At a time when many other areas of business are struggling to maintain a profit, the food franchise industry in the UK continues to boom despite the economic downturn. The quick-service food industry in the UK is now worth an estimated £3.5billion, with franchises claiming a sizable stake of this. Paramount to this has been food franchising’s ability to resist (and in some instances even embrace) the threat of online purchasing which has corroded the profits of other forms of retailing. And although food franchises have felt the squeeze like everyone else, their adaptability and collusion with the twenty-first century lifestyle ensures that they remain a hit across the country.
Food franchising in Britain takes a number of guises. Such is the demand for healthier, organic options that this now constitutes a viable market in and of itself, a segment that food franchises have successfully tapped into. Holland & Barrett, the UK’s largest health food retailer, has gone from strength to strength over the last few years, with pre-tax profits increasing by 19.4% to £60million. Riverford Organic, a UK franchise specialising in the delivery of organic food, has seen its sales increase by 6% over the past year. Others have carved out smaller sections of this segment, which is widely predicted to grow into the future as more and more people take interest in the quality of the food they consume and the debate on the credentials (and possible dangers) of fast food remains centre stage.
Among the effects of this has been a recent resurgence in the UK sandwich market, with sandwiches widely perceived as a healthier alternative to fast food. The sandwich market in the UK is now worth more than three times that of pizza. This year saw Subway overtake McDonalds as the largest quick-service food chain in the world, and should this trend continue, investing in a sandwich franchise may yet prove prudent.
A revolutionary trend in British food franchising has been one that has impacted upon practically all areas of commerce; smartphones. The proliferation of intelligent cellular devices amongst the general populace has afforded food franchises with a new means to market themselves as well as a new platform by which customers can locate stores and even order food. According to research by Ofcom, 39% of British adults in 2012 own smartphones, compared to 27% in 2011, while research company mobile SQUARED estimates that there could be as many as 64 million smartphones in the UK by 2015. As a result, franchises such as McDonald’s, KFC and Pizza Hut have cultivated their own mobile apps enabling customers to locate their nearest outlet and in some cases incur discounts or even order food. The connectivity facilitated by such devices could have ground-breaking implications for how the customers of the future procure their food. McDonald’s have recognised this, and in 2012 began testing a system that would enable customers to purchase meals via PayPal, a move previously trialled by Starbucks in tandem with mobile payment company Square. Furthermore, within a year of launch, McDonald’s mobile app received over a million downloads in the UK, testifying to the potential mobile platforms offer for greater interface between franchise and consumer.
Pleasing the modern British consumer involves fulfilling a paradox of providing tasty, low-cost food that is also healthy. With the present economic downturn now approaching its fifth year, British consumers continue to feel the pinch, and this reduction in income has consequentially impacted on discretionary spend to the detriment of food outlets, with the industry growing at just 1.3% this year. Conversely, food franchises have benefitted from an increase in comfort eating fuelled by depressing times, as well as from consumers forced to trade-down from more expensive restaurants when eating out. This fact ultimately makes food franchising an industry capable of weathering the worst economic climate. Given that the food industry as a whole is expected to grow again with forecasted improvement in the economy, this would suggest that the years to come could be lucrative for food franchising in Britain.
At present however, despite the current optimistic outlook of the industry, the food franchising sector has identified a number of challenges that it continues to face. Chief among these has been competition from chain stores across the UK, which also offer low-cost eating options to consumers with the added benefit of consolidating a greater array of shopping choices into one area, incurring greater convenience. Despite the fact that chain stores are closing in record numbers – up to 30 every single day – the space occupied by chain stores in the UK has never been greater. This is due to the proliferation of fewer but increasingly larger stores, affording their shoppers the opportunity to avail of a plethora of eating options to the detriment of smaller, more dispersed food franchises. Furthermore, the number of convenience food stores in the UK is up by 5%, offering stiff competition to food franchises.
Another adversity is the spiralling cost of ingredients in recent times, fuelled by a number of factors including recent drought in the US devastating global corn stocks, causing various food stuffs which depend upon corn (including pig feed) to skyrocket in value. New EU regulations have caused the price of pork to rise by up to 10% over the last year, while animal rights legislation curtailing intensive farming practices have pushed up the price of eggs by 75%. Costs such as these ultimately trickle down to the consumer, who is forced to fork out a greater fee for food products. Last year for instance, McDonald’s was forced to raise prices by 3.5 – 4.5% due to the growing costs of raw ingredients such as beef.
Like all businesses during recession, food franchises are expected to guarantee greater quality with scarcer resources and lower funding. Given the hectic nature of modern life, twenty-first century Britons seek low-cost yet healthy food options from their franchises. It is this catch 22 that continues to drive innovation within the food franchising industry. Currently, it is estimated that one in four adults and one in five children in the UK are overweight. With obesity levels continuing to grow across the UK, combating this epidemic has become of paramount importance, and it is widely believed that the food franchise industry can have a big part to play in these efforts. To this end, food franchises in the UK – including the likes of Burger King and McDonald’s – have made a concentrated effort to try and reduce the fat and sugar content of at least some of their range. Growing numbers of food franchises have also sought to embellish the nutritional content of their produce and introduce more detailed nutritional labels for a more label-literate populace. Customer service is also critical, as Burger King has found with its attempts to improve customer satisfaction in the UK paying dividends.
Keeping the modern customer in mind is crucial for success in the world of British food franchising.
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