As casual dining continues to grow, it now accounts for 5% of all visits in Britain’s out-of-home (OOH) foodservice industry.
To put it into context, casual dining chains registered 34m extra visits for the 12 months to June, while the overall OOH market suffered a decline of 43 million visits – despite many high-profile brands having shut in the same period.
Over the same period, Brits spent circa £6 billion on casual dining - around 11% of the total out of home spend – with spending growing four times quicker than the total market.
NPD insights director, Dominic Allport, commented: “Casual dining restaurants remain one of the key growth stories in Britain’s OOH foodservice market, despite the high-profile closures, rescues and restructuring seen in recent months.
“But while the market is expanding, success is not guaranteed. One of the problems has been the tendency for some operators to scale up too quickly, with ‘quantity of sites’ outweighing ‘quality of sites’.
“Some of the newer brands are also failing to set themselves apart from competitors, leaving consumers with the sense they are getting similar menus, similar venues and similar customer experiences.
“But the biggest issue is the pressure on profit margins with business rates, rent, food and labour all costing more in an over-supplied market.“
To help operators avoid potential pitfalls and failures, Allport expands:
Escaping London’s high costs
One way to address margin pressures is to seek lower-cost sites and there are signs that the push to expand casual dining is now less inclined to focus on London. For YE June 2018, there were only an additional three million casual dining visits in the capital compared to 23 million more in the southeast and southwest of England.
Recipes for success
Delivery continues to grow strongly (up 9% YoY), as are order ahead/click and collect visits (up 25% YoY), and meal deals or promotion (up 16% YoY).
Some casual dining restaurants are trying to expand into other opportunities such as breakfast (up 24% YoY within the casual sector) and snacking (also up 24% YoY).
The growth rate casual dining operators are enjoying with breakfast is 10 times greater than breakfast growth in the wider OOH market.
Families, young adults and millennials
Casual dining has a strong following in the family segment. Family visits grew by 11% for YE June 2018, almost three times faster than family visits across the overall OOH market. Consumers are going to casual dining restaurants because they want ‘something different’ and good ‘quality of the food.’
Young adults/millennials are also loyal fans of casual dining restaurants - visits from 16-24s are up 15% YoY, and 9% among 25-34s.
Allport concluded: “The continued growth of casual dining in Britain is good news for our foodservice industry.
“The ability of delivery platforms to reduce barriers to entry has particularly helped small brands to expand. Operators can support further growth by building strong consumer awareness, maximizing automation to reduce costs, maintaining prudent supply chain management, and driving off-peak visits through flexible pricing.
“But growth brings the risk of saturation and for that reason it is likely the casual dining boom will see further closures and rescues.
“Casual dining chains are most at risk from the ‘perfect storm’ of oversupply, lack of differentiation and sharp exposure to inflation, particularly labour costs. A chain that deals with this by cutting prices to boost visits will be the one that’s most at risk.”