What should restaurants consider when looking to open their second or third site? David Abramson, Chief Executive of Leisure Property Consultancy Cedar Dean Group discusses with Casual Dining Magazine.

 

Over the last 20 years, Cedar Dean Group has seen many restaurants come and go. We have institutions such as Zuma, Nobu and Scott’s which have been around for decades and those which came and went quickly, like Aaya, Ape & Bird and Barbecoa Piccadilly. With regards to casual dining brands, names like Honest Burger, Shake Shack and Wagamama, have now become established and successful chains. So, what is the secret to their success?

 

Once you have one restaurant open and trading well, the tendency is to simply take that model and try and replicate it in an area with a similar demographic. While this can be really good in the short term - I have seen countless operators, who have done very well in Soho and open in Covent Garden for this reason - but they then struggle to expand beyond these two central locations.

 

The more strategic long-term approach for operators looking to open a second and third site is to create a vision of where they see the brand in five years. Do they believe the brand has the ability to compete with what is currently out there and have they got the desire and execution to deliver on that vision?

 

If you have one or two restaurants trading really well in a great location like Covent Garden or Southbank it doesn’t make you an award-winning casual dining brand. It may just mean you have a couple of great locations. In order to experiment and test the brand you may need to go a little further afield, like Kings Cross or Hammersmith. Take The Gate, for instance, a well-regarded vegetarian chain which now operates three thriving sites. It has opened in off pitch locations and has attracted a following due to its good name and successful execution. Usually, casual dining brands, however, will need to be in more prominent locations with attractive double fronted or corner properties to maximise visibility. 

 

Operators should also be thinking about is what future investors would want to see. I have listed below a few pointers which I believe are the key to ensuring, not only a solid footing in brand expansion, but also attracting investment at the highest possible valuation.

 

  • Investors want to see a consistent level of turnover and profit in each site.
  • The cost of capex, i.e. fit outs should be similar across all the branches of a restaurant
  • Operators and investors should be concerned if rent and rates are in excess of 20% of turnover and ideally, these should be under 15%
  • Is the business reliant simply on one person or is there a culture that drives all the decisions and principles?
  • Are all areas of the business above board - taxes paid, licenses in order, EHO etc? All investors will want to make sure this can stand up to the highest scrutiny.
  • Does the brand have access to a social media audience? Changing consumers require this, be it in the form of home delivery, click and collect or simply great imagery via Instagram or Snapchat.
  • Is the concept in any way immersive or experiential rather than just about the quality of food and services? Customers today want to get more involved and are willing to pay for this.

 

If you want to know who we rate, concepts such as Pizza Union, Farmer J in Leadenhall Street, Honest Burger, Black Sheep Coffee and Bao are just a few of the brands that we think are leading the way and developing into the larger casual dining brands of tomorrow.

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