Business of Restaurants in London - Example

Business of Restaurants in London Restaurant business in London is stated to enter into a "golden age" of dining out according to the 17th edition of the annual Harden’s London Restaurant guide. The assumption is based the emergence new restaurants in London which may result in larger customer base. On the other hand, analysts also predict that the amount of business closures may witness a rise which may even out the number of restaurants in the city. Particularly, when the market conditions are good, owners would like to sell their businesses in order to earn huge profits. In addition, the significant increase in rents and land prices may also see owners closing their businesses, thus thrusting up the number of closures in London (Caterer & Hotelkeeper 2002). Analysts also predict that the value for money proposition would be a prominent factor for keeping the customer base rolling. The quality of food and the services offered by the restaurants owners coupled with aesthetic ambience would play an important role in luring new clients and sustaining the interest of the existing customers (Robinson 2002). As per the figures released by British Hospitality Association in their report British Hospitality: Trends and Statistics 2007, top five restaurants group in London are as under. Rank Owner 2007 2006 Selected brands outlets outlets 1  Gondola 525 505 PizzaExpress, Ask, Zizzi 2 Mitchells & Butlers 477 799 Harvester, Browns, Toby 3 Spirit Group 402 510 Chef & Brewer. Two for One, Miller's 4 The Restaurant Group 284 279 Frankie & Benny's, Garfunkels 5 Wimpy 252 250 Wimpy Growth in the restaurant business in London The restaurant business in London has witnessed a transformation over the past two decades. Dining out is no longer the prerogative of only rich and wealthy, the plastic money has given the opportunity to large sections of the society to indulge in culinary delicacies. The change in the pattern of consumers have also seen a paradigm shift with youngsters and teenagers becoming dedicated customers and spending heavy amount of money in dining out. In order to cater to larger audience, especially working mothers, most restaurants in London are offering facilities for babies. These are the next generation of customers who were ignored by the business owners previously. Some of the changes that have also taken place in the arena are the huge surge in investments that has given place for global cuisines to thrive and become popular in London. Further, this has also resulted in restaurant owners investing huge amount of money in decorating and creating unique and swanky ambience to attract costumers. The emergence of new technologies has aided the owners to reach out to larger audience and creating awareness of the different cuisines offered in the restaurant easily. This has also propagated the technique to in reaching out to the customers in their homes, which has significantly reduced the owner’s liability of investing in land or rent which would have otherwise increased the overhead cost of operating the business in London (Kühn 2008). During the past few years, UK on the whole, and London in particular has seen a surge in opening of restaurants. The below mentioned figures, taken from a survey conduced by Horizons for Success provides the proof. Number of UK restaurants 2001 2006 London 6,908 6,978 UK 25,832 26,700 (Excludes fast-food restaurants and pubs)Source: Horizons for Success Marketing the service and sustaining the business In order to meet the changing food pattern in the global market scenario, London restaurant owners should cash-on the growing needs of the consumer by not only introducing new palettes of food in their menu but also by renovating the existing service offerings. In order to create a business model sustainable in the market, the owners should be able to create a niche by augmenting the local food and serving combos at a very economical rate. Further, to entice all the segments of the society, they should plan to offer various discounts and condiments to their regular costumers. Emergence of the new trends like organic and health food can also serve as a diverse revenue generator for the owners. In certain cases, few restaurateurs fail to leverage their popularity by not promoting their unique cuisine in the media or through other traditional marketing channels. Being in an aggressive competitive market, restaurants need to promote their establishment through various channels such as viral marketing, media articles and by hosting contests. These restaurants have to be cognizant of the local taste of the consumers and customize the menu according to their preferences. This exercise should be an on-going process that would ensure long-term sustainability of the business (Walton 2008). While the owners have to evolve their menu per the changing environment, they should also be aware of the various ethical concerns raised in the community about the food served in the restaurants. For instance, British consumers prefer eating eggs and vegetables brought from local farmers rather than from artificially or genetically grown products manufactured in units. If restaurant owners focus on the needs of the consumers by buying these products from the local markets, they would be able to win their loyalty. This in-return would result in garnering goodwill and free publicity for the restaurant. This would also translate into a long-term business commitment and building trust-based relationship with the customers (Walton 2008). Owners can also leverage from the growing environmental awareness among the local community. Restaurateurs who are able to get free environmental audits done for their restaurants, that eventually help them in improving waste management, recycling water etc help in increasing their credibility with the customers. This in turn would help in increasing their customer base and add to the value proposition for sustaining in the market in the long run. Restaurant owners are facing stiff competition to differentiate their service offering from others by competitive prices while keeping highest standard quality. For instance, lot of restaurant owners promote their businesses by offering complimentary drinks or by providing personalised services. Many smaller restaurants also generate publicity by promoting their establishment in local events, fairs and through local news papers and radio (Walton 2008). The restaurant owners in London have become more specific about procuring the raw material from certified places. In order to highlight their effort in preparing a world class meal, they mention the credit on the menu. In order to meet the quality standards, chefs and restaurateurs have been collaborating with farmers for buying fresh fruits and vegetables. The trend has been followed by owners for simple meals such as salads and soups. This has ensured business continuity for most of the restaurant owners and garnered customer loyalty. An innovative project, London Scores on the Doors scheme, launched on 8 October 2007 in London provides encouragement and recognition to various restaurants which does not have full legal compliance to run the business. The scheme allows the general public to scrutinize the hygiene standards in the restaurants and comment on the quality of the food served. The businesses are further authenticated by getting star ratings from various councils such as Hammersmith & Fulham, who send their food safety team to inspect the food hygiene of each restaurant. The assessment also takes into account the efficiency of the restaurant’s management to serve safe food to the customers. The ratings awarded to the establishments ranges from five stars to zero stars, with five being given for maintaining excellent food hygiene standard and zero for poor standards. At the end of the inspection, the restaurants are provided with a window sticker and certificate depicting the stars earned by the establishment. Although, displaying the stickers is a voluntary move, many restaurant owners choose to display them on the main door to showcase their credibility and authenticity in the market. The star ratings provide greater credibility to the businesses as the protocols and standards followed by the scheme is consistent across London and are based on a unified national code of practice. Social, economic and environmental effect on the business Analysts have predicted that increase in food costs and low cost eateries thriving in London is likely to dent the revenue of large and mid-sized owners. With economic slowdown and ever rising energy prices, most restaurants are left with no other option but to increase the prices of the service offering. This has in-turn witnessed a steep fall in the customer base of mid-size and large restaurant owners. Social factors such as stringent alcohol licensing act and smoking ban in public places has aggravated the problems of the owners further. This has also led many pub owners to switch their business model from selling liquor to cooked meals. This has also attributed to increased competition in the market. The increase in the inflation rate may also be a big concern for restaurant owners. The raw material prices and the labour cost would eventually witness an increase in the near future, which might translate into low profit earned. The UK government is contemplating a change in the customers tipping in bars and restaurants in London. The move would ensure that the money accrued by tipping is not counted as the part of the staff salary by the owners. This would also increase owner’s liability to shelve more money for paying staff salary and thereby increasing the overhead cost to run the entire business (Sky News 2008). The Central London congestion charging scheme introduced in the year 2003 has also effected the restaurant business. In the survey conducted by London Chamber of Commerce and Industry, The Retail Survey: February 2004 found that the sector was considerably affected by congestion charging. Nearly 74.5% of respondents covered in the survey opined that there was fall in orders and approximately 78.3% saw a diminishing number of customer since the change was introduced (London Chamber of Commerce and Industry 2004). As per the survey conducted by the Zagat London Restaurants 2008 guide, London has topped the list of the expensive cities in the world to dine out, with the average cost for a meal in London costing almost £39. The survey further states that most diners did not mind paying extra for organic or healthy food. This phenomenon can be attributed to the greater health awareness and availability of health food options in the city. One of the other social factors is the low level of union involvement of the sector. This may be attributed to the high turnover and temporary jobs offered in the sector. Mostly young employees refrain from joining trade unions as they are either apprentice or students working part-time. Along with this, the nature of the business, wherein most of the employers are single owners or have chain of irregular establishments makes representation in the trade unions difficult (European Foundation for the Improvement of Living and Working Conditions 2004). General Eating Trends In one of the reports published by OC&C Strategy Consultants, casual dining in UK is estimated to grow upto £4.7b by 2011 as against £3.8b in the year 2007. This growth is attributed by the rising trend in eating fast food, consistent dining out by young population and the need for catering to the ever changing taste of the young professionals. Further, the growth in the sector would be majorly driven by branded chain restaurants such as Wagamama, Strada and Gourmet Burger Kitchen. Established brands such as Pizza Express and Nando's would further fuel the competition in the sector by innovating and introducing global cuisine to their menu. The report also elucidates that ethnic cuisine such as Italian, Indian and Chinese restaurants dominate the major part of the business currently. However, the brand operators who have deep pockets, higher margins and low operational cost would be able to sustain the market pressures in the long run. The casual operators would not be impacted with the economic slowdown because of the low operational cost and with the revenue dependent on economies of scale. The survey also depicts the eating habit of people in London, which shows the preference for ethnic over traditional British food (Caterersearch 2007). Type of Cuisine Responses Pizza/pasta 87% Chinese 80% Traditional British 77% Indian 76% Thai 66% Source: OC&C survey of 1,000 diners In a bid to ensure a cyclical business, restaurants in London have been charging fines to customers who fail to honour their bookings. In a survey conducted by Evening Standard, it was found that 75% of London’s best restaurants have been consistent in charging cancellation fees from the consumers. Although, consumers have criticised the move and stated that owners were aping the American trend of seeking credit card details for booking, restaurant owners continue to charge the defaulters. Importance of Ambience In order to sustain in the market over a period of time, restaurateurs should not only depend on offering varied cuisines, they should compliment food with attractive surroundings and hospitable atmosphere. The interior design of a restaurant forms the integral part in displaying the services offered in the place. Designs of unique nature attract larger audience and make them recommend the place to others. Restaurateurs have shown a remarkable change in their perception by paying keen attention to details such as lights, colour and decorations used in a restaurant. Great aesthetic designs have always given owners acclaim from the consumer who tends to visit the place frequently. Some of the restaurateur like Oliver Peyton, who own Mash in Manchester and London, have taken keen interest in decorating and making innovative designs for his restaurants. Restaurants are also increasingly focusing on designing even basic interiors and fixtures, such as air conditioning ducts, lightings, and even designer lavatory. . Some restaurants also offer separate or private dining rooms to create an atmosphere of exclusivity and promote intimate dining experience for their regular customers. However, the designer/restaurant owners must comply with the planning restrictions and fire safety norms while designing their places Tourism impact on restaurant business Growth in tourism industry has often reflected on the peripheral sub-sectors such as the hotel and restaurant business. Tourism not only promotes favoured destinations but is also a medium through which, culinary delicacies of a country is marketed. A surge in the tourism industry translates in earning more foreign exchange and gives a platform for cross-cultural linkages. This might prove to be an advantage for the restaurant owners in marketing their brand or cuisine globally. However, in order to earn higher profit margins, the owners should constantly innovate their products and services in congruence to cater to the foreign tourist arriving in the country/city (Faulk 2000). Works cited Robinson, Jancis, “Changes in the restaurant industry over the past 20 years,” Jancis Robinson, 5 October 2002, viewed 4 August 2008, . Kühn, Kerstin, “Experts predict strong growth for restaurant market,” Caterersearch, 05 June 2008, viewed 4 August 2008, < http://www.caterersearch.com/Articles/2008/06/05/321299/experts-predict-strong-growth-for-restaurant-market.html> “New Move To End Waiting For Tips,” Sky News, 31 July 2008, viewed 4 August 2008 Walton, Christopher, “Rising food costs herald the end of mid-market restaurant boom,” Caterersearch, 01 April 2008, viewed 4 August 2008 < http://www.caterersearch.com/Articles/2008/04/01/319963/rising-food-costs-herald-the-end-of-mid-market-restaurant.html> Walton, Christopher, “Experts predict rapid growth in casual dining,” Caterersearch, 24 April 2008, viewed 4 August 2008, < http://www.caterersearch.com/Articles/2008/04/24/320424/experts-predict-rapid-growth-in-casual-dining.html> London Chamber of commerce and industry, “The Impact of Congestion Charging on the Central London Restaurant Sector,” September 2004, pp. 5-7. “Despite 'golden age' of restaurant openings, its still a tough market, ” Caterersearch 23 August 2007, viewed 4 August 2008, < http://www.caterersearch.com/Articles/2007/08/23/315607/despite-golden-age-of-restaurant-openings-its-still-a-tough-market.html> “Industry data: Top 20 restaurant groups in 2007” Caterersearch 02 November 2007, viewed 4 August 2008 http://www.caterersearch.com/Articles/2007/11/02/55991/industry-data-top-20-restaurant-groups-in-2007.html “London restaurant goers hungry for change,” Sustain Web, 4 May 2007, viewed 4 August 2008 Greater London Authority, “Social Enterprises in London, A review of London Annual Business Survey,” October 2007, pp. 11-13. European Foundation for the Improvement of Living and Working Conditions, “EU hotel and restaurant sector: Work and employment conditions” 2004, pp.21. Faulk, Saskia “A survey of environmental management by hotels and related tourism businesses” , 2000, pp. 10-15. “Restaurants in London area charging fines for customers who fail to show, ” Caterersearch, 11 January 2007 , viewed 4 August 2008 “Experts predict rapid growth in casual dining” Caterersearch, 24 April 2008, viewed 4 August 2008 Read More