Author: Harri Jaaskelainen, 14 July 2017

Following on the heels of Ed’s Easy Diner, Handmade Burger Co. is another well-established, UK-based F&B operator that has fallen into administration in a space of just over six months. Whilst the industry has been talking about the F&B ‘bubble’ bursting for some time now, I was still surprised by the news that resulted in a loss of over 160 jobs as nine of the 29-strong restaurant portfolio closed their doors. The reason why I was so surprised was because only five months ago the operator made an announcement about its rapid expansion plans for the brand.   

burger

What could have been the contributing reasons for the fall of one of the early pioneers of the made-to-order burger restaurants in the UK that set up its first shop in Birmingham back in 2006? Ed’s demise was contributed to poor sales performance and over-expansion.

Since opening, Handmade Burger Co. has expanded steadily to cover the UK from Southampton all the way to Aberdeen, but in terms of total unit numbers, they are well behind the other two early pioneers of the burger revolution. GBK, founded in 2001, has over 70 units and Byron, founded in 2007, has some 65 units spread across the country. Given the considerable larger portfolio sizes of the two main competitors of roughly the same age serving essentially the same product, I do not think over-expansion is the issue here. However, I do think the main contributor to the business downturn is the stiff competition that the sector is facing, evidenced by Byron’s year-to-year sales growth that plummeted in 2016 amidst, and I quote, “growing competition”.

Indeed, following in the footsteps of the ‘big three’ specialist burger operators, the sector has been mushroomed with operators across the country over the last 10 years. What concerns me is that seemingly all of them provide ‘the best’, ‘the uncomplicated’ and ‘the honest food’. Surely if operators are to stick out from what is becoming an increasingly homogeneous sector of the F&B market they need to come up with something a bit more unique? Aside from dedicating a bit more thought to the marketing blurbs, what can burger operators do to future proof their businesses? 

Burger

One of the things that struck me when I was reading about Handmade Burger Co.’s bankruptcy was that most of the units that were closed were located in prime retail areas. This reflects a trend we see in the world of commercial retail i.e. the rising cost of prime pitches. Good for the owners of the real estate but increasingly financially challenging for retailers and F&B operators. Whilst F&B operators have no control over the rising food costs, the increases in minimum wages and business rates, or the number of competitors they need to compete against, they all have the freedom to decide where to locate their unit.

Secondary pitches, where unit rents are usually significantly lower than in prime pitches, can offer just as good a platform to create a successful business in the world of burgers. This is because, let’s face it, most of us, irrespective of geographical location or demographic profile, crave for a juicy burger every now and again despite all the hype around healthy food. To that end, you can count on the market, for what I would describe as the royalties of comfort food, is here to stay.

The F&B sector as a whole will undoubtedly be facing some strong headwinds in the months and years to come. In the face of this, a degree of anticipation and forward planning are essential components of success for operators and investors alike. From high street location planning to full-scale shopping centre F&B strategies, FSP works with both F&B operators and commercial retail investors to allow their businesses to take advantage of the fast-changing consumer trends whilst staying resilient to economic cycles. To hear how FSP can help your business achieve this, please email me at Harri@fspretail.com

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