One thing that everyone agrees with, whichever side of the political spectrum you are one, is that the world is moving fast. Brexit negotiations, driverless cars, the end of diesel, rising inflation and the prospect of a Jeremy Corbyn government in the short or medium term.
These changes and the uncertainty around them are having dramatic impacts on the eating out sector like never before. I believe veterans such as Philip Kaye are talking about this being the most changing market in history.
Here at the Cedar Dean Group we are privileged to get a real helicopter view of the market, seeing the high end punchy London transactions as well as distress in areas of the market in and outside London through our lease restructuring business. It is clear that rents and premiums are falling and opportunities are there to be had but I suppose the question is ‘who is taking advantage in the current climate?’. When I talk to fellow team members here at Cedar Dean Group and with those I interact with it seems that as inflation has bitten and continues to affect everybody, people are loathed to cut back on eating out which they enjoy so much. Essentially it seems that people are turning away from casual dining brands and choosing fast food brands such as KFC, Chopstix, Roosters Chicken and Dominos as well as independents who are offering really great service, product and value. Brands that are backed by private equity and have to hit a margin such as Prezzo, Byron and Busaba are all struggling to find their identity and being able to put the customer first, when they clearly need to make their margin. It is not a new phenomenon that people in recessionary or uncertain times choose more value for money but this seems to be more present than 2008/2009 and is set to continue in the short term.
The good news is for those independent and start-up operators. Londoners are very much interested in what independents have to offer as they really feel that they are being taken care of by the owners of these businesses. Whilst rents and rates are high in Central London, these locations are still offering the best turnovers and certainty by a long way compared to suburbs such as Islington, Muswell Hill, Fulham and Balham and many operators would rather play the volume game.
In short, operators need to be offering value for money and have to be on top of their margins in order to be able to do this. They need to be located in densely populated areas to ensure that they can get the volume through to ensure they are profitable. For this reason, we see on-going opportunities nationally within shopping centres as landlords are making more and more emphasis on food as retailers continue to slump due to the internet continued growth curve. The time for strategic advice and execution has never been more important in this sector and that is why we are delighted to be helping operators on their journey to ensure that they don’t make short term decisions and are planning for the long term for the wellbeing of their brand, profitability and future.