Inside Track by Paul Charity This is my final Inside Track after 10 years covering the sector. It’s a chance to reflect on the many changes that have taken place in this vibrant industry. Perhaps the first thing to note is how much more interesting the landscape has become. Luke Johnson notes, in his current book, Start It Up: Why Running Your Own Business Is Easier Than You Think, that the returns for his Pizza Express business in the mid-1990s were stellar thanks to the relative lack of competition (20% unit margins and 35% cash returns). The business was helped, of course, by its big expansion drive coinciding with an opportune moment in the business cycle - a recession had left suitable property readily available and landlords super-keen to do cut-price deals. But the wider opportunity was around a branded, consistent food offer in a marketplace where there was very little competition. Here’s where the massive change has taken place with a battalion of quality, branded offers offering value appearing in high streets, retail parks and suburbs across the country. The eating out market has grown steadily for 50 years, albeit suffering relative stagnation in the past couple of years. Right now it’s worth £60bn in sales per annum and more than 30% of total food spend goes on eating out. A host of pub, restaurant and food-service operators are growing sales. New entrants appear by the week. This month, there’s talk of American “Better Burger” chain Five Guys taking a tilt at the UK market. When I toured Five Guys sites in the United States I was reminded of one particular thing - it is, of course, possible to target a large category and do it better. Five Guys is quick-service “Better Burger” with provenance and super-competitive price points. Jamie’s Italian, Cote, Gourmet Burger Kitchen, Byron and Wildwood provide some of the obvious UK examples of similar thinking. And Mitchells & Butlers (M&B) is about to embark on a push into the sizeable Asian food market with its forthcoming TUK CHO launch. It’s worth noting, too, how fragmented the UK market still is with the market leader M&B accounting for just two per cent of total sales. There is more market share for well-organised scale operators to grab. Another major trend of the past decade has been the steady growth of the pure-pub operators within the eating out market. Six of the biggest 10 managed eating and drinking out operators in the UK are pub companies - M&B, Greene King, JD Wetherspoon, Spirit, Marston’s and Stonegate. One restaurant operator once described the pub players as having “the best sites and the worst concepts”. The site-envy is understandable, of course, but you can’t argue with success and the typical mainstream pub food offer has had a good few years. Simon French, leisure analyst at Panmure Gordon, notes the eating out pub market has grown by £2.5bn since 2003 to be worth £10.6bn currently - and will grow to be worth £12.3bn by 2015. Drinking out spend in the on-trade, by which, of course, we mean beer sales, have been in long-term decline. But alcohol without food is worth £16bn a year in the on-trade while alcohol with food is worth £11bn. In global terms, it is still a very large market - and a big help in making decent margins for any operator in licensed retail. I leave the most heartening change in the past decade to the end of my piece. The out-of-home food and drink market is a people business, where the human clay makes a big difference. Staff training and development, the quality of service itself has improved a lot. French restaurants often offer a more efficient if haughty form of service, but our industry has got better at warmth and engagement. It’s been an honour and a privilege doing this job. I’m leaving to set up a company providing public relations services within the sector - so I’m not going far. My replacement is Rob Willock, who has 17 years' experience in business journalism - I’m sure you’re in safe hands.