Loungers – the one and only?

So Loungers’ management have finally decided the time is right to take the plunge and float the business - good for them. What has particularly caught my eye about this was the accompanying and bold statement that it is the “only growing all-day operator of scale in the UK with a strong reputation for value for money”. I am sure the management team and their advisors would have done their due diligent homework, but I was curious to see whether I could find fault or just maybe an exception.

The Loungers’ business is of course comprised of two arms (I was going to say ‘brands’ but the anti-corporate/anti-chain approach taken with the Lounge might raise a few management hackles) led by the neighbourhood café/bar Lounge and supported by the bar/restaurant Cosy Club format. Given the significant outlet skew towards the Lounge at 122 compared with 24 Cosy Clubs, I am going to focus on the larger and more informal, Lounge format. By way of approach, I am going to adopt a deconstructed unpicking review, and question the four key elements in the pronouncement individually.

Taking these elements in reverse order, we have:

Q: Does the Lounge have a value for money reputation? This is unfortunately a tricky one to reliably answer as while MCA collects a significant volume of customer perception data via our Eating Out Panel (EOP) on a host of criteria for many pub and café brands, the individual site naming approach of the Lounge severely restricts the sample size and reliability of our consumer reads. Looking instead at comparative menu pricing insights, it is possible to make a case, of sorts. Against the tough pub comparative of Wetherspoons, the Lounge is considerably dearer on many lines, not least traditional breakfast, burgers and steaks; but in terms of small plates and selected sides, it is highly competitive. As with Wetherspoons, the Lounge also offers a number of added-value, daily deals, that enhance its value for money credentials. 

A: Difficult to categorically say the Lounge does not have a value for money reputation, so on balance, I would give the benefit of doubt - Yes.

Q: Is the Lounge an operator of scale? MCA’s Operator Data Index identifies 270 chains across the branded restaurant/café/fast food/pub restaurant sector with 5 or more outlets. While there is no definitive benchmark of where genuine scale begins, it would be very difficult to argue against a minimum qualifying criteria of 100 sites. At this level, there is actually a large field of runners of 35, led by Costa, McDonalds, Starbucks, KFC and Wetherspoons.

A: Yes, the Lounge has scale.

Q: Is the Lounge a genuine all-day operator? The Lounge offers the same menu served from 9am to 10pm everyday and management report that sales are pretty well diversified across all day-parts. Significantly, only a limited number of those 35 scale-bearing operators can genuinely lay claim to be ‘open all hours’. This immediately removes a large number of restaurant chains that struggle early doors, including the likes of ASK Italian, Nando’s and Wagamama. And whilst we are whittling down the contender list, it would also be appropriate to tighten the definitions around the field of play. The availability of alcohol is critical here. Consequently, this serves to remove fast food and coffee shop operators, and narrows down the 100+ pub chains to 15. Scrutinising this list against MCA’s Pub Brand Monitor and cross-referencing those brands with the highest ratings for Value for Money, we are left with just six - more on this shortly.

A: Yes, the Lounge has all-day attractiveness.

Final Q: So is the Lounge the ONLY growing all-day operator of scale in the UK with a strong reputation for value for money? The tension is building as I announce the final competitor contenders. These comprise: Flaming Grill, Hungry Horse, Sizzling Pubs, Stonehouse Pizza & Carvery, Toby Carvery and Wetherspoons. Of these businesses, and looked at purely in terms of outlet growth, only Sizzling Pubs and Stonehouse Pizza & Carvery expanded over 2018. Revisiting the all-day (or at least the opening hours criteria), only Stonehouse consistently opens at or before 9am every day. However, I remain unconvinced about the extent that this business has such a fully evolved breakfast and shoulder-part trade as the Lounge.

Final A: The Lounge is a great business with significant growth potential. Indeed, I liken it to a younger version of, and attracting a more youthful audience than, the market leader Wetherspoons. However, regarding whether I can support the claim that the business is the only growing all-day operator of scale in the UK with a strong reputation for value for money, I am going to have to say decline and say ‘No.’ This mind, is only because McDonald’s cannot be totally excluded from the picture. That said, I would endorse the view that it is ‘the only growing all-day bar operator of scale in the UK with a strong reputation for value for money’. As Chesney Hawkes might almost have said, you can’t take the pedant away from me.