Eating out before or after going to the pub was most popular among 20 to 34 year-olds, many of whom might well consider the meal as part of the evening out. A broad range of venues in town and city centres cater for late-night drinkers, whereas pubs continue to develop their meal offerings.
The survey revealed some interesting variations in terms of social grade, with Es being the most likely to eat out before or after the cinema/theatre or a visit to the pub. However, As were almost as likely as Es to eat out before or the cinema or theatre, but much less likely to do so before or after a trip to the pub. Ds showed the least inclination to eat out before or after the cinema or theatre, whereas the popularity of eating out before or after going to the pub was lowest among Bs.
The region with the highest proportion of pre- or post-cinema/theatre diners was the East Midlands (53.6%), while the region with the lowest proportion was the North West (34.6%). However, eating out before or after an evening in the pub was most popular among those living in Yorkshire/Humberside (43.8%) and least popular among those in Wales (25.8%).
At Airports, Motorway Service Areas and Railway Stations
The proportion of adults who eat out at airports appears to have stabilised in 2007, at 40.4% compared with 40.7% in 2006. Recent trends that helped to boost eating at airports included increased air travel by UK consumers, particularly on low-cost airlines that do not offer on-board refreshments; and greater airport security, requiring earlier check-in times and, therefore, more spare time at the airport. As these factors have become the norm, the level of eating at airports has levelled off.
As Table 3.5 shows, a slightly higher percentage of men (41.5%) than women (39.4%) eat out at airports, with 16 to 19 year-olds being the age group most likely to do so, followed by 20 to 24 year-olds. Around two-thirds of all respondents in these age groups claimed to eat out at airports in 2007, compared with around half of 25 to 34 year-olds, around a third of 35 to 64 year-olds and a fifth of those over 65. There was some correlation between eating out at airports and social grade, with As being the most likely and Ds the least likely to do so. Regional variations were marked, ranging from 26.3% of adults in Wales to 58.2% of those in the West Midlands.
The growing volume of motorway traffic continues to sustain demand for catering at motorway service areas, and has encouraged both improvements in quality and a wider choice. Almost a third (30.2%) of respondents in the 2007 survey claimed to eat at these locations, rising to 33.3% of men. Regarding age, 16 to 19 year-olds were the most likely to do so (46.1%), followed by those aged 25 to 34 (39.9%). In terms of social grade, As and Es were likely to be the biggest customers. Regionally, penetration peaked at 43.2% in the West Midlands and was lowest in Wales (20.5%).
Just 7.7% of respondents claimed to eat out at railway stations in 2007, with penetration being highest among 20 to 24 year-olds (at 21.2%) and those in the A social grade (16.9%). Regionally, the West Midlands and the South West had the largest proportions of adults who ate out at railway stations.
At Sunday Lunchtimes and For Weekday Breakfasts
In 2007, 39.1% of respondents claimed to eat out at Sunday lunchtimes, up from 34.5% in 2006. A growing number of public houses now offer — and promote — value-for-money Sunday lunches and their popularity is evident across most age groups and social grades. However, peak penetration occurred among 25 to 34 year-olds (48.7%) and those in social grade E (52.1%). Regional variations ranged from 27.3% in Scotland to 46.5% in the West Midlands.
The appeal of eating out for weekday breakfasts appeared to wane in 2007, the proportion of respondents having done so falling from 13.5% in 2006 to 12.1%. Although a wide range of outlets now offer breakfast services, including pubs, fast-food outlets, hotels and restaurants, take-up remains low compared with other meal occasions. The 2007 survey revealed that eating breakfast away from home was most prevalent among young adults (aged 16 to 24) and those in the E social grade. In terms of region, the habit was most popular in Wales (21.5%) and least popular in the North (5.4%).
5. Restaurants
DEFINITION
Restaurants are defined as places that supply food for consumption on the premises only. The market includes standalone restaurants, as well as outlets adjacent to or part of public houses, hotels, roadside service areas, transport terminals and other establishments where food is served. Bar food sold in public houses is excluded, as are sandwiches sold by various takeaway outlets and any food delivered to the home. Sandwiches form part of the fast-food and takeaway market, which is discussed in the next chapter of this report, while bar food is covered in Chapter 9 (Public Houses). The market includes both licensed and unlicensed premises, and both independent outlets and chains of outlets.
KEY TRENDS
The number of restaurants operating in the UK continues to increase and, in 2007, reached a 5-year higher of 53,485 (see Table 5.5 in the Supply Structure section of this chapter). However, the majority of establishments are relatively small, with more than three-quarters of the total having turnovers of less than £250,000 a year.
The share prices of some publicly quoted restaurant chains fell in the latter months of 2007, owing to factors such as dampened consumer spending, an uncertain economic outlook, potential food price hikes and lower consumer confidence.
The restaurants market is still uncertain about the long-term effects of the smoking ban, which was in place across the UK by July 2007. So far, trends following the smoking ban in England (where the legislation took effect from 1st July 2007) are broadly in line with those seen in the first year of the ban in Scotland (where it took effect from 26th March 2006), which experienced a slowdown in overall sales in the winter months following the ban.
In an attempt to minimise the adverse impact of the smoking ban, many pub operators have developed outside sheltered areas (for smokers) and, as a means of expanding the social appeal of pubs, are extending their menus and developing their reputation for serving good food at attractive prices. It is generally hoped that this will enable pubs to take advantage of the opportunity that the ban offers to attract new, casual-dining customers. Standalone restaurants have introduced similar measures to reduce the effects of the ban, which also include widening the range and variety of food they offer and introducing specially priced menus.
MARKET SIZE
The UK restaurants market, including café meals, was worth an estimated £10.72bn in 2007, having increased by 3.9% on 2006 and by 19.7% since 2003. The three key sectors of the market, as defined in this Market Review, are pub restaurants, roadside restaurants and other restaurants.
MARKET SEGMENTATION
Pub Restaurants
Pub restaurants formed the largest and fastest-growing sector over the review period (2003 to 2007), during which time it increased in value by 38.5%. In 2007, the sector's value grew by an estimated 5.3%, to £2.7bn, giving it a 25.2% share of the total restaurants market (see Table 5.2).
Chain pubs, which have set menus but normally offer fairly high-quality food, constitute a large part of this sector. Pub chains are increasingly owned by the large pub operators. Pubs that are not part of chains but which offer food (and prices) along the lines of that offered by restaurants are also covered. However, they are small in number compared with the number of outlets operated by the chains.
Developments that continue to benefit the sector include pub refurbishments, improvements in the quality and value of food on offer, and the introduction of new and more varied menus. The persistent decline in beer sales in pubs is encouraging pub owners to attach more importance to, and place greater emphasis on, food sales.
Roadside Restaurants
Roadside restaurants are basically functional places that provide a refreshment break for people who are travelling. They are not usually seen as locations to be visited specifically for an evening meal. The sector is generally divided between restaurants situated on A roads (including the Little Chef chain) and those situated at motorway service areas.
Key Note estimates that the roadside restaurants sector was worth £715m in 2007, having increased by 2.9% on 2006 and by 10% over the review period (see Table 5.3). Value growth tends to be limited by the fact that travellers who use roadside cafés are usually seeking food that is both good and economically priced. Increasing fuel costs have also had an effect on this sector, in that they have deterred some drivers from making long journeys and, consequently, using the services provided by roadside restaurants. However, the sector maintained its share of the total restaurants market, at 6.7%, in 2007.
Other Restaurants
The other restaurants in this market constitute a large and diverse sector, and include thousands of independent businesses. Together, these offer numerous types of food, but the two main categories are Indian restaurants, which number around 10,000 in the UK, and Chinese restaurants, of which there are around 7,000. Other outlets in this sector include Thai, Greek, Caribbean, Turkish, Malaysian, Italian, Spanish, French and English restaurants.
Key Note estimates that the `other restaurants' sector was worth £7.3bn in 2007, having increased in value by 3.5% on 2006 and by 15% over the review period. However, the sector has been steadily losing share to pub restaurants and, in 2007, accounted for 68.1% of the total market by value, down from 70.9% in 2003.
SUPPLY STRUCTURE
Number of UK Businesses
The number of UK VAT-based enterprises engaged as restaurants, cafés and takeaways increased by 9.5% between 2003 and 2007, to 53,485. Key Note estimates that full-service, eat-in restaurants account for around half this figure, or approximately 26,700 enterprises.
By Turnover
Table 5.6 analyses these VAT-based restaurants, cafés and takeaways by annual turnover and shows that there has been a steady decline in the number of restaurants with turnovers of less than £100,000 and a steady increase in the number of restaurants with turnovers of £100,000 or more. Over the review period, the number of enterprises with turnovers of less than £100,000 fell by 4.6%, while those with turnovers of £5m or more increased by 22.2%, to 220. Although the reduction in the number of smaller restaurants, etc. can be attributed in part to companies moving into higher turnover bands, it is also likely that some unprofitable small businesses have closed.
The important role played by small independent businesses in the restaurant industry is reflected in the proportion of enterprises with annual turnovers of less than £250,000. These accounted for 77.3% of the total in 2007, while just 3.4% of enterprises had sales of £1m or more (see Table 5.7).
Employment
According to National Statistics' Annual Abstract of Statistics, the number of people employed in the restaurant industry increased yearly between 2002 and 2006, although the increase was only marginal in 2006. Across the period, the total number of employees rose by 12.8%, to reach 617,000 in 2006 (see Table 5.8). Based on the data in Tables 5.6 and 5.8, the average restaurant employed 11.6 members of staff in 2006.
The majority of restaurant employees work in establishments that employ fewer than five people. According to UK Business: Activity, Size and Location, these outlets accounted for 54.3% of the total number of local units in 2006, with a further 21.7% employing between five and nine workers. Just 2.5% of local units had 50 or more employees in 2007.
MAJOR PLAYERS
The Clapham House Group PLC
The Clapham House Group PLC is engaged in the operation of restaurants and food delivery outlets. As of September 2007, the company operated 71 restaurant locations across four brands: Gourmet Burger Kitchen (38 restaurants), Tootsies (24 restaurants), The Bombay Bicycle Club (three restaurants and 15 delivery kitchens) and The Real Greek (six restaurants). Clapham House also operates four Gourmet Burger Kitchen outlets under franchise in the Middle East. The Group is listed on the Alternative Investment Market (AIM).
Gondola Holdings Ltd
Gondola Holdings Ltd is the UK's leading casual dining group, with three major eat-in premium pizza/pasta brands: PizzaExpress, ASK and Zizzi. The company employs approximately 11,000 people and serves more than 31 million meals a year in 520 restaurants. The restaurants in its core portfolio are situated in prime positions across a wide variety of location types, including high streets, retail/leisure parks and business districts.
PizzaExpress, which is the group's largest chain, opened its first outlet in the UK in 1965 and currently has around 320 outlets across the UK and the Republic of Ireland. The ASK chain, which has 115 restaurants, offers a broad menu of Italian dishes, including pizzas, pasta dishes and salads. There are 87 restaurants in the Zizzi chain, which is viewed by the company as being the most upmarket of the three brands. In January 2007, Gondola Holdings Ltd was acquired by the private-equity firm Cinven for £1.33bn.
Greene King PLC
Greene King PLC is the largest British-owned brewery in the UK and has developed its position in the brewery market via a series of takeovers. Key brewery acquisitions in recent years have included Ridley's (2005), Belhaven (2005) and Hardys & Hansons (2006). The company's presence in the restaurants market includes the Hungry Horse chain (107 locations) and the 38-strong Loch Fyne chain of fish restaurants, which Greene King acquired in August 2007.
The Laurel Pub Company Ltd
The Laurel Pub Company Ltd was formed in 2004. As a privately owned company it has grown rapidly to become one of the UK's leading managed pub and restaurant operators, with around 460 drinking and eating establishments. The Laurel business is split into two distinct divisions: Casual Dining, which includes brands such as Ha! Ha! Bar & Canteen, La Tasca, La Vina and The Slug and Lettuce; and Bars and Pubs, which includes Yates's and traditional pubs. Many of its outlets are located on or just off the high street.
Little Chef
Little Chef has a chain of 186 roadside restaurants, which are typically located on A roads and next to Burger King restaurants or Travelodge hotels, or within Moto service areas. Some of the larger branches also include a Coffee Tempo. The chain was owned by Travelodge Holdings Ltd before being sold to The People's Restaurant Group in October 2005. In January 2007, The People's Restaurant Group went into administration and Little Chef was rescued by R Capital, a UK private-equity group, which paid less than £10m for the chain.
Mitchells & Butlers PLC
Mitchells & Butlers PLC is a leading UK operator of managed pubs and pub restaurants, with around 2,000 businesses offering food, drink, entertainment and accommodation. The company's restaurant brands, which number around 600 outlets, include All Bar One, Browns, Harvester, Toby Carvery and Vintage Inns. Mitchells & Butlers also operates the 40-strong chain of Alex restaurants in Germany.
Nando's Chicken Ltd
Nando's Chicken was formed in South Africa in 1987 and was introduced into the UK in 1993. The company currently has around 150 outlets in the UK and is opening new branches each year. Worldwide, the group has 400-plus restaurants.
Prezzo PLC
Prezzo PLC is a branded restaurant operator positioned in the UK casual-dining market. Its principal trading brand is Prezzo, which offers a contemporary menu consisting of a variety of pizza, pasta, salad and grill dishes with a distinctive Italian flavour. As of 1st July 2007, the company was trading from 105 branches. While concentration remains in the South of England, continued expansion is taking place across the UK.
The Restaurant Group PLC
The Restaurant Group PLC is one of the UK's largest independent restaurant and pub-restaurant groups, with a portfolio of nearly 300 restaurants, cafés and pub restaurants. The business consists of six brands, plus TRG Concessions, which operates 49 units in seven airports across the UK. The main brands are: Frankie & Benny's (147 units), Chiquito (46 units), Blubeckers (25 units) and Garfunkel's (27 units). The company also owns Brunning & Price Ltd, which it acquired in October 2007, and which operates 14 pubs, based mainly in the North West.
Spirit (SGL) Ltd
Spirit (SGL) Ltd is the managed division of Punch Taverns, the UK's leading pub company, with almost 8,500 pubs nationwide. The company operates more than 800 pubs, bars and restaurants, including its flagship brands Chef & Brewer, John Barras and Two For One. Its pubs and bars typically provide beer, wine and spirits, along with a limited menu of food items, while its restaurants focus more on menu selection and family dining. Another chain, Wacky Warehouse, provides dining and entertainment aimed at children.
Tragus Group Ltd
Formed in 2002, Tragus Group Ltd is one of the UK's largest independently owned restaurant-chain operators, with more than 240 sites across the country. The company's leading brands are operated as four divisions: Café Rouge (94 sites), Strada (57 sites), Bella Italia (72 sites) and Brasseries (13 sites). The company also operates five Ortega tapas bars. The Strada Italian restaurants were acquired by Tragus in May 2007 and followed the February 2007 purchase of Ma Potter's restaurants. Tragus is owned by The Blackstone Group, a private-equity company, which acquired the Group from Legal & General Ventures in November 2006.
Whitbread PLC
Whitbread PLC is the UK's leading hospitality company, with major brands in the hotels, restaurants and coffee-shops sectors. Whitbread's full-service restaurant operation covers its Brewers Fayre brand, which has around 263 restaurants across the UK, and Beefeater, which has 129 outlets within the pub and restaurant market. Whitbread is also expanding its Costa Coffee business and, in December 2007, it announced its intention to open 200 Costa stores in Russia by 2012. As of December 2007, Costa operated 923 stores, consisting of 655 outlets in the UK and 268 in 20 overseas countries.
MARKETING ACTIVITY
Owing to the overlap between the various catering markets, it is not possible to isolate a total figure relating specifically to main media advertising expenditure on restaurants as defined by this Market Review. In the Nielsen Media Research (NMR) data, the chain restaurants category includes fast-food as well as restaurant brands, while other restaurants are included with pubs and other catering services. Therefore, Table 5.10 shows only restaurants of relevance to this market that invested above the NMR threshold of £75,000 during the year ending September 2007 and which are, therefore, identified separately.
In the chain restaurants category, the leading advertisers were the three Whitbread chains — Beefeater, Brewers Fayre and TGI Friday's. All three of these chains increased the amounts they spent on main media advertising in the year ending September 2007 compared with the same period in 2006. The only other advertisers of note were Toby Carvery (owned by Mitchells & Butlers), Hard Rock Café and Little Chef.
In the broader restaurants, pubs and catering category, the leading restaurant advertiser was Wild Bean Café, a fast-food catering concept at BP Service Stations, followed by the Nando's chain. Most of the other advertising in this sector was in support of individual restaurants or small independent chains, reflecting the fragmented nature of the market.
BUYING BEHAVIOUR
BMRB International Ltd's Target Group Index (TGI) survey covers eating out at restaurants. According to the 2007 survey (conducted in March), more than three-quarters of adults (78.6%) in Great Britain had been to a restaurant for a meal in the previous 12 months (see Table 5.11). The percentage who had eaten such a meal in the evening was — perhaps unsurprisingly — higher than the percentage who had had a meal during the day, at 68.5% and 53%, respectively.
The proportion of women who had eaten a meal in a restaurant was higher than the proportion of men who had done so and there were some marked differences in behaviour by age and social grade. Around 80% of respondents between the ages of 20 and 54 had been for a meal in a restaurant during the year, with penetration peaking at 83.5% among 25 to 34 year-olds. After the age of 54 years, penetration tends to decline for evening meals, although it remains nearer the average for daytime meals.
As might be expected, there was a clear correlation between social grade and eating in restaurants, with almost nine out of ten adults in social grades A (88.6%) and B (89.1%) having visited a restaurant during the year, compared with just over half (54.6%) of adults in social grade E.
Although regional differences are not particularly strong, they are present, with the South East and Greater London having the highest percentages of people eating out in restaurants (82.5% and 81.2%, respectively) in 2007. Penetration was lowest in Yorkshire and Humberside, at 71.2%.
Although more than three-quarters of adults had eaten in a restaurant during the year prior to the survey, on the whole, this remains a fairly infrequent activity for most adults. In 2007, just 1.1% of respondents to the TGI survey said they had visited a restaurant more than once a week and only 3.4% had done so once a week. The majority of adults who visit restaurants (42.8%) do so less than once a month, with a further 18% visiting once a month and 11% doing so two to three times a month.
As Table 5.13 shows, pub restaurants were the most widely used type of restaurant in the 3 months prior to the 2007 TGI survey, visited by 41.7% of adults. The next most popular type of restaurant was Chinese, which attracted 23.7% of adults, followed by Indian restaurants, at 22.9%. It is noticeable that the split between day and evening visits to Chinese and Indian restaurants is much wider than it is for pub restaurants. In general, penetration of restaurant visits is higher in the evening than it is in the daytime for most types of restaurant, the only exception being hamburger bars.
FORECASTS 2008 TO 2012
Key Note forecasts that the UK restaurants market will increase in value by 4% at current prices in 2008, to reach £11.14bn (see Table 5.14). Thereafter, year-on-year growth is expected to increase, raising the value of the market to £13.66bn in 2012, which represents growth of 22.6% over the forecast period (2008 to 2012).
However, the outlook for consumer spending in the UK in 2008 is uncertain and this could have an impact on eating out. The first winter of the English smoking ban will also be challenging, although the evidence from Scotland suggests that the ban will prove to be beneficial in the longer term.
On a more positive note, consumer demand for greater choice, quality and service will continue to benefit the higher-priced restaurant chains, and the pub-restaurant sector should remain fairly buoyant. Roadside restaurants will continue to be the least dynamic sector of the market, but the broad `other restaurants' sector is forecast to maintain reasonable growth.
