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How to open a restaurant successfully: the Wagamama phenomenon

Written by Rachel Ann Kreis ·

Since the aftermath of the financial crisis, the restaurant industry in the UK has undergone a period of growth. Some who have had the courage to open a restaurant over the past eight years have experienced steady increments of success as dining out continues to be quite commonplace. However, for the affordable dining segment, this lucky streak seems to be fading. According to a recent article from the Financial Times, casual dining restaurants are showing signs of distress with the increases of labour costs and falling consumer spending power. Restaurateurs and investors alike from the casual dining category are holding their breath as the 2018 scene unfolds. Well-known chains such as Jamie Oliver’s Italian PizzaExpress and Burger chain Byron both announced their entrance into “company voluntary agreements” to pay their creditors over an extended period of time as a means to avoid bankruptcy. What will become of them is still undetermined as the prospects of a CVA can go a variety of ways.

On the other side of the coin, there are some chains that are proving the statistics wrong such as the Japanese noodle chain, Wagamama, reporting increases in revenue despite Brexit skepticism. This company’s prominent achievements beg the question as to what this affordable dining restaurant chain is doing to promote growth and, more importantly, which key factors are guiding their successful expansion strategy during times of economic uncertainty. We cover the fundamentals behind their accomplishments in this article.

The location ingredient

As Lord Harold Samuel, real estate mogul, once said: location, location, location’ is one of the most vital components that can make or break a business. We were curious to discover the location factors fuelling Wagamama’s rapid expansion strategy, so we used Geoblink’s Location Intelligence platform to identify the common denominators between three locations in London.

It goes without saying that location is playing a serious role in Wagamama’s strategy. Just by evaluating the three restaurants with 10-minute catchment areas defined for each, we observed that all were located in neighbourhoods where footfall traffic is extremely high and the disposable income of people around is between £37,000 and £44,000. Surely, this was no coincidence.

open a restaurant

Pro tip: Notice how all of the Wagamama catchment areas of 10-minutes by foot overlap one another in this region? In some cases, this could indicate the cannibalisation of sales between different establishments in a chain and result in a loss of market share for each restaurant as a person walking in the overlapping parts of the catchment areas could choose either one. This is why it’s essential for restaurants to capitalise on the internal sales data collected on the customers who visit their establishments to truly understand the level of influence each of their catchment areas has to launch a restaurant successfully. Having data on nearby commercial activity and identifying competitors in a potential area are also key elements of the site planning phase to ensure your newly opened restaurant thrives.

A twist of tech into dining

With innovation at the core of the Wagamama brand, this restaurant chain has used technology to make the experience for customers both engaging and efficient. Customers use digital tablets to review the company’s one-of-a-kind dishes to determine if their intriguing combinations are an untapped discovery for the palette or a culinary mishap. The waiting staff also uses hand-held devices to key-in orders and make the process uberly efficient like their menu selection. In this sense, Wagamama has really upped the ante for the casual dining category.

Pro tip: Wagamama has found the right blend between digital and physical, using technology to promote operational fluidity and ultimately enhance the customer experience. However, the technological recipe that works for Wagamama does not mean it will work for someone else who wants to start a restaurant. Restaurateurs need to understand which technological aspects to integrate into their strategy and which ones to leave out — the literal interpretation to digital transformation is not the only option. There are many other tools out there on the market to boost operational success that take place behind the scenes but the final impact is still quite lucrative.

Capitalising on new trends

When vegan cuisine moved from fad to trend, Wagamama was ready. The chain was able to identify the pattern and capitalise on it quickly. Wagamama succinctly pinpointed an unmet need on the market as younger consumers began searching for more ethical food choices and experiences that were aligned not only with their tech savviness but also their values. The brand was able to infuse their creativity and culinary know-how to create vegan Pans-Asian dishes that specifically cater to this segment which won them the “best vegan curry of 2017” by the Peta foundation in the UK.

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Pro tip: Identifying new trends and eating habits is an important way for restaurant industry players to continue innovating by designing new dishes that attract and retain customers. This is why understanding both your current and potential clients is an essential part of being able to cater to different profiles and increase market share. Technologies that provide data on the changes in consumer behaviour can help guide restaurant brands in developing their product offerings and capitalise on trends that resonate with different customer segments.

Open a restaurant with Location Intelligence

While the restaurant industry in the UK may be considered somewhat of a wildcard for 2018, there are certainly ways to overcome the current situation. Professionals looking to open a restaurant or continue expanding their businesses in this market need to find viable ways to grow whilst also reducing the risk of a failed opening. With so many options available, consumers are currently spoilt by choice which means that restaurants need to be even more strategic in how they go about developing their businesses. Wagamama has been able to expand their brand by finding the right restaurant locations, boosting efficiency with technology and capitalising on new trends — three of the main benefits restaurateurs can also tap into with Location Intelligence. In this highly competitive market context, there really is no reason to wonder which external factors affect (or will affect) the performance of a restaurant. Would you want to gamble on the success of your next restaurant opening? With Location Intelligence, you do not have to.

Request a demo to learn which ingredients will help accelerate your expansion strategy and one of our consultants will be happy to show you.

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