Economic uncertainty and third-party delivery impact UK, US restaurants
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While large quick-service brands like McDonald's and KFC have enjoyed years of success across the world, the globalization of food preferences has helped smaller American brands find a home in countries outside the U.S. The U.K., for example, is just one area where some of those brands, including Slapfish, Wingstop and Which Wich, are just now making the trek across the pond.
Peter Backman compares the U.S. and U.K. foodservice markets during a presentation on restaurant trends.
A joint presentation on the U.S. and U.K. markets at the National Restaurant Show in Chicago examined the similarities and differences of the two markets. Certain trends, such as economic uncertainty and the growth of third-party food delivery services, are impacting both countries' foodservice industries.
Hudson Riehle, the National Restaurant Association's senior vice president of research and knowledge group, and Peter Backman, managing partner at Peter Backman FS, took turns at the podium during a session, "Bridging the Atlantic — U.S. and U.K. Restaurant Trends"
Third-party food delivery services
Third-party food delivery services are making headway in both the U.S. and U.K., but it's unclear how that will affect the industry.
"Who wins the customer — is it the deliverer or is it the restaurant operator?" Backman asked. "It's not clear yet."
A delivery service reduces the amount of real estate needed for a restaurant and improves operating efficiencies, Backman said. At the same time, it compromises customer contact and immediacy of service, factors which can adversely affect a brand's image.
One delivery trend to keep an eye on is drone meal delivery, said Riehle, who cited a U.S. consumer survey that found that two in five people would use a drone service.
Economic uncertainty caused by political developments also impacts both nations. Where the U.S. economy was unsettled by the presidential election, Brexit did the same thing for the U.K.
"Brexit is highly disruptive, but nobody knows how it will be disruptive," Backman said.
Many expect it will adversely impact the labor pool, since the immigrant workforce is expected to decline.
"We can expect a growthless future if consumer confidence falls," Backman said.
Despite some economic uncertainty caused by the presidential election, U.S. restaurant sales posted a 4.33 percent growth rate in the past year, which outperformed the 1.6 percent gross domestic product growth rate, the weakest since 2011, Riehle said.
"The restaurant industry has become an economic juggernaut," he said, adding that three of every five Americans have worked in a restaurant at some time in their lives.
Riehle nonetheless agreed that the U.S. restaurant industry faces consumer uncertainty about the economy. Most consumers rate the economy as fair or poor, a factor that adversely influences decisions to eat at restaurants.
The growth of casual dining
Another similarity in both markets is growth in casual dining.
"There's a substantial increase in casual dining over the last 15 years," Backman said. Innovation and food delivery in this sector will support further growth.
Challenges to casual dining include rising cost pressure and consumer uncertainty.
A key difference between the two countries is that in the U.K., global brands (American) brands dominate the quick service market, Backman said. American brands, of course, dominate in America. Also, burgers lead U.K. QSR concepts, although coffee shops are also growing. Health- oriented products are also expanding.
U.S. companies dominate the franchise organizations in the U.K., a trend that goes back to pre-1980 with McDonald's, KFC, Pizza Hutt and Taco Bell; followed in the 1980s by Subway, Domino's, TGI Fridays and Baskin Robbins; in the 1990s by Starbucks, Papa John's and Ben & Jerry; in the 2000s by Krispy Kreme; and in the present decade by Five Guys and Chipotle.
The U.K. offers one example of a market where American brands are establishing a global presence. As challenges and opportunities become more global in nature — such as third party delivery — there is every reason to believe that American brands will continue to establish a more global presence.
Want to learn more about the UK franchising market? Register here for the Restaurant Franchising & Innovation Summit, July 18-20 in London.
Elliot Maras is the editor of KioskMarketplace.com and FoodTruckOperator.com.