Operators in the UK have always looked across the Atlantic for inspiration, so AlixPartners US managing director Adam Werner highlights some of the key trends affecting the US market at the moment. James Wallin finds out more.

The march of US brands into the UK has shown little sign of diminishing over the past year, despite the uncertainty sparked by the Brexit vote and the wider problems in the casual-dining market.

Wahlburgers, Slim Chickens and Which Wich are just a few of the brands familiar to the US consumer that have secured their first sites in London this year. Meanwhile, the prospects for British brands seeking to reverse the trend have been mixed, with Pret and Nando’s among the more successful insurgents across The Pond. On the other hand, YO! Sushi has closed its flagship Manhattan store and Wagamama has yet to see the same kind of momentum in the States that it has enjoyed over here.

Adam Werner, AlixPartners’ managing director in Chicago, says the contrasting fortunes are often down to a misapprehension about the make-up of the US market.

He says: “One of the challenges international brands sometimes overlook when they come to the States is that they think it’s one market when it’s really more like 50 and each are very different.

“When Pret first came to New York they did pretty well and I think a lot of that was because there was a correlation with London. When they moved over to Chicago they definitely found it more challenging. They had to figure out the right locations and how consumers viewed their brand. I think there was some confusion about whether Pret was convenience, QSR or QSR+. They had to re-evaluate the approach.

“With Wagamama, Boston was an atypical choice for an entry market into the US. It felt like them opening in New York was resetting the expansion push. I’m sure they’ve learnt a lot from that experience. Nando’s is the one where it feels like the strategy was right from the start. They launched in DC and considered going north but instead leapfrogged into Chicago and really focused on that market. They got their messaging right and really researched their target areas.”

US invaders

On the attitude of US brands looking at the UK, Werner says: “Five Guys are definitely a success story that people have watched closely. At the same time in the US the whole better burger scene is starting to plateau a bit, especially as that standard of burger, generally across QSR, has improved. It feels like those guys are now looking more closely at international opportunities.”

So, has the air of uncertainty around the UK economy affected their thinking? “It’s much more about the consumer demand rather than the wider political or economic climate,” Werner says.

“Looking from the outside, Brexit is seen much more as something that will happen and every- one will figure out how to deal with it and move on. There is maybe a question as to whether they will hold off the investment until the situation is a bit clearer but, generally, I haven’t sensed any diminishing appetite for the UK.”

On the subject of the casual-dining crunch, Werner says US brands have seen it all before in their own backyards. Brands have struggled with declining same-store sales since the turn of the decade, which they have attempted to tackle through a variety of loyalty pushes and promotions. Werner says the expectation that there would be a correction in the market with a number of brands disappearing hasn’t proven entirely true and that among the winners, there are several formats that have clung on through some dramatic ups and downs.

He says the approach to technology and how this is fused with consumer insight has been key to success.

“In this regard, Starbucks has been the gold standard,” he says. “What they have done – and Panera are very skilled at this too – is capture that ‘one more time’ spend. Whether that’s an extra visit in the afternoon or persuading a three-timea-week consumer to make it four, if they can replicate that across their estates, that’s a huge lift.”

Technology in general remains a key area of investment for brands in the US and Werner says there is still significant space to exploit, although it remains a better fit for some brands than others. He says: “What we saw was an initial big, flashy push at putting table tops into casualdining outlets, but in terms of driving the next level of sales, satisfaction and even cost reduction, it was a little underwhelming.

“Restaurant operators haven’t given up but they have focused elsewhere. Kiosks as front points have been a big area of focus and they seem to be pretty well received. But, it’s not right for everyone. Go into a KFC kiosk and you’re likely to see seven or eight people queueing at the counter and no one at the kiosk. That’s a case where there just isn’t the demand from their customers.”

Healthy approach

Another area of focus over the past few years has been healthy and sustainable eating, but recent research by AlixPartners has shown a plateauing of its importance for consumers when choosing somewhere to eat.

Werner says: “There is this dichotomy among US consumers, and I’m sure it’s not exclusive to us. They want to eat healthily, they want their kids to eat healthily but when they get to the restaurant they see a cheesecake on the menu and it’s goodbye willpower. “I would argue that in order to have a successful chain, you need to have a portion of your menu that shows how you are tackling health and wellness. That option needs to be there but when it comes to scaling that up into a truly sustainable or a vegan offering – it’s a question of whether the consumer is willing to pay for it.”

Comment by Graeme Smith, managing director at AlixPartners, London

“As the branded restaurant market in the UK continues to mature and new brands heighten competition for sites and customers, the largest groups are always looking for avenues to continue their growth. Given the size of the market, investors have long viewed expansion into the US market as the holy grail to drive continued returns.

“Those operators that can demonstrate the potential to succeed in the US – which is likely to involve some tweaks to appeal to the target market – will be highly attractive acquisition targets for both UK and international investor groups, as seen by the price JAB was prepared to pay for Pret A Manger.”