A taste for changeInsights into the evolving restaurant and takeaway sector

3 Executivesummary

5 Dynamicsofachangingmarket

7 Cheaperdiningoptionsdrivingsectorgrowth

9 Demographicsshapingdininghabits

13 RegionalsalesshowNorth–Southdivide

15 Customersgetatastefororderingonline

17 Brandloyaltyontheslide

19 Wideninggapbetweenweekdayandweekendspending

20 HowBarclaysMarketandCustomerInsightscanhelp

21 Reporthighlights

22 Aboutthisreport

Contents

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Executive summaryOuranalysisofthediningchoicesandspendingofmorethan8millionBarclaysdebitcardandBarclaycardcustomersreflectwhatweareseeingupanddownthecountryinthisrapidlyevolvingmarket.

Thefindingsshowoverallsalesgrowthacrossthesectorof11.5%intheyearendingJune2018.Thishaslargelybeendrivenbythefastfood,takeawayanddeliverysectorattheexpenseoffullservicerestaurants,particularlyinthecasualdiningsub-sector.

Underlyingprofitability–orlackofit–maybeanentirelydifferentstoryand,asever,thesectorwouldbewelladvisedtoensureitdoesnotputthe‘vanity’ofturnoverbeforethe‘sanity’ofprofits.

Despitegrowthinsales,operatorsarefacinga‘perfectstorm’ofsignificantover-supply,subduedconsumerdemandandchallengingeconomicheadwinds,leadingtointensecompetitionandpressureonmargins,addingtothechallengesofrespondingtochangingconsumertastesandgreaterhealthawareness.

Thiswillnodoubtcontinueuntilthereisafundamentalmarketcorrection,whichmayinturncreateopportunitiesforsome.However,whilesupplymaybedecliningslowly,itisbynomeansfallingoffacliff,withthemajorityofrestaurantsthatcloseseeminglyreplacedbynewonesfairlyrapidly.

Overallsalesconcealkeytrends

Theheadlinegrowthtrendalsohideswidelyvaryingfortunesamongthetoprestaurantandfastfoodbrands,withsomeperformingfarbetterthanothers.Inpartthissimplyreflectsthehugevarietyofdiningoptions,fromincreasinglydiversetakeaways,toestablishedcasualdiningbrands,topremiumrestaurants.

Althoughalimitednumberofthesebrandshavemanagedtobuckthetrend,themarkethasbecomeaccustomedtoprofitwarningsandrestaurantclosuresfromsomeofitsbiggestnames.Infact,formostdiningoperators,itisprobablyfairtosaythatflatyear-on-yearsalesgrowthisseenasaprettyhealthyoutcomeinthecurrentenvironment.

Location,location,location

Alookatthedataunderlinesthecriticalimportanceoflocation,overandaboveevenqualityofsite.

WhilethehugeLondonmarkethassufferedasaresultofhigherbusinessratesontopofalreadysky-highrents,anumberofcitylocationsoutsideLondonhaveseenmuchstrongergrowth,albeitfromalowerbaseline.

SomecasualdiningchainsinparticularhavebeenverysuccessfulatrollingoutaprovenformulatosmallercitiesoutsideLondon.However,theexperienceofsomechainssuggeststhatcautionisrequiredtoensurethathavingtoomanyoutletsinthesamecitydoesn’tleadtoabrandcannibalisingitsownbusiness.

Theheadlinegrowthtrendalsohideswidelyvaryingfortunesamongthetoprestaurantandfastfoodbrands.

Anoverallsalesgrowthacrossthesectorinyear2of

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Driving customer value

Our findings indicate that customers are generally trading down, primarily from casual dining to fast-casual and fast food, with a strong trend towards dining more frequently but more cheaply.

Average transaction values (ATVs) have declined slightly overall. However, higher volumes of low-ATV fast food and takeaway transactions more than offset this, giving the lower end of the market the highest ‘customer value’ in real terms.

Age, too, is a significant factor. The Instagram generation of millennials has emerged as a key customer group, while showing low brand loyalty and being heavily influenced by promotions and discounting. Indeed, customers as a whole are dining with a broader range of brands, reflecting more adventurous tastes and the growing number of options available. This raises important questions about how brands continue to differentiate themselves and how they retain authenticity as they grow.

The performance of bars serving food reflects something of a renaissance in the wet-led market – albeit one that is heavily influenced by the weather and major events. A year that has seen the ‘Beast from the East’, followed by a Royal Wedding, the World Cup and the hottest summer on record has clearly had a very different impact on wet-led as opposed to dining-led brands.

Food delivery is also clearly growing in importance, fuelled by the popularity and convenience of a new generation of delivery apps that are also increasingly being embraced by higher-ATV ‘gourmet’ brands.

Harnessing the power of data insights

In the face of the trends highlighted in this report, it is more important than ever for the dining sector to truly understand its customers and be agile enough to react quickly to changing consumer preferences.

We have identified nine key customer segments in this report and look at how their varying spending patterns are transforming the way they dine out and, increasingly, dine in.

This is just one example of how Barclays Market and Customer Insights can help the sector gain a more detailed picture of its customers based on their actual spending behaviour. We have included examples throughout this report of how restaurant and bar operators can capitalise on the wealth of customer data we can provide.

Whether it’s identifying the most significant and dynamic trends in the market, using location-specific data at postcode level to inform your next outlet opening, or week-by-week transaction analysis to help you understand changing customer tastes and spending patterns, these are powerful insights based on hard transaction data to help you make informed decisions.

Philip Richardson Director Hospitality and Leisure Barclays Corporate Banking

Customers as a whole are dining with a broader range of brands, reflecting more adventurous tastes and the growing number of options available, which raises important questions about how brands continue to differentiate themselves.

Raj Pattni Head of Insights Platform Barclays UK

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Dynamics of a changing marketHighlights

• Stronggrowth,butmarketcompositionchanging

• Restaurantslosingmarketsharetofastfoodandtakeaways

• Customersshiftingtowardscheaperdiningoptions

• Averagecustomervaluehighestforfastfoodandbarsservingfood

Ouranalysisofcustomerspendingshowsstrongindustrygrowthoverall,butwidevariationacrossdifferentdiningcategories.

Totalsalesofrestaurantandtakeawaymealsgrewby11.5%intheyeartoJune2018.However,thestoryunderlyingthesector’soverallgrowthisoneofrapidchange.

Shiftingmarketshare

Ourtransactiondatashowsdemandforfastfoodandtakeawayssteadilyincreasingandoutperformingfullservicerestaurants,withoverallsalesgrowthof20.6%and7.2%respectively.

Whilerestaurantsstillclaimthelargestshareofthemarketat65.7%,thisrepresentsadecreaseof2.6%inmarketshareoverthelastyear.Bycontrast,fastfoodandtakeawaysaleshavegrown2.8timesfasterthanthefigureforrestaurants,resultinginmarketshareincreasingto34.3%.

Ouranalysisreflectsthechallengesthatsomefamiliarhouseholdbrandnameshavefacedasconsumertastesbecomemoreadventurous.Theperformanceofthetop

Year-on-yearsalesgrowth Fastfood&takeawayvsFullservice

Fastfood&takeaway

30%

25%

20%

15%

10%

5%

0%

Jul-17

Jan-18

Aug-17

Feb-18

Sep-17

Mar-

18

Oct-17

Apr-18

Nov-17

May

-18

Dec-17

Jun-18

-50% 0% 50% 100%Fullservicerestaurants

Marketshareinyear2Fastfood&takeawayvsFullservice

Salesgrowthvariation Top100brands

100restaurantandtakeawaybrandsasmeasuredbytotalsalesintheyeartoJune2018demonstratessignificantvariationunderlyingtheoverallindustrytrend.

Themajorityofthetop100brandssawsalesgrowthoverthepastyear,butthisrangedfrom66%forthetopperformer,toa42%declineinsalesattheotherendofthescale.Thisisperhapstobeexpected,giventhatanumberoflargerrestaurantchainshavefacedmorechallengingtradinginthefaceofexpensivepropertyoverheads,risingbusinessratesandweakerconsumerspending.

Month-on-monthsalesgrowthoverthepasttwoyearsshowsasimilarpatternforfastfood/takeawayscomparedtofullservicerestaurants.ThegapbetweenthemhasbeenfairlyconsistentuntilnarrowinginQ22018.

Fastfood&takeaway

34% 66%

Fullservicerestaurants

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Customervalueupforlowerprice-pointbrands

Someinterestingpatternsemergewhenwelookataveragecustomervalue(ACV)–totalsalesdividedbythenumberofdistinctcustomers.Consumersarespendingmorefrequentlyinlowprice-pointcategoriesastheyshifttowardscheaperdiningoptions.

Althoughfastfoodandtakeawayshavethelowestaveragetransactionvalue,thehighvolumeoftransactionsatthisendofthemarketgivesitthehighestaveragecustomervalue.

Theseincreasesmustbeconsideredagainstthebackdropofa3.7%declineinaveragetransactionvalueoverall,indicatingthatconsumersarechoosingtospendlessperpurchase.

Unsurprisingly,frequencyoftransactionsdeclinesasrestaurantprice-pointincreases.Consequently,premiumrestaurantsenjoythefewestaveragevisitspercustomercomparedtoallotherdininggroups.However,thisistheonlycategorytoexperienceadeclineinfrequencyofvisitsovertheperiodinouranalysis,withafallof2.7%.

Atthesametime,frequencypercustomerrosethemostforoutletsinlowerprice-pointrestaurantcategories.

Fastfoodandtakeawaysareoutperformingfullservicerestaurants.

Averagespendfrequencypercustomer

Averagecustomervaluebydiningcategory

Year1 Year1 Year1 Year1 Year1Year2 Year2 Year2 Year2 Year2

18

16

14

12

10

8

6

4

2

0Fastfood

&takeaway

15.3

7.86.3

5.3

2.1

16.5

9.0

6.55.4

2.0

£155.68 £166.44 £82.06 £160.10 £137.15£173.35 £172.98 £84.09 £155.20 £135.05

Barsservingfood

Fast-casualdiningrestaurants

Casualdiningrestaurants

Premiumrestaurants

Theconsumerhasbecomeincreasinglydiscerninginafiercelycompetitivemarket,butthoseoperatorswithadifferentiated,authentic,value-for-moneyexperiencewillcontinuetowinout.Pop-upsandstreetfoodoperatorsarereinvigoratingthesectorastheconsumertakesamoreexperientialandadventurousapproachtodiningout.

PhilipRichardsonDirector,HospitalityandLeisure,BarclaysCorporateBanking

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Fastfood&takeaway

Fastfood&takeaway

Barsservingfood

Barsservingfood

Fast-casualdiningrestaurants

Fast-casualdiningrestaurants

Casualdiningrestaurants

Casualdiningrestaurants

Premiumrestaurants

Premiumrestaurants

Cheaper dining options driving sector growthHighlights

• Salesandtransactionsupacrossalldiningcategories

• Affordablediningoptionsgrowingfasterthanhigheraveragetransactionvaluerestaurants

• Takeawaysandbarsservingfoodincreasingmarket shareandshareofwallet

Winnersinagrowingmarket

Ouranalysisoftransactionsacrossthevariousdiningcategoriesshowsthatsalesgrewacrossallcategoriesinyear2,withfastfoodandtakeaways,andbarsservingfoodthebiggestsuccessstoriesintermsofmarketshare.

Fastfoodandtakeawayshaveseena20.6%increaseinsalestocapture34.3%ofthemarket,anincreaseof2.6%,asconsumersoptforconvenienceandaffordability.

Averagetransactionvalueinthefastfoodsectorincreasedby3.2%,morethananyotherdiningcategory.Barsservingfoodgrabbed26.6%ofthemarket,withasignificantincreaseintotaltransactions,butsufferedthelargestfallinaveragetransactionvalue,down9.3%,indicatingthatcustomersmightvisitthemmoreoftenbutarespendinglesspervisit.

Fast-casualsalesgrowthwasinlinewiththeoverallmarket.Casualdiningsalesgrowthofjust1.4%toJune2018meansitssliceofthemarketwas2.5%lowerthanthepreviousyear.

Premiumrestaurantsweretheonlydiningcategorytoseeadeclineinfrequencyofvisits,down2.7%,whiletheirmarketshareremainedfairlystable.

Year-on-yearsalesandtransactions

Marketshareinyear2

20.6%

16.9%

3.2%

11.7%

23.1%

11.5%12.4%

-0.7%

1.4%

5.4% 6.0%4.7%

1.2%

34% 27% 10% 25%

-3.8%

-9.3%

4%

Salesgrowth Transactionsgrowth ATVgrowth

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Affordablediningprovingincreasinglyattractive

Ouranalysisclearlyshowsthataffordablediningoptionsaregrowingatafasterratethanmoreexpensiveones.

Theproportionforsalesinfast-casualandpremiumrestaurantsremainedstatic,butdeclinedby2.5%to24.8%forcasualdiningrestaurants.

Capturingshareofwallet

Shareofwalletrepresentsafurthersuccessstoryforfastfoodandtakeawaydining,whichclaimsthegreatestproportionat39.8%,anincreaseof0.8%onyear1.

Fortheotherdiningcategorieswalletshareremainedsteadyinthesameperiod,exceptforcasualdining,whichdecreasedby1.5%to23.8%.

Lookingforfurtherinsights?

Ouranalysisreflectsincreasingpressureonsomeestablishedbrandnames,particularlyinthecasualdiningmarket.

Asconsumertastesandexpectationschangeinanincreasinglydynamicsector,itisessentialthatexistingbusinessmodelsadapt.

OurMarketandCustomerInsightscanhelpyouto:

• assessyourbusinessperformanceagainst widermarkettrends

• identifywhereyourlapsedcustomersaredining

• evaluatethestrengthsandweaknessesofyourrestaurantorfastfoodnetwork

• gainadeeperunderstandingofyourcustomersandidentifypotentialnewopportunities.

Shareofwallet

Ouranalysisclearlyshowsthataffordablediningoptionsaregrowingatafasterratethanmoreexpensiveones.

Fastfood&takeaway

Year1shareofwallet

Year2shareofwallet

Barsservingfood

Fast-casualdiningrestaurants

Casualdiningrestaurants

Premiumrestaurants

39.0%

39.8%

23.1%

23.6%

10.2%

10.3%

25.3%

23.8%

2.4%

2.4%

NB:Walletshareonlyincludesdataofcustomerswhomadeatransactioninbothyear1andyear2.

MajorsocialorsportingeventssuchastheWorldCupandRoyalWedding,alongwiththeweather,continuetoinfluencebusinessperformanceinthesector.WarmerweatherhelpedpubsandbarsinJuneandJuly,whilethecoolerweatherinAugustsawthependulumswingbacktowardsrestaurants.

PhilipRichardsonDirector,HospitalityandLeisureBarclaysCorporateBanking

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Demographics shaping dining habitsHighlights

• Topthreecustomergroupsbysize:AffluentCentreStage,DynamicWorkforceandFamilyBackbone

• AffluentCentreStagespendsmostineverydiningcategory

• KeyInstaAppetitegroupseeingfastestgrowthinspending

Wehaveidentifiedninekeycustomersegmentsbasedondemographicprofileandspendinghabits.

Basedonsalesgrowthandoverallspending,thethreemostvaluablecustomersegmentsidentifiedbyouranalysisareInstaAppetite,AffluentCentreStageandEmergingEagles.

Fastfood&takeaway

Fast-casualdiningrestaurants

Premiumrestaurants

Barsservingfood

Casualdiningrestaurants

Consumersegments

Salesdistributionbycategory

25– 4925–4918–24 MidtoHigh

LowtoMid

LowtoMid

Nochildren

Nochildren

Nochildren

25– 49 LowtoMid

Youngchildren

Key differentiators• Incomeislikelytobe

subsidisedbystudentloansandfamily

• Low-value,buthigh-frequencyshopperswitheatingoutfrequencydoubletheaverage

• Spendpertransactionisthelowestat£12

Key differentiators• Lowerincomegroup

• Spendpertransactionislowat£13andfrequencyisbelowaverage

Key differentiators• Averagespenderswith

ATVat£15

• Highfrequencyof transactions

Key differentiators• Shoppingtendstofocus

oncheaperstores

• Averagetransactionvalueislowat£14,frequencyofspendoneatingoutisaverage

Family Backbone

Familiesontightbudgets

Prime Shoppers

Affluentadultswithhighvalueandfrequentspend

Dynamic Workforce

Youngadultswithnochildrenonlowincomes

Insta Appetite

Students,recentgraduatesandyoungadults

46%

19%13%

20%

3%

44%

22%

10%

21%

2%

35%

24%

12%

24%

5%

47%

20%

9%

22%

2%

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Consumersegments

Salesdistributionbycategory

Key differentiators• Thelargestsegmentby

customervolume

• Highestfrequencyshopperswithaveragespendper transactionat£17

Key differentiators• Lowfrequencywithaverage

ATVat£18

Key differentiators• Spendfrequencyisaverage,

butATVisoneofthehighestat£24

• ThisgroupislikelytoexpandwithageingpopulationintheUK

Key differentiators• Thelowestspendfrequency

withATVof£26

• AveragecustomervalueperannumishalfthatofQualityFanaticsandtransactionsarelessfrequent

Key differentiators• Wealthycustomersnearing

retirement

• ThehighestATVof£36,morethandoubletheaverageATV

• Thefrequencyofspendat10transactionsperyear

Quality Fanatics

Better-offretireeswhodon’tshopoften,butwhentheydo,

theyprioritisequalityandcanaffordtosplashoutor

treatfamily

Core Necessity

Low-to-mediumretirementfundsmeanthatthisgroup

ofolder,likelyretired,customersisonabudget

Rare Indulgence

Poorergroupwithlowincomeandlowspend

Emerging Eagles

Withgrown-upchildren,theyregaintheirsparetimefor

hobbies,travelandshopping

Affluent Centre Stage

Affluentfamilies

34%

25%

10%

26%

4%

26%

36%

8%

27%

3%

17%

37%

8%

31%

7%11%

51%

8%

28%

3%6% 6%

31%

6%

50%

65+ MidtoHigh

Somehavechildren

65+ LowtoMid

Somehavechildren

50–64 MidtoHigh

Somehavechildren

50–64 LowtoMid

Somehavechildren

25– 49 MidtoHigh

Youngchildren

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Keycustomergroupscallingtheshots

Ouranalysisofthebehaviourofthesedifferentcustomersegmentsshowsthattheirspendingvariesconsiderably,withyoungerandmoreaffluentcustomersdrivinggrowth.Thereareanumberofpointerstotheinfluenceofspendingpatternsamongrelativelytime-poorconsumers,busyfamiliesandmillennials.

IntermsofsizethetopthreecustomergroupsfortherestaurantandtakeawaysectorareAffluentCentreStage,DynamicWorkforceandFamilyBackbone.

Thegraphicoppositeshowstheinfluenceofeachofthesemarketsegmentsforeachdiningcategoryoncerelativesalesgrowthandthesizeofeachsegmentistakenintoaccount,asanindicationofkeyfuturegrowthopportunities.

AffluentCentreStageisbyfarthelargestgroup,comprising20%ofdiningcustomersinthepastyear,deliveringthehighestproportionofbothoverallsales(30.8%)andtransactions(28.5%)ofanygroup.

ThenextlargestgroupsareDynamicWorkforce,forming18.2%ofthecustomerbase,andFamilyBackbone,makingup12.5%andcontributingaverysignificantproportionofsalesandtransactions.

Affluentfamiliestakecentrestage

Therelativeimportanceofthedifferentcustomergroupstoeachdiningcategoryvariesquitesignificantly,buttheAffluentCentreStagesegmentisundeniablyakeysegmentacrossallcategories.Ithasspentmoreoverthepasttwoyearsthananyothersegmentineverydiningcategory.

Customersinlower-incomegroups–DynamicWorkforceandFamilyBackbone–spendrelativelymorethanothersinthefastfoodandtakeawaycategory,whiletheCoreNecessitiesandQualityFanaticsgroupsover-indexforbarsservingfoodcomparedtoothergroups.

Unsurprisingly,customersinmoreaffluentgroupssuchasEmergingEagles,AffluentCentreStageandPrimeShoppersarethestrongestspendersinpremiumrestaurants.

TheAffluentCentreStagesegmentspentmoreoverthepasttwoyearsthananyothersegmentineverydiningcategory.

PremiumrestaurantsFastfood&takeaway Fast-casualdiningrestaurants CasualdiningrestaurantsBarsservingfood

Top3segmentsforeachcategorywhenyear-on-yearsalesgrowthandsegmentsizearetakenintoaccount

40%

35%

30%

25%

20%

15%

10%

5%

0%InstaAppetite Dynamic

WorkforcePrime

ShoppersFamily

BackboneAffluent

CentreStageRare

IndulgenceEmerging

EaglesCore

NecessitiesQualityFanatics

Year2customerdemographicdistributionbydiningcategory

Fast food & takeaway

Full service

InstaAppetite1InstaAppetite 1

AffluentCentreStage2Affluent

CentreStage 2

EmergingEagles3Dynamic

Workforce 3

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InstaAppetitekeytogrowth

Lookingatthethreegroupsthataremostimportantineachdiningcategory–takingintoaccountbothsizeandyear-on-yearsalesgrowth–InstaAppetiteisclearlythenumberonesegment,driveninparticularbyitsenthusiasmforfastfood/takeawaysandbarsservingfood.

Salesgrowthof33.6%intheInstaAppetitesegmenthasresultedina2.8%increaseinthisgroup’sshareofsales,drivenbyfastfood/takeawaysandbarsservingfood.Thisgroupaccountsfor17.6%ofallsalesand23.5%ofalltransactions,significantlyhigherthanthesecondandthirdlargestgroups.

Viewedinthisway,AffluentCentreStagebecomesthesecondmostimportantgroupinalldiningcategories.EmergingEaglesformsthethirdmostimportantgroupforeverycategoryexceptfastfoodandtakeaways,andDynamicWorkforcetakesfourthposition.

Thebubblechartoppositeshowsthespendingpowerofeachsegment,asmeasuredbytheshareoftransactionsandsalesitmakesup.Therearethreedistinctgroupsofsegments,withlow,mediumandhighspendingpowerrespectively.Thesizeofthebubblesreflectstheshareofcustomersinthesegment.InstaAppetiteandAffluentCentreStagehavethehighestspendingpowercomparedtoallothersegments.

NB.ThischartshowstherelationshipbetweenTransactions(Y-Axis),Sales(X-Axis),andVolumeofCustomers(%)(BubbleSize).

InstaAppetiteisclearlythenumberonesegmentacrossallcategories.

Segmentsizeandcontributioninyear2

Lookingforfurtherinsights?

Ouranalysisshowstheimportanceofunderstandingyourlargestdininggroupsandtheirrespectivespendingpower.Analysisofthesechangingdemographicsegmentscanhelpyouidentifynewopportunitiesandplanforthefuture.

Ourinsightscanenableyouto:

• deepdiveintocustomers’diningbehaviourwithineachsegment

• evaluatethesizeforeachmarketsegment

• understandeachsegment’sshareofthewallet.

InstaAppetite

RareIndulgence

DynamicWorkforce

EmergingEagles

PrimeShoppers

CoreNecessities

FamilyBackbone

QualityFanatics

AffluentCentreStage

20.0%

12.0%

18.2%12.5%6.9%

8.7%4.8%5.6%

11.4%

5% 10% 15% 20% 25% 30% 35%

35%

30%

25%

20%

15%

10%

5%

0%

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Salesgrowth–regions

On-premisessalesgrowthoutsideLondon

Regional sales show North–South divideHighlights

• Salesgrowthinthecapital5.5%belownational average

• Lowerregionalvariationinonlinesalesgrowth

• Top5growthareasoutsideLondon

AnalysisofdiningtransactionsindicatessomethingofaNorth–Southdividewhenitcomestosalesgrowth,withfastergrowthintheNorth.

BasedonrestaurantlocationtheNorthsawa12.3%growthinsalesintheyeartoJune2018,comparedtojust5.8%intheSouth,whereitwas2.1%belowthenationalaverage.However,theSoutheasilyaccountsforthelargestshareofsalesat67.3%.

Thetopfiveareas–asmeasuredbyon-premisessalesgrowthandsalesproportionoutsideofLondon–istoppedbyManchesterat12.6%.

LowersalesgrowthintheSouthisprimarilydrivenbytheperformanceofthecapital’srestaurantandtakeawaymarket,particularlyincentralLondon,althoughthesefiguresdonotincludespendingbyoverseasvisitors.

Evenso,thecapitaleasilyclaimsthehighestproportionofsalesofallregions,standingat29.1%,withSouthEastEnglandcominginsecondhighestat16.6%.

Whileface-to-facetransactionsvaryconsiderablyacrossthecountry,acomparisonofregionalsalesgrowthforonlinedeliveryordersonly(basedoncustomerlocation)revealsfarlessregionalvariation,suggestingthattheoverallupturninonlinetransactionsislargelyunaffectedbylocation.

Manchester Cardiff Birmingham Newcastle Chelmsford

WestMidlands

EastMidlands

EastMidlands

London

EastofEngland

SouthWest

0% 5% 10% 15% 20% 25% 30%

13.6%

27.3%

11.5%

26.8%

24.2%

2.4%

On-premises Online

NB.Top5areasoutsideLondonselectedbasedonsales%inyear2.

12.6%

11.3% 11.2%

9.4% 9.3%

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Scotland

NorthEast

Wales

NorthernIreland NorthWest

YorkshireandTheHumber

EastMidlands

WestMidlands

EastofEngland

London

SouthEast

SouthWest

13.2%

On-premisessalesgrowthbyregioninyear2

Lookingforfurtherinsights?

Ourdatashowswidevariationinregionalsalesgrowth,withmanycitiesoutsidethecapitaloutperformingLondon.

Inadditiontointelligenceonpopulationtrends,knowingthelocalenvironmentinsideoutisclearlycriticalwhenmakingdecisionsaboutwheretoopenorcloseyournextrestaurant,barortakeawayoutlet.

Ourinsightscanhelpyouevaluatecustomerspending(subjecttoprivacyrules)downtopostcodesacrosstheUKandhelpyouto:

• identifylocationswiththemostpotentialfor growth

• compareexistingoutletperformanceagainst areatrends

• verifyyourexpansionordown-scalingplans.

11.9%

10.9%

22.6%

12.0%

12.6%

11.5%

13.6%

9.2%

2.4%

7.7%

9.8%

Over-supplyalignedwithhigherinputcostsiscausingpressureinthemarket.Thatsaid,thedemandforgoodlocationsremainsstrong–ourMarketandCustomerInsightsanalysishasbecomeincreasinglyimportantasoperatorsseektomakeinformeddecisionsontheirstrategicexpansionbasedonhardfacts.

PhilipRichardsonDirector,HospitalityandLeisureBarclaysCorporateBanking

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Customers get a taste for ordering online Highlights

• Onlineordersgrowingfasterthanface-to-face

• Averagespendhigheronline

• Oldercustomersaremorelikelytodineoutprimarilyatfullservicerestaurants

Ouranalysissuggeststhatdemandfortakeawaydeliveriesisontheriseasthewaveofnewdeliveryappsincreasestheconvenienceoforderingarangeoffoodtoeatathome,drawingcustomersawayfromeat-inrestaurants.

Whilethevastmajorityofsalescontinuetobemadeusingface-to-face,‘offline’transactionsatdine-inrestaurantsandtakeaways,peoplepayingfortakeawaysonlineviamobile

devicesisgrowingfaster.Theproportionofonlinesalesincreasedby2%inyear2.Thedevelopmentofeasy-to-useappsandwebsitesbymanypizzaandotherfastfoodchains,alongwiththeproliferationofonlinedirectoryservices,isclearlyhavingasubstantialimpactonthemarket.Thisisincreasinglybeingembracedbyhigher-ATVbrandsthroughpartnershipswiththedeliveryapps,althoughmanyfeartheresultingimpactonhigher-marginon-premisesalcoholsales.

Face-to-facepurchasesaccountfor83.5%oftotalspend,up8.9%year-on-yearwithanaveragetransactionvalueof£14.99.However,onlinetransactionsgrewby26.7%,withahigheraveragetransactionvalueof£21.10.Thissawtheiroverallshareofsalesincreaseto16.5%inyear2.

Theaveragenumberoftimesacustomermadeacontactlesstransactionhasincreasedby16.1%.Unsurprisingly,giventhecurrent£30limitonthispaymentmethod,thisisdisproportionatelyassociatedwithlowerprice-pointcategories.

TheseasonaltrendforonlinepurchasesshowssalesdeclininginJulyandAugustandpeakinginJanuary,perhapscorrelatingwithlowertakeawayconsumptionduringtheschoolsummerholidayperiodandconsumersreigninginspendingafterChristmas.

Easy-to-useappsandwebsitesbymanypizzaandotherfastfoodchainsareclearlyhavingasubstantialimpactonthemarket.

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Ageandincomekeytoonlinegrowth

Despitetheapparentgrowthinpopularityofhomedelivery,onlyaverysmallproportion,2.4%,ofcustomersusedonlyonlinetransactionsviatheinternetandoverthephone,whilethemajority,62.2%,boughtfoodwithface-to-facetransactionsonly.

Amongthe35.4%ofpeoplethatselectedbothdeliveryandon-premisesdiningoptionstheInstaAppetiteandAffluentCentreStagegroupsdominate.OldercustomersintheEmergingEagles,CoreNecessitiesandQualityFanaticsgroupsprefertraditional,fullservicedining.

Adaptingtothedemandforgreatervarietyandhigherquality‘gourmet’takeaways,andallowingcustomerstopurchaseconvenientlythroughtherightplatform,willclearlybecriticaltofuturegrowth.

Operatorswillnodoubtcontinuetobemindfuloftheimportanceofconsistencyofproductandthefactthattheeatingoutexperiencecanfundamentallyaffectthewillingnessofacustomertodinein.

Lookingforfurtherinsights?

Ouranalysisshowsthegrowingimportanceofonlinefooddeliveryinthemarket.

Understandingyourcustomers’channelpreferenceandhowtheyspendwithinthosechannelsisvitaltohelpyouinvestinthemosteffectiveomni-channelcustomerexperience.

Ourinsightscanprovideyouwithvaluableintelligenceon,forexample:

• yourcustomers’channelpreferencefordifferent foodcategories

• yourchannelgrowthperformanceagainst overallindustrytrends

• howyouronlinecustomersdineoutelsewhere.

Customerchannelselectioninyear2

%ofsalesovertimeinindustry

On-premisesonly

62.2%

Both

35.4%

Onlineonly

2.4%

Jul-16 Sep-16 Nov-16 Jan-16 Mar-16 May-16 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18

%Online %Cumulativeonline

20%

15%

10%

5%

0%

Thedeliverymodelisheretostay.Notonlydoestheconsumergetmoreconvenienceandchoice,itprovidesinnovativebusinesseswithanopportunitytoexpandintothesectorwithouttheusualset-upcostsassociatedwithopeningarestaurantonthehighstreet.

PhilipRichardsonDirector,HospitalityandLeisureBarclaysCorporateBanking

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Averagenumberofbrandspercustomerbycategory

Averagenumberofbrandspercustomerbysegment

Brand loyalty on the slideHighlights

• Customersdiningwithabroaderrangeofbrands

• Premiumrestaurantshavethegreatestbrandloyalty

• Brandloyaltygreaterinolderpeopleandlowincomegroups

• InstaAppetitegroupisleastbrandloyal

Accordingtoouranalysis,youngercustomers,strivingprofessionalsandaffluentfamiliesappeartobechoosingtospendtheirmoneyonagreatervarietyofrestaurantandtakeawaybrands,nodoubtreflectingmoreadventuroustastesandthegrowingvarietyofdiningoptionsavailable,suchastheincreaseinvegetarianchoices.

Thissuggeststhatconsumersaremorewillingtoexperimentbeyondtheircorego-todiningbrands,whichmayhaveimportantimplicationsforlargerbrandnamefranchisechainsinparticular.

Theaveragecustomerboughtfoodfromeightdiningbrandslastyear.Barsservingfoodwerethemostpopular,witheachcustomerbuyingfoodanddrinkfromanaverageoffourofthem.

Ingeneral,theaveragenumberofbrandspercustomerwashigherinlowprice-pointrestaurants,althoughitislowerinthefast-casualthanthecasualdiningcategory,whilepremiumrestaurantshavethegreatestbrandloyaltybythismeasure.

InstaAppetite DynamicWorkforce

PrimeShoppers

FamilyBackbone

AffluentCentreStage

RareIndulgence

EmergingEagles

CoreNecessities

QualityFanatics

11.9

13.3

6.2 6.1

11.8 11.3

6.6 6.8

10.8 11.2

3.7 3.8

6.2 6.6

2.9 2.94.2 4.3

Year 1

Year 2

Fast food & takeaway

Bars serving food

Fast-casual dining

restaurants

Casual dining restaurants

Premium restaurants

2.76 3.38 2.31 3.12 1.46

2.81 3.57 2.35 3.08 1.42

Year1 Year2

16

14

12

10

8

6

4

2

0

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Agefactor

Oldercustomersshowgreaterbrandloyalty,asdolowerincomeconsumersaged25–49.Meanwhile,high-incomecustomersinthe25–49age-bandareapparentlymuchlessbrandloyal.

TheInstaAppetite,PrimeShopperandAffluentCentreStagegroupsspendtheirmoneywithmorebrandsthantheindustryaverage.TheInstaAppetitesegmentappearstobetheleastbrandloyal,havingincreasedtheaveragenumberofbrandsitpurchasesfrombymorethan11.2%inthepastyear.

Operatorswillclearlyneedtoconsiderwhethertheyhavetherightmenus,pricing,customerserviceandambiencetodriveloyalty,aswellasembracingtheincreasinginfluenceofsocialmediainbuildingaloyalfollowing,encouragingrecommendationsanddealingwithcomplaints.

Lookingforfurtherinsights?

Itisimportantthatrestaurantandbarchainsplantheirpromotionsandrewardschemescarefully,todrivesaleswithouterodingmarginsunnecessarily.

Wecanprovideinsightsoncustomerloyaltyandtimingoftransactions,tohelpyouto:

• compareyourpromotionswithindustrynorms

• evaluatetheimpactofdifferenteventsandexplorethemosteffectivepromotionalopportunities

• evaluatecustomers’seasonalpreference

• matchyourpromotionstocustomeractivitybydayoftheweekandtimeofday.

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Highlights

• Proportionofweekendsalesincreasingslightly

• Weekdaysandweekendsbothshowsalesandtransactiongrowth

• Overallaveragetransactionvaluefallingforalldaysoftheweek

Adetailedlookatthetrendsforspendingandactivitylevelsbydayoftheweekthrowsupafewsurprises.

Unsurprisingly,Saturdaysbringinthehighestvolumeofsales,followedbyFridaysandSundays,butthegapbetweensalesatweekendsandweekdayshaswidenedinyear2.

Bothperiodsoftheweekshowedsalesgrowth,butweekendsalesincreasedby14%,whereasweekdaysaleswereupjust9.9%,perhapssuggestingthatsqueezedconsumersaremoreinclinedtosavetheirmoneyforaweekendtreat.

Intermsoftransactions,againweekendsshowgreatergrowthat19.4%against14%fortherestoftheweek,primarilythankstofastfoodandtakeawayweekendactivityincreasingbymorethanafifthandweekendtransactionsatbarsservingfoodgoingupby27.1%.Overall,theproportionofweekendsalesandtransactionsincreasedby0.9%year-on-yearto38.6%.

Aswouldbeexpected,averagetransactionvalueis25.7%higheratweekends,reaching£18.23,buttheaveragetransactionvaluetrendisdownwardyear-on-yearforbothweekends(4%)andweekdays(5%).

Widening gap between weekday and weekend spending Salesandtransactionsgrowth

Weekdays Weekends

SalesGrowth

TransactionsGrowth

9.9% 14.0%

14.0% 19.4%

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How Barclays Market and Customer Insights can helpTapintoawealthofspendingdata

Doesyourbusinessneedtotailoritsdiningofferingtolocalcustomerdemographics?

Doyouneedlocalareaperformanceanalyticstoinformyouroutletexpansionprogramme?

Areyoulookingtotweakyourseasonalpromotionstobringmorevisitstoyourrestaurantsbyunderstandingyourcustomers’diningbehaviour?

Getinsightsfor

Gainingmarketshare:

• Identifyhowtowinbacklapsedcustomers

• Evaluateyourkeytargetsegmentsandwheretofindthem

• Comparetheperformanceofyourmarketingcampaignsrelativetotheindustry

• Reviewwhetheryourrestaurantlayoutmeetstherequirementsofyourkeycustomersegments.

Managinggrowth:

• Identifythelocationsforyournewoutlets

• Evaluatecustomersegmentsdrivingyourgrowth

• Understandcustomers’diningpreferencetoinformyourrewardstrategy

• Findouttheshareofwalletofyourkey customersegments.

BarclaysMarketandCustomerInsightscanhelpfoodanddrinkoperatorsimprovetheirperformanceandidentifynewgrowthopportunitiesbygivingyouaccesstopowerfulanalysisbasedonbillionsofcustomerdebitandcreditcardtransactionsacrosstheUK.

What we offer Customisedonlinedashboard

Thedashboardcanbetailoredtoyourneedsandenablesyoutomonitortheperformanceofyourbusiness,marketpositionandcustomerbehaviouratanytime.

Consultancy

Youcanaccessadedicatedteamofanalystswhowillprovidecomprehensiveandin-depthinsightstoresolveyourspecificchallenges.

Ourinsightscangiveyouanin-depthunderstandingofconsumerspendingbehaviouronatimelybasis.Wecanhelpyoushapeyourbusinessstrategyandgiveyoutheintelligencetomakemoreinformedbusinessdecisions,basedonfacts,notmodels.

Ourservicesaredesignedtogiveyouinsightsatthefrequency,scaleandlevelofdetailyouneedtomeetyourspecificrequirements.

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• Strong growth across the sector but varying fortunes across dining categories

• Fast food and takeaways continue to outperform full service restaurants

• Lower price-point outlets driving growth as consumers shift to cheaper dining options

• Younger and more affluent customers key to growth

• Sales growing fastest outside London

• Deliveries driving 26.7% increase in online sales

• Brand loyalty down as customers opt for more variety

• Weekend sales increasing at faster pace than weekdays.

Report highlights

To find out more about how Barclays can support your business,please call 0800 015 4242* or visit barclayscorporate.com

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*Calls to 0800 numbers are free from UK land lines and personal mobiles, otherwise call charges may apply. Please check with your service provider. To maintain a quality service we may monitor or record phone calls.

About this reportThis report is based on two years of debit and credit card transactional data for Barclays customers only. The data represents all customers who made a transaction in the restaurant and takeaway sector between 1 July 2016 and 30 June 2018.

Data series

• Year 1 is defined as 1 Jul 2016 – 30 Jun 2017

• Year 2 is defined as 1 Jul 2017 – 30 Jun 2018.

Calendar months are used in this report, which could result in variations that are mainly due to seasonality and the number of Saturdays within a particular month.

Rounding has been used in some instances in this report so the data adds up to 100 +/- 1%.

The South is defined as London, South East (England), East of England and South West (England).

The North is defined as North West (England), West Midlands (England), East Midlands (England), Yorkshire & The Humber, Wales, North East (England), Scotland and Northern Ireland.

All insights are based on gross sales and transactions. Cash to card growth is not accounted for in this report.

Some sections in this report refer to top-100 brands only. In these cases, top-100 brands are defined by sales in year 2, exclusive of any outliers.

Data privacy

Barclays adheres to strict data protection regulations and all banking data used by our Market and Customer Insights team is anonymous. We do not share any data that can be used to identify any individual or business.

Data scope

The dining categories are defined using merchant category codes and Barclay’s categorisation engine – we have also further broken down the restaurant groups by brand price-point as measured by average transaction value (ATV):

• fast food and takeaway

• pubs serving food (could include alcohol-only transactions)

• fast-casual restaurants – ATV less than £20

• casual dining restaurants – ATV between £20 and £50

• premium restaurants – ATV above £50.

We also looked at the following high-level categories in this industry report:

• fast food and takeaway

• full service restaurants – including bars serving foodand restaurants.

We include the following breakdowns in this report for the channels in which the payment was processed:

• online – payments which are made through online andtelesales channels, the majority of which will be deliveries

• offline – transactions made on-premises.

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barclayscorporate.com @BarclaysCorp

Barclays Corporate Bankinginsights.uk.barclays

Barclays Bank PLC is registered in England (Company No. 1026167) with its registered office at 1 Churchill Place, London E14 5HP. Barclays Bank PLC is authorised by the Prudential Regulation Authority, and regulated by the Financial Conduct Authority (Financial Services Register No. 122702) and the Prudential Regulation Authority. Barclays is a trading name and trade mark of Barclays PLC and its subsidiaries. Item-Ref: AP414063. October 2018.