Inside Track by Peter Martin
Nandos and Gourmet Burger Kitchen on the same menu sounds a tasty prospect. The weekend papers carried the news that Capricorn Ventures, owner of Nandos, has taken advantage of last week’s dip in the share price to build an 11% stake in GBK’s parent Clapham House. The understandable deduction is that this could be a prelude to a takeover bid that could unite the two hot concepts. Early days yet, but it does demonstrate the underlying confidence in the eating out market from those already in it. It has not been a great week for the sector, with two profit warnings and a hit on share prices. It follows some bleak November trading figures, particularly from the bar sector, where like-for-like sales appear to be down something like five percentage points across the board. The run-up to Christmas is always a nervous time, and this hasn’t helped, although many operators are also reporting solid Christmas bookings. Times are getting tougher, which makes any speculation about two of the UK’s leading fast casual concepts coming together particularly exciting. The fact is that despite current economic concerns, industry leaders remain confident about the longer term future, as demonstrated by Peach Network’s recent poll of chief executives that showed even pub operators are on balance optimistic about the next five years – with over 80% of restaurant bosses upbeat. No-one believes that the public is soon going to rediscover the art of cooking at home – even in a potential downturn. The same survey showed that if the market does get tighter, restaurant operators in general think that spend per head will be squeezed while pub and bar operators reckon customer visits will be hit. Evidence from the United States, where the economic screw is already turning, is that UK restaurateurs may well be right about eating-out. The big winners in the US have been the fast food and fast casual chains, particularly those that have “premiumised” their menus to catch the middle classes trading down. Angus burgers are all the rage. Chipotle, the Mexican counter-service fast casual concept, for example, is focussing on freshness and no additives in its products, with its ‘food with integrity’ strapline, and is reaping the benefits. Fast casual, with its emphasis on the style and quality of casual dining coupled with the systems and value of fast food, seems well placed when the financial climate worsens. In the UK, Nandos and Gourmet Burger Kitchen are two prime UK examples. It was significant this week that despite the trading blip at Clapham House, GBK was still held up by analysts as one of the stars of the eating our market. Another rumour has it that Clapham House would be happy to dispose of its other interests, including Tootsies and Bombay Bicycle, to concentrate on his upmarket burger business. Investing in fast casual makes very good sense. Peter Martin is the co-creator of M&C Report and founder of Peach Factory