Last year was all about the US incursion on the UK restaurant sector – in case you hadn’t noticed – in particular the so-called burger war between patty purveyors Shake Shack and Five Guys, which had the temerity to turn up over here and muscle their way into the consumer psyche as only the Yanks can.
Even if it wasn’t actual US companies that pitched themselves into the restaurant market, the country’s food took hold in other ways, with the likes of US-inspired Grill Shack, Jackson and Rye and Q Grill in London and Neighbourhood in Manchester (a New York bar and restaurant) and Red’s True barbecue in Leeds (serving food from the US barbecue belt) all proudly inspired by the Land of the Free.
Ever since the likes of KFC and McDonald’s infiltrated these shores – in 1965 and 1974 respectively – US restaurant and fast-food brands have become a ubiquitous and highly recognisable part of the eating-out scene.
Yet, the relationship hasn’t been a two-way street and despite a number of hugely successful UK brands having attempted to return the favour and break out across the Pond – most notably Pizza Express and Wagamama – surprisingly few have gained little more than a toehold in the States over the past few decades.
Sea-change
The tide is now starting to turn, however, and a number of well-established restaurant groups are targeting the US – as well as Europe, the Far East and beyond – with the belief that this time round they can gain traction in a country that is big on giving but not so hot on receiving when it comes to restaurant concepts.
Carluccio’s, the all-day Italian café chain led by Simon Kossoff, for example, is exploring opportunities to launch in the US as well as bolster its position across Europe. The brand, which is now owned by Dubai-based investment company Landmark Group, is on the cusp of significant global expansion, says Kossoff. “Landmark is a massive fashion and retail business built over 40 years throughout the Middle East and India. They think about going to a new overseas territory like we think about going to a new town in the UK,” he says. “When you look back in five years’ time, now will mark our real move into the international arena.”
The company, which currently operates 10 international sites, has set up a new company, Carluccio’s USA, to oversee a number of planned sites in America. It will open its first US outlet, a 125-cover, 6,500sq ft restaurant, in Alexandria, an upmarket suburb of Washington DC, this autumn. Trading over two floors, it will take a similar approach to that in the UK, although there will be small tweaks to cater for the US happy hour and bar snacking culture. Downtown Washington and a retail centre in the city will be the next targets.
“The plan is to get three up and running and prove the brand, which will in turn open up wider opportunities,” says Kossoff, who adds that the company could eventually open between 10 and 15 sites in the state. Beyond that Boston and Chicago are slated as being viable cities for the chain.
Movement en masse
Carluccio’s is by no means alone in wanting to court the US public on its home soil. Yo! Sushi recently revealed bullish plans to open 50 restaurants in the US over the next six years after signing a new franchise agreement for the country. The deal with One.23 Entertainment Group, will see the sushi chain – which has 70 sites in the UK – open restaurants predominantly on the eastern seaboard of the country, which includes the states of Maine, New Hampshire, Massachusetts, Connecticut, New York, New Jersey, Virginia, Georgia and Florida.
The first site will open at Westfield Garden State Plaza, in Paramus, New Jersey with One.23 Entertainment Group in the final lease stages on three other locations.
The move is significant, not least because Yo! Sushi is one such UK brand that already has a presence in the US, albeit a small one. The company opened its first restaurant in the country in Washington DC’s Union Street train station back in 2012, but recently closed it after parting company with its franchise partner, with which it had signed a 10-site agreement. But rather than pulling away from the country it is just taking a fresh approach.
“We wanted to keep [Union Street] open but there were too many complications with the landlord,” says business development director Alison Vickers. “The US has always been part of our strategy. We are a bit behind where we wanted to be but the deal with our new partner means we have a much bigger area to open in.”
Yo! Sushi’s experience of America, while hardly extensive, will prove helpful this time round in knowing what changes need to be made to suit the US market. “Around 90% of the menu will be the same,” says Vickers, “but we now know that in the US they like a bit more mayonnaise and more spice. We have also tweaked the portion sizes, so serve four rolls instead of three – but we are fortunate that sushi is a universal portion size.”
Wagamama, meanwhile, is also looking to kick-start its US operations. The Japanese chain has been in the US since 2007 when it made its debut in Boston, and now has four sites in the country – all in Massachusetts – which are 100% owned by the company. Last year it appointed Carlos Bernal, a man with 25 years’ experience in the hospitality industry in the US, as its first chief executive to oversee the US operations and is believed to be looking at developing a franchise model to move things on.
At the start of last year, its then chief executive Steve Easterbrook was reported to have started a strategic review of the group’s rollout in the country, looking at whether it should fund the expansion itself, work with a partner or develop a franchise model. Wagamama is already well experienced with franchising: it operates 35 restaurants under franchise in 15 countries.
Confidence is king
So why the renewed interest in the US market? Many operators share the view that the timing is right to have a fresh stab at the States, and the trading environment is certainly better than when some of the UK brands tried last time. “We got our timing wrong,” admits Ian Neill, the then CEO of Wagamama when it launched in the US. “We got hit by a big wave called the global economic meltdown.”
Despite this, Wagamama opened three US sites relatively quickly and Neill says that they traded well from the offset, although head office costs in the US impacted on overall profitability.
Many large UK brands such as Wagamama and Yo! Sushi have grown in stature and confidence since they first tried to break the US, believes Thomas Rose, partner, leisure and restaurants at property agent Cushman & Wakefield, which has helped UK brands find sites in the US. “Over the past three years these brands have really grown up to become UK powerhouses. They are more confident about how they do business and are seeking a new market. The UK is arguably the best casual-dining market in the world in terms of branded offer and they are starting to believe in themselves more.”
Operators have also realised that despite the US eating-out market’s expertise in certain styles of cuisine, there are other areas where its dining scene is still lacking. “When US clients come to the UK they are always amazed at our Asian sector,” adds Rose. “They look at Asian brands such as Wagamama and Wasabi and really like what they see. They have nailed Mexican and burgers but Asian food is a segment that isn’t done particularly well over there. The people behind Chipotle recently launched Shop House in Denver, which is a south-east Asian concept, so if those guys are only cottoning onto the market now there is still a lot of scope. This is why Yo! Sushi is so eager to expand in the US.”
“We were blown away with the food, concept and the fun dining experience that this iconic brand provides,” says Coby DeVary, chief executive of One.23, talking about the partnership with Yo! Sushi. “The flexibility on site size, and the growing demand for quality sushi in the US, is what led us to YO! Sushi. The timing is perfect.”
Gaps in the US market
This gap in the market hasn’t been lost on Wasabi, either. The London-based sushi and bento chain is planning to open its second New York restaurant next March, following the launch of a debut site in Times Square in February. The chain will open at 7 Westfield World Trade Center and is also in negotiations to open at Manhattan’s downtown Fulton Street subway station. Further American locations are also on the cards.
The growing profile of UK – and in particular London-based – restaurant brands is certainly making some more upbeat about their international prospects. “We are a lot more confident in our own ability to cross borders,” says Wagamama’s Neill, discussing the UK eating-out sector. Managements are good, the execution is there and companies have great key performance indicators for their financial backers. The UK has a lot to offer.”
“At the moment there is a lot of interest from overseas in London restaurants,” adds George Bukhov-Weinstein, director of Goodman and Burger & Lobster. “Burger & Lobster is considered to be a London rather than a British brand, and that appeals to a lot of people.”
Burger & Lobster, which operates six sites in the capital, is due to open its first non-London site later this year, in New York. That the company has chosen the States above other major UK cities such as Manchester and Liverpool – the conventional approach for a nascent chain of its size – is indicative of how it views its chances of succeeding Stateside. “New York is one of the most dynamic and happening places and it’s a great match with our brand,” says Bukhov-Weinstein. “It seemed the logical location in which to open next.”
Burger & Lobster New York opens this autumn in the Flat Iron district of Manhattan, in what will be the group’s biggest restaurant by some margin. At 4,000sq ft and with 330 covers it has more than double the capacity of its largest London site, on Soho’s Dean Street, although Bukhov-Weinstein says that this is par for the course when dealing with America.
Indeed, the size of the operation isn’t the biggest challenge the group faces but rather it will be trying to “create a very high energy restaurant through a very strong team,” he says.
Admittedly, Burger & Lobster’s reasons to want to open across The Pond are more pressing than some. The chain air-freights its lobsters from Maine and sources its beef from Nebraska, so an American restaurant places it much closer to the source of its ingredients. Yet it still faces the obstacles that every other ‘foreign’ interloper has to deal with: convincing Americans to eat at a UK chain when they are spoilt for choice with home-grown options.
While Bukhov-Weinstein says there is no strategy in place yet to open any further restaurants on US soil, should New York prove to be a success, the company will “definitely” start to look at other big cities, most likely Los Angeles and Chicago. “Because we spent a year looking for a site a lot of property companies are sending us potential locations across the US, many of which are very interesting.”
As with Wagamama, the New York restaurant, as well as any future American openings, will be 100% owned by the UK group, but with other international openings it will go down the franchise route. Burger & Lobster is very close to securing a franchise partner for an opening in Dubai next year and has considered many further offers for other places in the Middle East and beyond.
“We have had 65 companies around the world who have shown interest in becoming a franchise partner,” says Bukhov-Weinstein. “It makes sense in countries such as the Middle East because they know the language and understand the various licensing laws that can be problematic. They can even offer protection where necessary, which is something that needs to be considered in certain countries.”
“At their best, franchisees can bring great value to your business,” adds Neill, who used the franchise model to open Wagamama elsewhere around the world. “With a franchisee you can get a much quicker diffusion of the brand across a much bigger geographical area. In the US, if you wait too long to expand they just nick the idea.”
Global gathering
It is not just the US that UK brands have their sights on. Europe and the Middle East are proving just as attractive. Carluccio’s already operates eight restaurants in the Middle East and two more sites are being built to add to its existing one in Turkey, where Kossoff says there will be a total of five by the end of the year. Yo! Sushi, meanwhile, operates 10 international franchises in the Middle East, Ireland and Scandinavia and is likely to want to build on its overseas presence in the coming years.
Scottish brewer and bar operator BrewDog has also surprised a lot of commentators in recent years with its expansion route, which has seen it move into places such as Gothenburg, Florence, Stockholm, Tokyo and São Paulo. It is continuing to look at places across the globe, and says it has found partners for openings in Bologna and Helsinki and is scouting places such as Paris, Barcelona, Oslo and New Delhi.
Pizza Express already has a major international presence, with 68 international sites in places such as Kuwait, Indonesia, Hong Kong and Shanghai. Its global expansion is set to pick up pace – particularly across Asia – following the purchase of the chain last month by Chinese company Hony Capital. In a statement, chief executive Richard Hodgson said Asian expansion in Asia was a “key part” of future growth strategy for the company.
La Tasca, meanwhile, is considering launching in India under a franchise agreement. According to reports in India, the company, which currently operates 45 sites in the UK and five in the US, has tasked Gaurav Marya, chairman of Franchise India, to find a suitable franchise partner for the country. It is thought that the group has been exploring international opportunities for a while, with no specific rollout numbers set for the sub-continent, although Marya is quoted in the Indian press as saying he was looking for partners who can open 30 sites over the next 10 years.
Jamie’s Italian also has Indian aspirations. The brand, which has nine international restaurants located from Sydney to Dublin, is launching in Delhi next year, after signing a partnership with Dolomite Restaurants Pvt, before expanding across India in due course.
International expansion is a major focus of the group’s attention this year, according to Jamie’s Italian managing director Simon Blagden. The brand has openings lined up in Moscow, Hong Kong, São Paulo, Stockholm, Canada and Mexico, plus more sites in Australia.
So far Blagden says the brand has gone into territories where Jamie Oliver has proved popular, which is why Australia has been a key region, with five sites currently trading, but it has also based its decisions on where to go by looking at its UK operations.
“A significant proportion of our revenue in the UK comes from overseas visitors,” says Blagden. “We know from which countries they come and that helps when looking where to go internationally.”
The company operates on a franchise agreement – or partnerships, as Blagden prefers to call them – with Jamie’s Italian UK providing training and quality control. This way it makes use of local knowledge and expertise, he says.
The company’s international presence is set to become an increasingly important part of the overall business. With 34 restaurants in the UK, Blagden says that the company is approaching its optimum number of sites over here. “Over time our international business will be the most dominant,” he says.
The vast area which the company can expand into will mean that its presence in many countries will be very different from that in the UK, he adds. “Over here we’re seen as a high- street brand, but people in Australia don’t consider us as a brand, even though we’ll have six or seven restaurants there soon, because we are in geographically diverse places.”
Overcoming the obstacles
Given the compelling reasons for international expansion, it’s not hard to see why many brands are taking the plunge. As Rose says: “In the UK, casual-dining brands can get to 250-400 sites before they max out. In the US you can reach 1,000 – it’s massively attractive.”
Yet it is not without its challenges. “There is a tremendous amount of research that is needed both on location and opportunities of the concept, says Vickers. This is often harder to carry out than in the UK, adds Rose, who says that catchment data so readily available in the UK for prospective entrants is not as widely available in the US.
US bureaucracy and individual state laws, in particular licensing laws, can also be a hindrance. In Burger & Lobster’s case the company had to jump through a number of hoops in obtaining a liquor licence, which required approval from a hearing of Community Board representatives.
“We were told that it would be almost impossible to get a licence for a space for more than 300 people,” Bukhov-Weinstein says. “When our application was put to the community representatives, one person said that they had visited Burger & Lobster in London and loved it and so agreed to the licence, while another said they had tried to visit but couldn’t get in and wanted it to open in New York to increase their chances of getting in. We were lucky.”
Timing is another factor. “Everything takes longer,” says Vickers. “The US permit process means that the length of time to secure a location and get a build open can be four times that of the UK.”
Blagden echoes this, saying the company sets international expansion targets four to five years in advance. “The length of time it takes to find the right partner is the biggest challenge, and finding the right site – it can take well over three years from start to finish.”
Waiting for the time to be right is currently what’s holding Jamie’s Italian back from US expansion, but Blagden expects the brand to cross The Pond “within the next five years”.
When it does, it can expect success. “Conventional wisdom says it is difficult to take UK concepts to the US, but I don’t agree,” says Neill. “There are numerous US brands that didn’t work in the UK first time round – Domino’s and Burger King both had a number of attempts. If you’ve got a good concept you’ve got as much chance as anyone else in the States.
“There are a group of operators in the US that are doing great things but there are also people who are not cutting it any more. UK brands can get in there and get the job done instead.”
