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The casual dining property gold rush

24 August 2018 by
The casual dining property gold rush

The smart and the savvy are seeing chaos in casual dining as a ladder to success. Vincent Wood reports

There have been plenty of horror stories and headlines marking the decline of casual dining stalwarts and trailblazers. Jamie's Italian announced debts 24 times larger than the £3m Jamie Oliver ploughed into the business from his own pocket. Prezzo announced the closure of 94 restaurants, including the entire Chimichanga chain. And more recently, Gaucho announced the closure of all its Cau branches, costing 540 jobs.

But reports of the death of casual dining may have been greatly exaggerated. Mass closures and concern over the once-ballooning sector may be an omen to some, but to others there is opportunity in the chaos. Andy and Pranee Laurillard, the husband-and-wife team behind Thai chain Giggling Squid, opened their first outlet during the recession when banks were keen to get empty lots off their books. In 2018, they are once again finding opportunity where others have found loss.

Andy and Pranee Laurillard

y told The Caterer

"We've got a list of about 100 towns we'd like to go to. Of those, there are about 40 we're really after. I could go to every single one of those towns and have a choice of two or three reasonable properties. It's painful that I can't afford to do 40 at once - I'd love to get out there and just buy all this stuff out at the moment because it's great value."

One key has been looking for rents that are affordable in the long term, which Andy believes has been the downfall of some of his competitors - particularly the decision by Jamie's Italian to "spend a couple of million" on large listed buildings: "You've got to sell a lot of pasta to make that work. He did sell a lot of pasta for a while - and then he didn't."

A Giggling Squid site

h their scale and commitment to sites outside of the M25 (with one or two exceptions, including a former Jamie's Italian site in Kingston upon Thames), he adds switching to a system of centralised distribution has had a "huge impact" on Giggling Squid's balance sheet. He added: "It makes you so much more efficient. I mean, we're still making all the food fresh in the kitchen, but to get the ingredients to us now, the supplier has to make one delivery a week. Before we used to have a van running around the country almost all the time. It's transformative."

Benito's Hat is also on the up - but it has responded to the industry squeeze by downsizing its Mexican restaurant concepts, which largely operate in London and the Home Counties. On its 10th anniversary, the company secured a £1m investment from its existing investor base, the majority coming from private equity firm Calculus Capital. It hopes the smaller format will give it more opportunity to expand both home and abroad in the coming three years. Robert Davis, deputy chief executive and head of portfolio management at Calculus Capital, described the move as "an intelligent response to the changing dynamics of the eating-out sector," adding that "smart businesses adapt with the times".

Benito's managing director Mike Pearson said property for the eight-strong group is "obviously a huge consideration," and explained: "The whole beauty of the smaller format is that 80% of our product in our existing stores is taken away. When you can do a 400 sq ft site, the rents are considerably lower but you're still able to generate 80% of the revenue you would have if you had 50-60 seats."

He said that while larger sites are still on the cards - including a flagship at the O2 arena - "the big growth will come from 500-600 sq ft sites, where rents are a quarter of what we would pay for 1,000 sq ft in London."

But how can a business downsize and make the most of smaller properties while maintaining the brand? "There's no single right answer - I think there's a variety of things that we're looking at. Supply chain is obviously very important, and we are trying to centralise some of that, but I think one of the things that our customers love about us is the fact that they know that they're getting fresh produce made in store every day. Things like guacamole - you can't centralise that; you've got to make it on site daily. Salsa and what have you - yeah, you can take those out of the kitchens - but we're about fresh produce.

"The things that we're doing are probably more about implementing smart technology: looking at ways we can reduce the reliance on extraction, which is a very expensive part of the set-up of a restaurant. We've managed to build a model now that allows us to do that."

Other chains have used their versatility to stay ahead of the curve. Café and bar concept Loungers has a substantial wet offering on top of its food operation, competing with the likes of Costa Coffee and JD Wetherspoon. The company, which also operates the more casual dining-style Cosy Club brand, has felt no temptation to creep into the A3 lots that have been steadily abandoned by casual dining operators - instead aiming for former A1 retail lots and converting them to fit its needs. It currently operates in 137 locations, growing by 25 every year for the past three.

Loungers chief executive Nick Collins said: "We haven't seen any change in consumer behaviour; we haven't seen any change in footfall. Value for money has always been one of our founding principles; it is absolutely crystal to our ongoing success, so that's always at the forefront. If you look at the reason perhaps some restaurant chains have done quite so well, it could be because they haven't been as close to the pricing as perhaps they should have and they've become more expensive."


Bucking the trend

Wagamama Outperformed the UK market for 208 consecutive weeks on the Coffer Peach Tracker amid organic growth, new openings and the introduction of an 'Uber-style' payment app.

Dishoom Slow and steady growth from the London restaurant group, which had a 47% boost to turnover in 2017, is prompting a UK-wide expansion into Edinburgh and Manchester.

Rosa's Thai Cafe Rapid expansion into 13 sites over a decade across London led to a majority stake buy-out from US equity firm Tri Span in June, which is set to grow the brand into new lots.

Nando's With revenue valued in 2017 at £847.9m, along with an extra £104m of turnover and more than 390 sites in the UK, the brand has showed no signs of slowing.

Loungers continue 25-a-year expansion plan with four openings this month >>

More restaurant groups will collapse, but smaller operators seizing opportunities >>

Jamie Oliver's relaunch recipe: chief executive Jon Knight reveals all >>

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