, Kenny Tranquille, is a huge differentiator for us," Frith remarks. "He provides a personal service to each of our customers, something the high street does not offer."

Frith has also found that people are increasingly loath to cook for themselves after long hours at the office. "Our chefs have, therefore, innovated with a range of ‘Just Add' products, which our customers can buy from us and finish at home," she explains. "The feedback we've been getting about this innovation is phenomenal - so simple, but so effective!"

Crown Group creates an atmosphere

Charles Beer
Charles Beer
The Crown Group's "Feed" concept, a café brand launched at the end of 2010, was borne out of a need to develop a retail offer that challenged the high street. But for managing partner Charles Beer, simply developing an offer that matched the high street in food terms was not enough.

"We went one step further and looked at ways of replicating the experience as well as the product," he explains. "Our research found that consumer choice was habitual, not just in terms of the type of sandwich or coffee they wanted, but also in terms of the way they behaved when doing simple things such as approaching a counter to place an order."

The Crown Group, therefore, created an environment that their customers felt comfortable in, and later introduced additional products that allowed the company to demonstrate its flair for food.

"Since Feed's introduction in late 2010, we've had lots of great feedback, but the best evidence of the success of the brand can be found in the fact that our outlet hasn't suffered when newer outlets have opened nearby," Beer concludes.

Negotiating discounts to tempt out the trade

Tim Hall
Tim Hall
According to Tim Hall, CEO of Pod Food, a healthy fast-food restaurant chain in central London, location is everything for a fast-food business, and for this reason he regularly locates his company's outlets strategically in order to take on workplace caterers.

"Workplace catering can often be slightly less contemporary in terms of food style to Pod, so a lot of the very discerning city workers who may be used to eating in great restaurants in the evening are not so keen on some of the catering they're provided with in the workplace," he says. "We often find that we win quite a large share of their loyalties quite quickly."

Indeed, the chain, which offers products such as the "Elixir of Youth" salad and the "Pod detox box", often finds that employers are keen for their teams to buy from Pod because they want to promote healthy eating.

"We sometimes offer the larger companies a negotiated discount, if they promote Pod on their intranet or encourage their employees to use us," he adds.

Stepping up the breakfast offering

Vincent McKevitt
Vincent McKevitt
Healthy eating chain Tossed, which launched in 2005, has always been very strong in its lunch category, but the company's most recent innovations have been focused on giving consumers the healthy breakfast they are increasingly demanding.

"Even contract caterers are offering porridge now; it has become very fashionable, so we really wanted to step up our breakfast offering," says Tossed founder Vincent McKevitt.

Tossed now offers a range of low GI wholemeal muffins, as well as "Smuesli", which is a cross between a smoothie and muesli, and sub-300 calorie wholemeal croissants.

"We recognise that people aren't particularly adventurous at breakfast, but they do want to eat healthily," says McKevitt.

Although McKevitt is the first to admit that none of his innovations are exactly "rocket science", the company's strategy is clearly paying off. "Our Westfield branch is a good 10-minute walk from the nearby . office, which operates several contract catering restaurants, but they are our biggest customers during the week," he remarks.

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