High-flying private equity players are looking at long-term investments, buying brands that they know will be worth more in the long run, according to specialist business property advisor Christie & Co.
Simon Chaplin, senior director of Pubs, Restaurants, & Franchise, tells MCA that listed groups going private – such as Fulham Shore and The Restaurant Group last year – is more about opportunity than trend.
“It’s opportunistic, and if it’s good value, why not?” he questions. “[Some groups] are a bargain right now.
“Private equity is still a bit sore – they lost a lot on some casual dining brands. There could be some deals out there, but it will be the big players.”
Christie & Co’s Business Outlook 2024 report, released last week, forecasts that casual dining will continue to struggle.
“Casual dining has been through such a hiatus that really started in 2018,” he adds. “They jumped on the bandwagon, wanted the volumes. Post-Covid, everyone had run out of a loan and started to come out to roost.
“Even Nandos, Wagamama…have they increased their numbers significantly? Not really. Others have whittled their numbers down.
“There’s no reason you can’t have 100 sites, or that sweet spot might be 50, 60. People will travel to get to a brand they’re keen on.”
While premium dining has been comparatively better off, Chaplin points out some high profile chefs have announced closures in recent months.
“The top end is again a problem end of the market, but there will still be a place for celebrity chefs and high end restaurants.
“QSR is usually the market people want to utilise; it allows for dining in, delivery, or takeaway.”
Chaplin suggests it is not only QSR but also experiential concepts and pubs that have taken share from the casual dining sector, as more and more pubs introduce a strong food offer.
It is primarily franchised, affordable propositions looking to enter and expand in the UK market, as Christie & Co works with brands like US-based Korean fried chicken concept Bonchon, which is soon to make its UK debut.
“There’s a lot of opportunity in franchising, although quite a few McDonald’s franchisees have express pain, so there are problems there as well.
“Independents are finding it difficult, not because of brand loyalty but because people have comfort in not taking risks. Little Chef used to rely on that.”
Despite its decline, Chaplin proposes casual dining may well make a comeback – albeit below the level of its pre-pandemic heights. Increased investment into shopping centres and high streets will mean casual dining also benefits.
“In three years’ time, the private equity investors who caused part of the boom will have forgotten, and will think casual dining is the next big thing.”
One of QSR’s strengths, however, is that it doesn’t have to rely on retail. Within the segment, Korean and Mexican cuisines may be having a moment, but Chaplin points out there’s no secret to success.
“Burgers and pizza are still very popular. Everyone said Mexican is the big thing, Taco Bell and Tortilla are doing well, but Chiquito failed.
“But since Gourmet Burger Kitchen and Byron went down, there’s definitely a gap in the market for better burgers.”
Another opportunity is branded Indian food, while pan-Asian QSR concepts like Chopstix are doing well owing to their high-margin nature.
“For mid-market operators, it’s £3m just to set a site up, compared to £300,000 for Bonchon. That’s a big jump when money’s a bit tight.
“Brands will continue to look for sites, but be more critical about where they want to be. Back in 2015, 2016, 2017, they weren’t doing that. There will also be a lot of investment into existing estates.”
