Despite the well-reported challenges facing many restaurants around the UK, the country’s lucrative F&B market has become a major target for international chains, looking for expansion opportunities, with the focus on quick service and premium operators.
US F&B groups have been especially active at the quick service end, with industry giants such as burger chain McDonald’s and coffee specialist Starbucks announcing ambitious plans for Britain as both companies pledge to bolster their physical presence in the country. They have also been joined by a host of comparatively new names, from fired chicken offers, to burger concepts and all-day meal occasion offers.
F&B market polarised
However, not all the F&B growth will be based around quick service and family restaurants, with a squeezed middle offering opportunities at both the casual and more upscale ends of the market. And there are plenty of examples of growth at both ends of the sector.
“Consumer spending patterns on F&B and leisure are polarising in a way we have not seen before. When belts tighten, people seek value in how they spend their money, and that doesn’t mean just cheap eats. Actually, the rise of ‘eatertainment’ and ‘experiential’ dining and drinking venues has demonstrated how the perception of value also rings true at higher price points,” adds Carlene Hughes, director and head of UK restaurants and leisure at advisor Savills.
Viklari Consulting managing director Jonathan Doughty agrees and says that premium dining is seeing an uplift in demand, especially where food and leisure are blended.
“The bottom line is that people are prepared to pay more for really good experiences,” Doughty says. “F&B is on a journey of rediscovery. We are firmly going back to experiential physical and combining food and music especially is going to be a big future trend. The age of canned music is over.”
One such example is The Ivy Collection, the upscale bistro concept that has spun-off from the famous West End eatery and club. Bournemouth on the south coast will become the 42nd venue within the chain, while Stick’n’Sushi has grown to 14 outlets with an opening in Islington. Cote and Miller & Carter have also performed well, while Gaucho and M-owner Rare Restaurants will open 30 new sites following its double-digit revenue growth in 2023.
Quick service expansion
McDonald’s, which this year celebrates 50 years since it opened its first UK store in Woolwich, south London, recently announced that it is to open more than 200 restaurants across the UK and Ireland over the next four years, creating about 24,000 jobs in its largest expansion programme in the UK in more than 20 years.
It has backed that with a £1 billion investment as it looks to increase on its 1,435 existing UK restaurants, while coffee chain Starbucks earlier this year announced its own plans to open 100 more UK stores. In the 12 months to October 2023 it ended the period with 1,168 UK stores and has since expanded to 1,260 outlets nationally, with growth focused on both its 340 UK drive-thru sites and high-footfall urban locations.
In the quick service market, Hughes says that the US brands have been able to chip away at the middle market, where a number of established brands have experienced more challenging trading conditions. Another with growth plans is Yum Brands’ KFC division, which acquired more than 200 KFC restaurants from forecourt specialist EG Group in the UK and Ireland about a year ago. KFC UK and Ireland wants to add another 500 outlets to its 1,050-strong estate by 2030.
“Quick service restaurants are flourishing for the most part. The rise of franchising and new entrants - particularly from the US - has driven a flurry of activity in site acquisition and resulted in rental growth. Wingstop is an excellent example, going from zero sites to 38 in the space of five years and reporting exceptional trade,” she says.
Indeed, the established giants will also see the market becoming increasingly competitive, with a host of chains from the US pledging growth, including Dave’s Hot Chicken, Chick-fil-A, Popeyes, Five Guys, Shake Shack and Carl’s Jr.
European chains
However, not all fast food growth is being driven by US brands, even though Amsterdam-based, Fat Phill’s, a smash burger franchise brand, was inspired by American food. It entered into a franchise agreement with Auntie Anne’s UK master franchisee Freshly Baked at the start of the year to develop the brand across 100 locations over the next 10 years. Fat Phill’s was founded by Armin Vahabian in 2019 and has since expanded to 17 sites across the Netherlands.
It will not have things all its own way, as Junk Group from France is opening in Soho, London and Copenhagen-based Gasoline Grill also recently opened a pop-up in London.
For its part, Freshly Baked currently operates around 40 Auntie Anne’s locations in the UK and last year it agreed to renew its master franchise agreement with US-based Focus Brands for a further 10 years to more than double its UK estate of pretzel stores.
Meanwhile, domestic brand is continuing its rapid growth and this summer Greggs opened its 2,500th shop in a petrol forecourt at Sainsbury's Cobham, Surrey. Targeting an eventual estate of more than 3,000 shops in the UK, it overtook Subway in 2023 as the country's largest sandwich operator, and aims to have opened between 140 and 160 new shops by year end, with a focus on travel hubs and roadside locations. It is also looking for opportunities outside the UK, particularly Central and Eastern Europe.
“We are looking to test international markets and we are looking to grow to a sizeable scale, we are not looking to just plant flags,” says Nigel Simpson, head of international at Greggs. “Our point of difference is snacking and meal occasions throughout the day. It puts us ahead of much of our competition and is coupled with fast and friendly service.”
With a host of new and established names pushing hard for expansion, the UK market remains a stand-out investment opportunity for many chains, despite, or perhaps because of, the squeeze on the middle market.
“I think we’ll see more blending of F&B and leisure too,” says Doughty. “Where they are well integrated and work seamlessly together they can boost revenue at destinations and can act as a lubricant for each other, keeping people for longer and spending on different activities.”