On the face of it London doesn’t seem like a sound bet for investment at the moment, especially if you are in the restaurant game.
Of all of the UK’s cities, London’s hospitality sector is the one that has been slowest to recover post-pandemic. Overall trading is still sluggish, and as the latest CGA data shows it is losing sites at a faster rate than the country as a whole - with the number of licensed premises in the capital falling 2.6% in the last three months alone.
Working from home, or people’s aversion to the daily commute, has seen Friday trading slip off a cliff, declining 2.2% since 2019, with an uptick in Thursday and weekend business hardly compensating.
Hospitality’s share of the London jobs market fell from 7.6% to 6.5% between December 2019 and 2020, and has remained unchanged pretty much ever since, according to the Mayor of London’s office, reflecting among other things the flight of hospitality workers post-Brexit.
None of that’s encouraging, but don’t despair just yet, London remains one of the world’s great world cities and is still on the hit-list for big name brands.
It all depends on how you look at the market, or to be precise which part of the market you focus on that matters. Looking through a global lens, and focusing on the strata of society that still has cash to spend, the picture our capital city presents appears a lot rosier, at least to some ambitious international players.
One such restaurant entrepreneur giving London a vote of confidence is John Kunkel, founder and CEO of the Miami-based 50 Eggs Hospitality Group, who was in town this month on another scouting trip for sites and partners for his ‘polished casual’ Yardbird brand.
50 Eggs is credited as being “one of the coolest multi-concept companies” in the US, and Kunkel is a seasoned operator. When I met up with him, he was in positive mode: “I see more signs of life in London than almost any other market. It’s teeming and ready to explode again, despite the news cycle and all the things happening. Timing is everything; it’s a great time to be looking.”
He maintains that the conventional wisdom that the London market is a deterrent to overseas operators doesn’t really apply, with real estate costs, usually seen as a barrier to US operators, no more of a challenge than in major US cities, where rents can be even higher.
“We also see a similar customer in London as in New York, Miami and LA,” he adds. And that is an important part of his approach - knowing your customer type and where they are going to be.
Going international is always about finding similarities not differences – and for 50 Eggs that’s the same whether its London, Tokyo, Sydney, Dubai, Austin, Boston or New York, all of which are on its current target list.
For Kunkel that process of location selection is part instinct, part hard data analysis. “There are lots of similarities in terms of cheque average and food,” he says. Yardbird, based on modern American classic food with fried chicken as its signature, has a $60 average spend, and while not high end, is “somewhere in the sweet spot in the middle” - fine dining service, scratch quality kitchens, in a relaxed atmosphere, great cocktails, chef driven, and with an entry price point.
But product differentiation is also important – and much of that is down to the experience served up. Kunkel believes he has something unique. “We don’t have natural competitors in London.”
And once Yardbird is established expect other concepts from the 50 Eggs stable to arrive later. Latin America-inspired Chica is a more premium proposition with live-fire cooking and a live floor-show, developed on the back of 50 Eggs’ experience of opening in Las Vegas. Wakuda is a high-end Japanese dining experience created in partnership with two-Michelin-star chef Tetsuya Wakuda.
But there will be no stampede, Kunkel told me he is initially seeking out a flagship for Yardbird and wanted to make a “thoughtful” entry into the market. “Even in the US, we have this idea that we don’t want to flood the market.”
Having launched in cities across the US and in Singapore, he is also mindful of adapting to the market and becoming a part of the local restaurant community – and he has spent much of his time in London talking to established UK operators. “The idea that you can flop your brand in London and walk away is a recipe for disaster.”
John Kunkel’s underlying view is that the hospitality industry and the world is getting “smaller and smaller”, with more, not fewer, similarities between customers across international markets, particularly at the higher end.
And that’s a view shared by an increasing number of UK operators too, as more seek international city destinations for growth rather than trying to saturate the domestic market. The important lesson is to have international growth as part of the plan from the start rather than as an afterthought.
Hawksmoor is now established in New York and looking for more US cities to open in. Brewdog, as it discards some of its smaller locations in favour of super sites (like its new Waterloo operation in London), is spreading at a rate right around the globe – Atlanta being its latest destination, with Vegas on the map soon.
Meanwhile, The Alchemist has signed up to open in Berlin, and even brands like Black Sheep coffee are seeing the benefits of finding like-minded customers in new territories, such as the trendiest corner of Dallas.
But it is the experiential brands like Flight Club, Swingers and Puttshack that are seeing the most potential for global growth, especially in the States. Puttshack may have been born in the UK, but it is now essentially a US company – because that’s where the greater potential lies.
The prediction that post-pandemic cities would die as been wide of the mark. Yes, many have struggled to get workers back to their centres (San Francisco being one of the worst affected), and others like Hong Kong, Beijing and Moscow have become off limits for other reasons, but the attractiveness of the likes of Miami, Berlin, Tokyo and yes even London remain bright.
Berlin is Europe’s fastest-rising global city, and Tokyo’s population is a massive 37 million. Think on that.
Some times it takes an outsider to point out what opportunities we have under our nose, if we know where to look. But there are also exciting openings out there across the planet. As John Kunkel says the world is getting “smaller and smaller”.
