Location Intelligence’s recipe for restaurant expansion
Written by Ángela ·
Great-tasting, exquisite gourmet food, that is easy on pockets, never fails to attract the consumers of today’s world. People’s views towards food are changing constantly since they expect something unique, personalised, off the track, in everything they are involved.
With the rise of affordable gourmet food and especially gourmet hamburgers, the gastronomy industry is taking a good shape against the cliched food experience. On a statistical note, the Technavio’s analysts forecast the Global fast-casual dining market to grow by CAGR 10.71% during the period 2017-2021. Also, by 2030, the global food demand is expected to rise by 35%.
What are the global food trends?
Despite the numerous restaurants sprouting everywhere, what about the eating trends of the population worldwide? Are they constant? Food choices and eating habits have changed dramatically over the past fifty years. Consumers are expecting tasty, less-processed and healthy eats in tandem with the value and wholesome eating experience. This brings us to an understanding that customer engagement and adaptation is central to the Expansion Directors
How is this sector performing in the european markets?
Eating out is one of the most popular leisure activities in Europe, resulting in the booming food industry. Here are a few gastronomical statistics of the continent:
- The food & beverage industry is one of the major contributors to Europe’s economy ahead of the automobile industry
- The food & drink industry is one of the most important in Europe in terms of turnover (1 trillion), employment (4.25 million employees) and value (industry accounts for 285,000 SMEs that generate almost 50% of the value added)
- Germany, France, Italy, Spain, and the UK, are the largest EU food producers by turnover.
- Spain is the largest F&B market in Europe with the consumer spending on “eating out” reaching USD 133 billion (PPP) in 2016.
Food & Beverage trends in the UK
Recent reports have stated that people in the UK eat out more often contributing to the rapid growth of the restaurant industry. Significantly, the growth is supported by careful examination of the demographics and inevitable consumers preferences. Out of the overall contribution from the food sector to the UK’s growth, major market share comes from the chains that have grown the market to a greater extent by offering extensive, quality and affordable services. The restaurant industry, including both the service-led and fast food outlets, accumulated to the largest market share of 32.4 billion GBP in 2016.
A statistical slice from UK’s pizza
Delving into the UK’s pizza trends, in 2016, 4-million people used pizzas once a week or more (excluding the takeaways). It is an essential component not only at the restaurants but also in the supermarkets, and fast food chains. Out of all the versions, (chilled/frozen, restaurants, and takeaways), full-service pizza restaurants occupy a fat market share of 39%. They are considered to be the prominent players in the UK’s high streets. This is followed by the takeaway outlets (34%) and frozen pizzas (27%). Moreover, the overall market value of the pizza restaurant is £1271 million and over 90% of the outlets are chains. With such rich statistics, what makes a restaurant to expand?
The high popularity and demand lead to expansion
With such rich statistics, we can see the food business is only as important as ever. It is a business that is given a priority over other ideas. People either come up with an individual business or opt for a franchising endeavour. In both the cases, rolling out the restaurant in a suitable location is the focal point. What makes this business expand? (domestically and internationally). The expansion strategies can be attributed to many factors ranging from profitability, high demand to business development. Out of all the restaurant closures and commencements, 60% of them do not make it past the first year and 80% go under in 5 years.
The reasons for such failures could be inexperience in the field, sub-par food quality, poor customer service, etc. But will your restaurant be profitable if it is put in a location that has weak demographics and low visibility? The answer is head-on “no”. The location directly links to the success magnitude and profitability of your business.
That said, what goes into choosing the right location for any restaurant business?
- The top factor an expansion director looks in a new location is the number of footfalls. This is 100% true for a public targeted business where increasing the store’s visibility is the most direct approach to magnetise customers. Therefore, the location with high footfall density is given the top-most priority by the owners.
- Following this comes the competitors’ history (it is better to know your similar and diverse players, the menu they serve, etc.)
- Population and tourism densities are the prime factors that go into the decision-making process. Knowing who populates your desired location (average age, number of baby boomers vs millennials, disposable income and spending capabilities, transactionality, tastes and preferences, eating habits, i.e., more of fast or healthier food) fine-tunes an expansion plan.
- Tourist rich area is another component that can empower your business in a new location. For example, let’s see the percentage of foreign consumers spending on bars & restaurants in Madrid; It is deduced from Geoblink that in the municipality of Madrid the following countries contribute to the food industry: The United States of America (20.12%), France (12.07%), The United Kingdom (8%), Argentina (6%), and the rest of the world (48.60%).
By knowing the foreign consumers, one can design bespoke business and marketing strategies.
- Above all the factors, comparing the new location with your previous branch locations helps gain a better vision of your business performance.
With all the above components in context, choosing a suitable location is the foundation for success in this business, after which all other following aspects takes in a good stride.
Let’s take a real time example
How did the bigwig “PAPA JOHN’S” integrate Geoblink into its expansion strategies?
Coming in a simple yet powerful tagline “Better ingredients and Better pizzas”, Papa John’s is the USA’s third largest takeaway and delivery restaurant headquartered in Kentucky. It has a total of 4,700 establishments worldwide, with 3,500 in the United States and 1,200 spread across 37 countries. The UK currently has 320 restaurants.
The restaurant has full-on expansion plans in the pipeline with an extensive focus on socio-economic and demographic factors. With plentiful information about the next locations in hand, the popular chain finds it difficult to extract precise and valuable details required to roll out the expansion strategy. Moreover, they were particular in choosing specific ideal locations, underpinned with solid data, for their upcoming stores. Papa John’s then collaborated with Geoblink to spot the right location in tandem with better location management skills and reduced time-to-market. What went into the integration?
The “better ingredients, better pizzas” star spotted the ideal locations for its upcoming stores. It also sharpened the skills necessary to manage a location that is also home to its competitors. Here is an extensive yet crisp case study on how location analytics was served as an exclusive topping on this pizza chain: