fast-food & home-delivery outlets 2012

Market Report Plus 2012

26th Edition October 2012Edited by Leah Tutt

ISBN 978-1-84729-918-5

Fast-Food & Home-Delivery Outlets

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Fast-Food & Home-Delivery Outlets Foreword

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Contents

Executive Summary 1

1. Market Definition 2REPORT COVERAGE....................................................................................................................2MARKET SECTORS.......................................................................................................................2Sandwiches .....................................................................................................................................3Burgers ............................................................................................................................................3Pizza .................................................................................................................................................3Fish and Chips ................................................................................................................................3Chicken ............................................................................................................................................4Other Fast Food/Takeaway .........................................................................................................4MARKET TRENDS.........................................................................................................................4Economic Crisis...............................................................................................................................4Demand for Convenience ............................................................................................................4Innovation ......................................................................................................................................5Nutrition and Healthier Products...............................................................................................5ECONOMIC TRENDS....................................................................................................................6Table 1.1: UK Economic Trends (000, m, %, million and ), 2007 2011............................7MARKET POSITION......................................................................................................................9The UK..............................................................................................................................................9Table 1.2: The UK Fast-Food Market in Relation to Household Final ConsumptionExpenditure on Restaurants, Cafs, Canteens, etc. by Value (m and %),2007-2011........................................................................................................................................9Overseas...........................................................................................................................................9

Fast-Food & Home-Delivery Outlets Contents

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2. Market Size 11THE TOTAL MARKET................................................................................................................11Table 2.1: The Total UK Fast-Food, Takeaway and Home-Delivery Market by Sectorby Value at Current Prices (m at rsp), 2007-2011................................................................11Figure 2.1: The Total UK Fast-Food, Takeaway and Home-Delivery Market by SectorShare (%), 2011............................................................................................................................12BY MARKET SECTOR.................................................................................................................12Sandwiches ...................................................................................................................................12Table 2.2: The UK Sandwiches Sector by Value at Current Prices (m at rsp and %),2007-2011......................................................................................................................................13Burgers...........................................................................................................................................13Table 2.3: The UK Burgers Sector by Value at Current Prices(m at rsp and %), 2007-2011...................................................................................................14Pizza................................................................................................................................................14Table 2.4: The UK Pizza Sector by Value at Current Prices(m at rsp and %), 2007-2011...................................................................................................15Fish and Chips...............................................................................................................................15Table 2.5: The UK Fish and Chips Sector by Value at Current Prices(m at rsp and %), 2007-2011...................................................................................................16Chicken...........................................................................................................................................17Table 2.6: The UK Chicken Sector by Value at Current Prices(m at rsp and %), 2007-2011...................................................................................................17Other Fast-Food and Takeaway Outlets .................................................................................18Table 2.7: The UK Other Fast-Food and Takeaway Outlets Sector by Value at CurrentPrices (m at rsp and %), 2007-2011........................................................................................18

3. Industry Background 19RECENT HISTORY.......................................................................................................................19NUMBER OF COMPANIES.......................................................................................................19Table 3.1: Number of UK VAT- and/or PAYE-Based Enterprises Engaged asRestaurants, Cafs and Takeaways by Turnover Sizeband (000, number and %),2010 and 2011..............................................................................................................................20EMPLOYMENT............................................................................................................................20Table 3.2: Number of Employees in the Restaurant Industryin Great Britain (000), 2007-2011..............................................................................................21Table 3.3: Number of UK VAT- and/or PAYE-Based Enterprises Engaged asRestaurants, Cafs and Takeaways by Employment Sizeband (number and %), 2010and 2011........................................................................................................................................21


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REGIONAL VARIATIONS IN THE MARKETPLACE.............................................................22Table 3.4: Number of UK VAT- and/or PAYE-Based Enterprises Engaged asRestaurants, Cafs and Takeaways by Government Office Region (number and %),2011................................................................................................................................................23Table 3.5: Adults Who Have Eaten Takeaway Foods and Adults Who Have EatenFast Foods in Outlets in the Last 12 Months by Region (% of adults), 2012...................24DISTRIBUTION.............................................................................................................................24Table 3.6: Selected UK Fast-Food and Takeaway Chainsby Sector and Estimated Number of Outlets, 2011...............................................................25HOW ROBUST IS THE MARKET?...........................................................................................25Table 3.7: Number of UK VAT- and/or PAYE-Based Enterprises Engagedas Restaurants and Takeaways by Age of Business (number and %), 2011.....................26LEGISLATION...............................................................................................................................26KEY TRADE ASSOCIATIONS....................................................................................................27British Hospitality Association ..................................................................................................27Hotels, Restaurants and Cafs in Europe................................................................................27The Pizza, Pasta and Italian Food Association.......................................................................27

4. Competitor Analysis 28THE MARKETPLACE..................................................................................................................28MARKET LEADERS.....................................................................................................................28Burger King (UK) Ltd ..................................................................................................................28Dominos Pizza Group PLC.........................................................................................................30Greggs PLC.....................................................................................................................................31Kentucky Fried Chicken (GB) Ltd .............................................................................................32McDonalds Restaurants Ltd .....................................................................................................34Pizza Hut (UK) Ltd........................................................................................................................35Select Service Partner UK Ltd ...................................................................................................36Subway Realty Ltd ......................................................................................................................37Other Companies.........................................................................................................................38OUTSIDE SUPPLIERS..................................................................................................................39MARKETING ACTIVITY.............................................................................................................39Table 4.1: Main Media Advertising Expenditure by Fast-Food Chains (000), YearsEnding March 2008-2012............................................................................................................39Figure 4.1: Main Media Advertising Expenditure by Fast-Food Chains (000), YearEnding March 2012......................................................................................................................40


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5. Brand Strategy 41INTRODUCTION..........................................................................................................................41COMPANIES BRANDS..............................................................................................................41Burger King...................................................................................................................................41Dominos Pizza.............................................................................................................................42KFC..................................................................................................................................................42McDonalds ...................................................................................................................................43Pizza Hut........................................................................................................................................43Subway...........................................................................................................................................44MAIN MEDIA ADVERTISING EXPENDITURE .....................................................................44Table 5.1: Main Media Advertising Expenditureon Leading Fast-Food Brands (000 and %), Years EndingMarch 2011 and March 2012.....................................................................................................44

6. Strengths, Weaknesses, Opportunities and Threats 48STRENGTHS..................................................................................................................................48WEAKNESSES..............................................................................................................................48OPPORTUNITIES.........................................................................................................................49THREATS.......................................................................................................................................49

7. Buying Behaviour 51INTRODUCTION .........................................................................................................................51VALUE............................................................................................................................................51Table 7.1: Adults Who Agreed That Major Fast-Foodand Home-Delivery Outlets Offer Good Value for Money(% of adults), August 2012........................................................................................................52Table 7.2: Adults Who Agreed That They Tend to Eat Fast Food to Save MoneyDuring the Recession (% of adults), August 2012.................................................................55CONVENIENCE ...........................................................................................................................57Table 7.3: Adults Who Agreed That They Tend to Eat Fast Food and Takeawaysto Save Time and Effort (% of adults), August 2012............................................................58NUTRITION...................................................................................................................................61Table 7.4: Adults Who Think About Calories When They Order Fast Foodand Takeaways (% of adults), August 2012 ..........................................................................62Table 7.5: Adults Who Agreed That They Try to Avoid Fast Food and TakeawaysBecause They Consider Them Unhealthy (% of adults), August 2012..............................65Table 7.6: Adults Who Agreed That They Would Eat More Fast Food If There WereMore Healthy Options on the Menu (% of adults), August 2012......................................69


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Table 7.7: Adults Who Agreed That Fast-Food Restaurantsand Home-Delivery Outlets Now Offer Healthier OptionsThan 5 Years Ago (% of adults), August 2012.......................................................................72Table 7.8: Adults Who Consider the Food on Offer Better Quality than 5 Years Ago(% of adults), August 2012........................................................................................................75

8. Current Issues 78TECHNOLOGY ............................................................................................................................78Contactless Payments..................................................................................................................78Wi-Fi Access...................................................................................................................................78Social Media Advertising Campaigns.......................................................................................79Electronic Menu Boards and Other Digital Gadgets.............................................................80POLITICAL ISSUES .....................................................................................................................81Public Health Responsibility Deal ............................................................................................81Fast-food Employers Abandon Jobless Work Experience ...................................................81Pasty Tax .......................................................................................................................................82CORPORATE SOCIAL RESPONSIBILITY ...............................................................................82Social Causes ................................................................................................................................82Environmental and Animal Welfare Concerns ......................................................................83Ethical Sourcing and Supporting British Trade .....................................................................84CORPORATE ACTIVITY.............................................................................................................85Burger King (UK) Ltd...................................................................................................................85Dominos Pizza Group PLC ........................................................................................................85KFC (GB) Ltd..................................................................................................................................85Pizza Hut (UK) Ltd........................................................................................................................86Select Service Partner UK Ltd ...................................................................................................86

9. The Global Market 87INTRODUCTION..........................................................................................................................87GLOBAL CORPORATIONS........................................................................................................87McDonalds Corporation............................................................................................................87Table 9.1: McDonalds Corporation Number of Restaurants by Type, Years Ending31st December 2009-2011..........................................................................................................87Table 9.2: McDonalds Corporation Number of Restaurants by Region, YearsEnding 31st December 2009-2011............................................................................................88Table 9.3: McDonalds Corporation Revenues by Type ($m), Years Ending31st December 2009-2011..........................................................................................................89Yum! Brands Inc...........................................................................................................................89Table 9.4: Yum! Brands Inc Number of System Restaurantsby Type of Ownership, 2009-2011............................................................................................89Table 9.5: Number of Yum! Brands Inc System Restaurants by Brand, 2011...................90


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Table 9.6: Yum! Brands Inc Revenues by Companyand Franchised Sales ($m), 2009-2011.....................................................................................91Burger King Worldwide..............................................................................................................91Table 9.7: Burger King Holdings Inc Number of Restaurants by Type, Years Ending30th June 2009-2011...................................................................................................................92Table 9.8: Burger King Holdings Inc Revenues by Source ($m), Year Ending30th June 2009-2011...................................................................................................................93Table 9.9: Burger King Holdings Inc Revenues by Region ($m), Years Ending30th June 2009-2011...................................................................................................................93

10. Forecasts 94INTRODUCTION..........................................................................................................................94General Economic Forecasts......................................................................................................94Table 10.1: Economic Forecasts (000, % and million), 2012-2016......................................94FORECASTS 2012 TO 2016......................................................................................................95Table 10.2: The Forecast UK Fast-Food, Takeawayand Home-Delivery Market by Sector by Value at Current Prices(m at rsp), 2012-2016.................................................................................................................95Figure 10.1: The Forecast UK Fast-Food, Takeaway and Home-Delivery Marketby Sector by value at Current Prices (m at rsp), 2012-2016...............................................97MARKET GROWTH....................................................................................................................97Figure 10.2: Growth in the UK Fast-Food, Takeawayand Home-Delivery Market by Valye at Current Prices (m at rsp), 2007-2016..............98FUTURE TRENDS.........................................................................................................................98Social Media Campaigns.............................................................................................................98Exotic Flavours and Innovative Products.................................................................................99Healthier Options ........................................................................................................................99Greater Use of Quality Ingredients..........................................................................................99Value...............................................................................................................................................99

11. Company Profiles 100BURGER KING (UK) LTD.........................................................................................................101DOMINOS PIZZA GROUP PLC.............................................................................................103GREGGS PLC...............................................................................................................................105KENTUCKY FRIED CHICKEN (GB) LTD...............................................................................107MCDONALDS RESTAURANTS LTD.....................................................................................109PIZZA HUT (UK) LTD...............................................................................................................111SUBWAY REALTY LTD............................................................................................................113


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12. Company Financials 115

13. Further Sources 117Publications...............................................................................................................................117General Sources.......................................................................................................................118Government Publications ....................................................................................................119Other Sources...........................................................................................................................119Key Note Sources ....................................................................................................................120

Understanding Consumer Survey Data 122Number, Profile, Penetration..............................................................................................122Social Grade...............................................................................................................................123Standard Region......................................................................................................................123

Key Note Research 124

The Key Note Range of Reports 125


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The recession and the subsequentsqueeze on disposable income hasencouraged millions of families to cutback on spending on luxuries,especially on meals in restaurants. Thishas encouraged many to trade down tocheaper meals, especially burgers andfried chicken.

(The Telegraph, 15th January 2012)

Over the past few years, weveworked hard to open up our business,both online and offline. However,there are still lots of myths out thereabout McDonalds, and lots of thingsthat people simply dont know aboutus.

Alastair Macrow, Vice-President of Marketingat McDonalds UK

(Marketing Magazine, 15th May 2012)

A recent survey by the consumergroup Which? found that two out ofthree adults would like to see thecalorie information clearly displayedon all fast-food products.

(Pizza News, 22nd September 2011)

Increasingly, people are contactingbrands through Facebook and Twitterinstead of making a phone call.

Rick Maynard, KFC spokesperson(http://www.thedrum.co.uk, 21st February 2012)

Fast-Food & Home-Delivery Outlets

Key Note Ltd 2012

Executive SummaryThis Key Note Market Report Plus analyses the fast-food and home-deliveryindustry in the UK. Key Note calculates that the market grew by 6% in 2011.It divides the market into six principle categories by type of food: sandwiches,burgers, pizza, fish and chips, chicken, and other fast food or takeaway. Thesegment for sandwiches is the largest subsector and accounted for 31.3% ofthe market in 2011, followed by the burgers sector (23%). In 2011, the shareof the fish and chips sector stood at 10.5%, while the share of the pizza stoodat 11.6%. Although the smallest sector overall, chicken has undergone thefastest growth since 2007, increasing its market share by 0.4 percentage pointsto 7.3% of the market. The sector for other fast-food and takeaway outlets,which encompasses all other cuisines from sushi to kebabs increased by8.9% in 2011 to account for 16.3% of the market.There are three different types of enterprises that are active in the market:branded fast-food restaurants, independently owned businesses andtraditional takeaway outlets. The major chains in the UK are Greggs,McDonalds, Burger King, Subway, Dominos Pizza, Kentucky Fried Chicken(KFC) and Pizza Hut.In spite of the economic crisis, the overall fast-food and home-delivery industryhas remained resilient. The good value and convenience that this type ofrestaurant offers makes it popular among consumers in the UK. When eatingout, Britons are increasingly opting to eat more fast food. Its inexpensivenesshas been a key factor in this trend. Moreover, consumers lead increasinglyfast-paced lifestyles, and as a result, they are eating their meals on-the-go, aswell as looking for hassle-free solutions, which are prepared easily and quickly two defining traits of fast food and takeaways. These factors are giving thetotal industry an advantage over competitors. Moreover, an influx ininnovative flavours and healthier products in the market has helped to boostcompanies sales, by bringing new excitement to menus, offering more choiceto consumers than ever before and appealing to a broader consumer base.Still, the negative association between fast food and poor quality andunhealthy foods continues to plague the industry. Companies are oftencriticised and blamed for their contributory role to the obesity epidemic in theUK. As a result, chains are taking a proactive role to combat this image, bytaking part in the Governments Public Health Responsibility Deal, committingthemselves to social and environmental causes and placing calorie counts onmenu boards, as well as launching media campaigns that attempt to improvethe reputation of the industry.Key Note expects that the fast-food and home-delivery industry will continueto increase over the next 5 years. Value, flavour and the development ofhealthier fast-food products, as well as interactive social media campaigns, willbe at the core of future growth. The persistence of the economic crisis andconsumers hectic schedules will continue to drive demand in the fast-food andhome-delivery industry, which is expected to grow by 24.5% between 2012 and2016.

Fast-Food & Home-Delivery Outlets Executive Summary

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1. Market DefinitionREPORT COVERAGE

This Market Report Plus separates the fast-food and home-delivery industryinto the following categories: Branded fast-food restaurants these sell both hot and cold food that can

be eaten either in restaurants or taken away. Well-known fast-food chainsinclude McDonalds, Kentucky Fried Chicken (KFC) and Dominos Pizza.

Independently owned businesses companies that are classified under thisheading are cafs, takeaways, kiosks and counters that sell eat-in ortakeaway foods in conjunction with hot and cold beverages, with theexception of alcohol. Of the foods covered by the fast-food and home-delivery market, sandwiches are the primary products sold by thesebusinesses. These include paninis, baguettes and bagels. Other foodscommonly found in these types of outlets are muffins, cakes and doughnuts.Tea rooms and ice cream parlours fall into this category.

Traditional takeaway outlets fish and chips, Chinese and kebab shops arecommon in this category. The sector also includes venues that sell productssuch as sandwiches, pizza, chicken and jacket potatoes. Ethnic variety isabundant in the segment. Many of these businesses are independentoperations. Some of these restaurants also offer home-delivery services, butthose with eat-in areas are not covered in this report.

The industry is dominated by fast-food chains and independent takeawayoutlets. These can be found on the high street and in various other locations,including shopping malls, transport stations and terminals, leisure parks andpetrol stations. The businesses form part of the hospitality industry, a pillar inthe UKs economy.Small-scale catering units, such as motor vans, that can be found at festivalsand along roadsides are excluded from the analysis. It is important to note thatKey Note changed its definition of the market in 2010. Coffee shops andsandwich sales from retail outlets and chemists are no longer covered by thereport. Details on these can be found in Key Notes Coffee & Sandwich ShopsMarket Assessment.

MARKET SECTORS

Key Note classifies the fast-food and home-delivery market according to thetype of food primarily sold by companies in the industry. These are: sandwiches burgers

Fast-Food & Home-Delivery Outlets Market Definition

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pizza fish and chips chicken other fast food or takeaway.

SandwichesThe sector for sandwiches is the largest in the fast-food and home-deliveryindustry. An array of sandwiches make up the segment. Traditional variantsremain popular though innovative and original filling flavours, as well asalternative breads, are increasingly present in the section. The primarycompanies active in the category in the UK are Greggs and Subway. Sales inthe subsector are being driven by the demand for on-the-go products,including the rise of the on-the-go breakfast occasion.

BurgersBurgers are traditionally associated with US fast-food joints, particularlyMcDonalds and Burger King. Although the category is not the dominant sectorin the UK, the presence of the products is nevertheless important. Moreover,the market is actually saturated with burgers. As a result, companies areincreasingly giving traditional burgers innovative twists to remain competitive:offering various meats, introducing exciting flavours and adding differentbuns.

PizzaPizza is the most commonly delivered food in the fast-food and home-deliveryindustry in the UK. This feature caters well to the demand for convenience inthe UK, as consumers can now place orders online or via their mobiles whereverthey may be and have the pizza delivered straight to their home, making themealtime solution hassle-free. Moreover, innovation has boosted sales in thecategory. Companies are introducing lighter versions, premium pizza andinnovative crusts and flavours to maximise sales. Two major chains are activein the segment, Dominos Pizza and Pizza Hut, as well as a series ofindependent operators in towns and cities across the UK.

Fish and ChipsFish and chips is an iconic dish in the UK. Although a national symbol, the sectorhas struggled in recent times compared with other categories in the market.Independent businesses account for the majority of the segment. Thesecompanies are struggling to cope with the economic crisis and some are beingforced out of business. Moreover, not only do firms have to deal with risingoperational and production costs, but the issue of sustainability, which is nowat the core of the fishing industry, is putting an even greater strain on thesection.


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ChickenChicken is increasingly being used in the fast-food and home-delivery industryas a healthier alternative to red meat. KFC is the major chain that specialisesin the product, though other companies also use poultry for meals includingsalads, pizzas, sandwiches, burgers and wraps.

Other Fast Food/TakeawayThe other fast food/takeaway category covers a broad range of products fromdifferent ethnic backgrounds. This subsector is increasingly popular in the UK,as consumers are becoming more adventurous in their food choices. Chinese,Indian and kebab shops traditionally dominate the segment, but Mexican,Caribbean and Thai, among others, are gaining importance in the sector.

MARKET TRENDSEconomic Crisis

The fast-food and home-delivery industry is benefitting from the economiccrisis. The value it offers means that consumers are increasingly opting for thistype of restaurant when eating out, as an economical mealtime solution. On15th January 2012, in The Telegraph it was written that:

The recession, and the subsequent squeeze on disposableincome, has encouraged millions of families to cut back onspending on luxuries, especially on meals in restaurants. This hasencouraged many to trade down to cheaper meals, especiallyburgers and fried chicken.

Fast-food now makes up more than half of all meals eaten out of the home.The article quotes figures by the NPD Group, a market research company thattracks consumer spending, which found that, in 2011, 5.54 billion visits torestaurants were made to fast-food and takeaway chains out of a total 11billion. Thus, although consumers are eating out less frequently than prior tothe recession in 2008, when they do dine out, more and more are opting forfast food instead of other types of restaurants.

Demand for ConvenienceBritons are leading increasingly fast-paced lifestyles. With busier schedules,consumers have less time to prepare and eat meals from scratch. Not only dothey not have the time, but many do not want to put in the effort required inthe process, especially after a hard-working day. In addition, an increasingpercentage of the population is eating food on-the-go, instead of sitting downand having a proper meal, as they no longer have the time to do so.


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The fast-food and home-delivery industry is in a prime position to benefit fromthe rising demand for convenient meal solutions due to consumersincreasingly hectic lives. Not only do these restaurants offer good value, butconsumers hardly have to wait for the food to be ready. Moreover, they candecide whether to eat the meal in the venue or take it away. Furthermore,certain businesses offer delivery services, meaning that consumers can evenenjoy the food from the comfort of their home without having to put in anyeffort. This phenomenon is one of the primary reasons for the industrys successin the UK.

InnovationAlthough there is a strong demand for fast food and takeaways in the UK, themarket is saturated with products and restaurants. In order to differentiatethemselves, companies are increasingly resorting to innovation to maintaindynamism in the industry. Moreover, consumers are becoming more and moreadventurous when it comes to food and there is a growing demand for excitingand original flavours that tickle the palate in the industry in the UK. Examplesthat support this trend include Burger Kings Angus XT Ploughmans and lambburger and KFCs Reggae Reggae Box Meal. There has also been a surge inpremium products, such as Dominos Pizza Gourmet and Pizza Huts Poshranges. This innovation marks an attempt by chains not only to push the valueof the industry, but also to break away from the association of fast food withpoor quality. In addition, companies are trying to appeal to a broaderconsumer base by offering more variety on their menus. Healthier recipes arealso being developed, as explained below.

Nutrition and Healthier ProductsBritons are increasingly conscious of the importance of leading a healthylifestyle, both in terms of food and exercise, due to efforts by the media, theGovernment and organisations to raise awareness. In the process, the fast-foodindustry is often blamed for playing a contributory role in the obesity epidemicthat is affecting the nation. Food in the market is often fried and high in fat,salt and sugar. In response, companies are making a conscious effort to breakaway from this stereotype by limiting the number of calories in recipes, playingan active role in campaigns that promote healthier lifestyles and by stressingtheir achievements to consumers.Menu boards that display calorie content, salads and smoothies areincreasingly being found in fast-food restaurants, and the trend has been a keycomponent of innovation in the industry. McDonalds Deli Choices, Pizza HutsPizzetta range and Subways Low Fat Subs are all designed to offer consumersan alternative to traditional fast food. Companies are catering for consumersgrowing demand for healthier options by widening their product portfolio tooffer these types of products, which were not originally present in the market.


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The main chains in the industry have also signed up to the Governments PublicHealth Responsibility Deal. In addition to promoting exercise, such as BurgerKings Be Active campaign, companies are highlighting their participation inthe removal of unhealthy ingredients from the recipes. For example, on7th September 2011, Subway published a press release that described itscontribution to the healthier foods initiative. It removed artificial trans fatfrom all of its products in 2009, as well as making a conscious effort to reducesalt levels in its food. Furthermore, the company has signed up to theGovernments 2012 salt target. According to the article, Subway supports thedisplay of calories on menu boards across the UK. In addition, on5th March 2012, KFC announced its decision to stop using palm oil. This is notonly to improve its environmental impact, but also to ameliorate thenutritional content of its food by reducing the levels of saturated fats in theproducts. It plans to gradually replace it with rapeseed oil instead.Fast-food and home-delivery companies have been keen to emphasise theirachievements in the domain. For example, McDonalds has been stressing thefact that its innovative drink, Fruitizz, contains no added sugar, artificialcolours or flavours, and also contributes to one of childrens 5-a-day. SubwaysLondon 2012 advertisement features the number of calories per sandwich tohighlight how healthy they are. Pizza Huts website states, in text that standsout, that salad at the restaurant is free all day, every day. Businesses hope thatthis strategy will improve the reputation of the industry, as one which offersnot just value and convenience, but also good quality and nutritious products.

ECONOMIC TRENDSIn addition to market trends, economic factors affect the fast-food andhome-delivery industry in the UK. Table 1.1 summarises population levels andthe state of the economy over the past 5 years. Population, gross domesticproduct (GDP), inflation, unemployment and household disposable incomehelp to determine the state of the environment within which companiesoperate.The population in the UK is growing exponentially. Between 2007 and 2011,it increased by 2.9% to 62.7 million. The rise is due to a combination of bothimmigration and natural births. A growing population is favourable for thefast-food and home-delivery industry, as it augments its potential consumerbase. This is further boosted by the fact that the restaurants are considered tobe family friendly with family deals and meals, play areas and toys for children.The economic crisis struck the UK in 2008 at the start of the recession. In spiteof Government efforts, the downturn is persisting. In 2011, GDP growthslowed, inflation increased and unemployment deteriorated by 2% to 1.53million. Although household disposable income has risen year-on-year since2007, consumers are facing their biggest spending squeeze since 1982,according to a Retail Economics article published on 25th October 2011. This isdue to the simultaneous increase in food, living and energy costs in the UK.


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Table 1.1: UK Economic Trends (000, m, %, million and ),2007 2011

2007 2008 2009 2010 2011Resident PopulationEstimates (000)Mid-YearsFemale 31,068 31,244 31,418 31,619 31,833Male 29,918 30,154 30,374 30,643 30,902

Totalpopulation 60,986 61,398 61,792 62,262 62,735% changeyear-on-year - 0.7 0.6 0.8 0.8

Gross DomesticProduct (m)Current prices 1,412,119 1,440,931 1,401,863 1,466,569 1,516,153% changeyear-on-year - 2.0 -2.7 4.6 3.4

Annualchain-linked GDP 1,474,153 1,459,885 1,401,863 1,427,087 1,437,909% changeyear-on-year - -1.0 -4.0 1.8 0.8

Rate of Inflation (%)Inflation 4.3 4.0 -0.5 4.6 5.2Percentage pointchangeyear-on-year - -0.3 -4.5 5.1 0.6

Actual Number ofUnemployed Personsin the UK (million)Actual number ofclaimants 0.86 0.91 1.53 1.50 1.53% changeyear-on-year - 5.8 68.1 -2.0 2.0

Table continues...


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Table 1.1: UK Economic Trends (000, m, %, million and ),2007 2011

...table continued

2007 2008 2009 2010 2011Household DisposableIncome Per Capita ()Householddisposableincome 14,305 14,733 15,109 15,619 16,042% changeyear-on-year - 3.0 2.6 3.4 2.7% changeyear-on-year - 3.0 2.4 3.1 1.9

GDP gross domestic productNote: inflation is at retail price index (RPI); inflation data shown are annual averagechanges; claimant count measures the number of people claiming Jobseekers Allowance.

Source: Population Estimates for UK, England and Wales, Scotland and NorthernIreland Population Estimates Timeseries 1971 to Current Year, December 2011/National Population Projections, 2010-based projections/United KingdomEconomic Accounts, July 2012/Consumer Price Indices, July 2012/Labour MarketStatistics, August 2012, National Statistics website Crown copyright material isreproduced with the permission of the Controller of HMSO (and the QueensPrinter for Scotland)

Hard times and tightened consumer purse strings have actually benefitted thefast-food and home-delivery industry. The ability of the restaurants to offerBritons good value has boosted sales and profit for companies in the market.This trend is evidenced by the fact that there is a growing number of fast-foodand home-delivery venues in the UK. Still, the smaller businesses in the industryare more likely to be struggling with the tough climate and rising productionand operational costs. As a result, chains are increasing their presence in themarket, as they are better able to offer cheap deals and have the economicresources to weather the storm.


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MARKET POSITIONThe UK

The amount households spend on fast-food, takeaways and home-deliverymeals represents approximately 13.3% of their overall expenditure onrestaurants, cafs, canteens and other types of restaurants in the UK in 2011.The industry has increased its market share by 1.5 percentage points since 2007.These figures support the fact that Britons are increasingly opting to eat valuefast food when dining out during the economic crisis, as well as choosingtakeaways and home deliveries as convenient mealtime solutions, since theyare hassle-free.

Table 1.2: The UK Fast-Food Market in Relation to HouseholdFinal Consumption Expenditure on Restaurants, Cafs,

Canteens, etc. by Value (m and %), 2007-2011

2007 2008 2009 2010 2011

Household expenditureon restaurants, cafs,canteens, etc. (m) 73,003 73,991 70,778 75,363 77,577Total fast-food,takeaway andhome-delivery market(m) 8,592 8,925 9,263 9,702 10,283Fast-food, takeawayand home-deliverymarket as a % ofhousehold expenditureon restaurants, cafs,canteens, etc. 11.8 12.1 13.1 12.9 13.3

Note: figures are at current prices and are not seasonally adjusted.

Source: Consumer Trends Quarter 1 2012, National Statistics Crown copyrightmaterial is reproduced with the permission of the Controller of HMSO (and theQueens Printer for Scotland)/Key Note

OverseasThe US and the UK were the two original markets for the fast-food andhome-delivery industry. Although these markets remain important, they arebecoming saturated with products and venues. Moreover, competition in thesemarkets is intense.


Key Note Ltd 2012 9

However, fast-food and home-delivery chains are pinning their hopes forfuture growth on emerging economies, particularly the Peoples Republic ofChina (PRC), as well as Latin America, the Middle East and Eastern Europeregions, in addition to France and Germany in the West. The fast-expandingmiddle class in newly industrialised states is driving a demand for fast-food andtakeaways, as consumers want to spend their newfound wealth.In spite of a general global demand for fast food, companies still have tomodify their menus to suit local culture and preferences. For example, in Japan,McDonalds sells Ebi Filet-O, which is made with shrimps, lettuce and aThousand Island sauce in a steamed bun; while in Germany, the company sellsBig Rsti, a beef patty with a crispy potato pancake, bacon, cheese and cheesesauce in a bacon-and-cheese bun. In India, Taco Bell sells a Fajita and PaneerGrilled Stuffed Burrito that comes with paneer, beans, rice, fajita, vegetables,cheese sauce, salsa and cheese. In France, Dominos sells a Kebaba pizza, whichis inspired by kebabs and includes jalapeos, crme fraiche and garlic, as wellas a Savoyarde version that is made with crme fraiche , mozzarella, potatoesand Reblochon cheese.


Key Note Ltd 2012 10

2. Market SizeTHE TOTAL MARKET

Key Note calculates that the fast-food, takeaway and home-delivery market ispresently worth 10.28bn after growing by 6% in 2011. The industry hasexperienced year-on-year growth since 2007. Overall, its value has risen by19.7% over the covered period. Moreover, with the exception of 2009, whenthe rate slowed by 0.1 percentage points, its momentum increased as the yearswent by. All subsectors increased in value during the time period.

Table 2.1: The Total UK Fast-Food, Takeaway and Home-DeliveryMarket by Sector by Value at Current Prices (m at rsp),

2007-2011

2007 2008 2009 2010 2011

Sandwiches 2,678 2,800 2,903 3,045 3,217Burgers 2,015 2,065 2,140 2,230 2,368Pizza 1,020 1,055 1,090 1,124 1,192Fish and chips 989 1,015 1,040 1,061 1,077Chicken 590 625 660 700 749Other fast-food/takeaway outlets 1,300 1,365 1,430 1,542 1,680

Total 8,592 8,925 9,263 9,702 10,283% change year-on-year - 3.9 3.8 4.7 6.0

rsp retail selling prices

Source: Key Note

In spite of the economic crisis, the fast-food, takeaway and home-deliveryindustry has gained in value over the past 5 years. Furthermore, the market hasactually benefitted from the downturn. Tighter purse strings mean thatconsumers are opting for good value when eating out. This has given fast-foodrestaurants an advantage over other types of restaurants.

Fast-Food & Home-Delivery Outlets Market Size


According to a report by the British Hospitality Association (BHA) entitledBritish Hospitality: Trends & Developments 2011, the quick-service sector is thesole category to have experienced year-on-year growth since 2007. Consumersincreasingly hectic lifestyles has also worked to the industrys advantage, ascustomers opt for easy and hassle-free mealtime solutions by popping intofast-food joints and ordering takeaways and home deliveries. The market shareof the different sectors, as estimated by Key Note, is depicted in Figure 2.1,below.

Figure 2.1: The Total UK Fast-Food, Takeawayand Home-Delivery Market by Sector Share (%), 2011

Other fast-food/takeaway outlets

16.3%

Chicken 7.3%

Fish and chips 10.5%

Pizza 11.6%

Sandwiches 31.3%

Burgers 23.0%

Source: Key Note

BY MARKET SECTORSandwiches

The sandwiches sector is valued at 3.22bn after growing by 5.6% in 2011. Inspite of this growth, the segment lost 0.1 percentage points from its marketshare over the course of the year. Still, it remains 0.1 percentage points above2007 levels. Since 2007, the category has increased by 20.1%. Sandwichesrepresent the largest market share in the fast-food, takeaway andhome-delivery market, accounting for almost a third of the market (31.3%).



Table 2.2: The UK Sandwiches Sector by Value at Current Prices(m at rsp and %), 2007-2011

2007 2008 2009 2010 2011

Sandwiches 2,678 2,800 2,903 3,045 3,217% change year-on-year - 4.6 3.7 4.9 5.6

Share of total fast-food,takeaway andhome-delivery market(%) 31.2 31.4 31.3 31.4 31.3


Source: Key Note

Sandwiches are popular with consumers. They are convenient and can be eatenon-the-go. Moreover, the rise of premium sandwiches with exciting fillings andmade using alternative breads, such as wraps, has boosted sales in the category.Furthermore, sandwiches are perceived by consumers to be healthier thanother products in the industry, including burgers and pizza, and are thereforemore favourable among health-conscious consumers.However, cash-strained consumers are finding ways to save money during theeconomic crisis. As a result, an increasing proportion of consumers are optingto make their own sandwiches at home, instead of purchasing them fromoutlets. The effect of this trend is evident in the slight fall in the categorysoverall market share in 2011.

BurgersThe burgers category increased by 6.2% in 2011 to 2.37bn. Its growth rate hasgrown steadily every year since 2007, indicating the popularity of the sector.Nevertheless, its market share fell by 0.5 percentage points during the 5-yearperiod. Key Note accredits the growing presence of alternative meals for itsdecline. Products, such as Burger Kings Sweet Chilli Chicken Wrap and VeggieWrap, as well as McDonalds Deli Choices range, are eating into the marketshare of the burgers sector.



Table 2.3: The UK Burgers Sector by Value at Current Prices(m at rsp and %), 2007-2011

2007 2008 2009 2010 2011

Burgers 2,015 2,065 2,140 2,230 2,368% change year-on-year - 2.5 3.6 4.2 6.2

Share of total fast-food,takeaway andhome-delivery market (%) 23.5 23.1 23.1 23.0 23.0


Source: Key Note

Burgers presently account for 23% of the total fast-food, takeaway andhome-delivery market. McDonalds, alone, is responsible for roughly half theburgers market in the UK. The days of the ordinary burgers are over. Chainsare adding new ingredients or using replacements to differentiate theirburgers from competitors. Examples include The M at McDonalds, which hasingredients, such as Emmental cheese and a dressing, and is surrounded by astone-baked Ciabatta-style roll instead of a bun; as well as Burger Kings AngusXT Ploughmans, which comes with Irish cheddar and Red Leicester cheeses, inaddition to a sweet vegetable pickle, white onions, iceberg lettuce, tomatoand mayonnaise. These products additionally aim to add value to the category.

PizzaIn 2011, the pizza subsector rose by 6% to 1.19bn in the UK. Its growth ratenearly doubled compared to previous years. Since 2007, the category hasincreased its value by 16.9%. However, its market share has declined by 0.3percentage points. As with burgers, Key Note attributes this to consumersexpanding sensitivity to calories, fat and salt content in fast food. Still, itsgrowth rate demonstrates that the products remain popular.



Table 2.4: The UK Pizza Sector by Value at Current Prices(m at rsp and %), 2007-2011

2007 2008 2009 2010 2011

Pizza 1,020 1,055 1,090 1,124 1,192% change year-on-year - 3.4 3.3 3.1 6.0



Source: Key Note

With the financial strain of the economic crisis, pizzas are an economicalsolution for consumers, who are staying at home in an effort to save money.Whether they are relaxing or entertaining, consumers are ordering takeawayand home-delivery pizzas due to their convenience. Moreover, innovation inthe category and the introduction of healthier and premium versions hashelped to boost sales.In order to compete with chilled and frozen pizzas sold in supermarkets,companies are utilising online and smartphone ordering services. This givesconsumers the extra practicality of not having to take time out of their busyday to go to the store. Papa Johns allows customers to make orders via itsonline website, while Dominos has been at the forefront of applications(apps) in the fast-food, takeaway and home-delivery industry in the UK.

Fish and ChipsFish and chips is the sole sector whose growth rate slowed in 2011. Thecategorys value rose by 1.5% to 1.08bn. Moreover, its market share has fallenmore than any other sector in the market since 2007 by 1 percentage point.Still, its value has increased by 8.9% during the covered period.



Table 2.5: The UK Fish and Chips Sector by Value at CurrentPrices (m at rsp and %), 2007-2011

2007 2008 2009 2010 2011

Fish and chips 989 1,015 1,040 1,061 1,077% change year-on-year - 2.6 2.5 2.0 1.5

Share of total-fastfood, takeaway andhome-delivery market(%) 11.5 11.4 11.2 10.9 10.5


Source: Key Note

The fish and chips sector has suffered more than any other category in thefast-food, takeaway and home-delivery industry as a result of the economiccrisis. Fish and chip shops have always benefitted from consumers nights outin the UK. Following an evening of drinking, dancing and socialising, it iscommon to stop by the chippy on the way home for some food. However,consumers are now limiting the frequency of their outings and this has takenits toll on the sector. Moreover, many independent operators are present inthe category. These smaller companies do not have the financial resources tojuggle the downturn with rising operational costs and are being forced out ofbusiness.Overfishing and EU quotas are increasing the value of fish in general, drivingup fish and chips shop owners production costs. Sustainability has become akey issue in the fishing industry in the UK. In his plea to save fish and chips, HisRoyal Highness (HRH) the Prince of Wales is quoted in The Telegraph on8th May 2012 as saying:

The simple fact is that fish and chip shops rely on there beingplenty more fish in the sea, and that is only going to be the caseif we take care of fish stocks now and plan for them to be therelong into the future. If their businesses are to remain viable inthe long term, fisheries management, accompanied by soundscience, really matters to them too.

Although inevitable, sustainable fishing, however, is expensive and ishindering the sectors value.



ChickenKey Note estimates that the chicken sector grew by 7% to 749m in the UK in2011. This growth reflects the popularity of the product among consumers inthe UK. On 25th July 2012, the Daily Mail reported the findings of a studycommissioned by Food Network UK, which found that chicken was the nationsfavourite food after bacon. Moreover, the category has increased its marketshare by 0.4 percentage points since 2007, following year-on-year growth.Overall, its value increased by 26.9% during the 5-year period.

Table 2.6: The UK Chicken Sector by Value at Current Prices(m at rsp and %), 2007-2011

2007 2008 2009 2010 2011

Chicken 590 625 660 700 749% change year-on-year - 5.9 5.6 6.1 7.0



Source: Key Note

White meat is viewed as a better option compared to red meat in the UK, interms of both fat and potential health concerns. This phenomenon has resultedin an influx in chicken-based products in the fast-food, takeaway andhome-delivery market, as companies offer consumers alternative meals.Examples include McDonalds Chicken Legend and Burger Kings FlamedGrilled Chicken Salad. Furthermore, Pizza Huts new Pizzetta lighter rangefeatures Chicken Delight but no red meat variants. The same is true for its Poshrange.



Other Fast-Food and Takeaway OutletsAn array of restaurants are covered by the other fast-food and takeawayoutlets category. In 2011, the sector increased by 8.9% to 1.68bn. Since 2007,the segment has increased its market share by 1.2 percentage points, morethan any other sector in the industry. Consumers progressively adventurouspalates for exotic cuisines and spicy foods is behind the success of the sectionin the UK. Types of foods that are in demand include sushi, Thai, Caribbeanand Mexican meals. In addition, the rise of the breakfast occasion has alsoboosted sales. An increasing number of consumers are opting to eat breakfaston-the-go, as their hectic schedules mean that they no longer have time forleisurely breakfasts. Although they are limiting their spending due to theeconomic crisis, the demand for convenience has sustained sales in thecategory. Since 2007, the value of the other fast-food and takeaway outletssector has risen by 29.2%. The sector now accounts for 16.3% of the totalmarket.

Table 2.7: The UK Other Fast-Food and Takeaway Outlets Sectorby Value at Current Prices (m at rsp and %), 2007-2011

2007 2008 2009 2010 2011

Other fast-food/takeaway outlets 1,300 1,365 1,430 1,542 1,680% change year-on-year - 5.0 4.8 7.8 8.9



Source: Key Note



3. Industry BackgroundRECENT HISTORY

In spite of the economic crisis, the fast-food and home-delivery industry hasremained resilient in recent times. Moreover, it has actually benefitted fromthe downturn, as consumers are opting for good value over quality when theydine out. Furthermore, consumers lead increasingly hectic lifestyles and seekto buy convenient mealtime solutions, including fast food, when they arepressed for time or cannot be bothered to prepare and cook dinner.In addition, companies have been responding to consumers growing healthconcerns by introducing lighter versions and healthier menu options, includingsalads and wraps. Still, evidence shows that, although consumers are concernedabout calories and unnutritious ingredients, these factors only affectconsumers fast-food choices in a minority of cases. Chains are also launchingpremium ranges in order to boost sales and increase market value. These twotrends mark an attempt by the industry break away from the perception thatfast food is unhealthy and that products are made using poor qualityingredients.In spite of the industrys overall success, small and independent operators arestruggling to cope with the economic downturn. Fewer customers, fiercemarket competition and rising production and operational costs are forcingthese companies out of business. The size of these enterprises means that theyare unable to keep up with large businesses that dominate the market andwhich have the necessary resources to weather the storm by enhancing theirpresence in the UK, by offering consumers appealing deals and by engagingin marketing activity to promote their brands and products. As a result, theindustrys top companies Greggs, Subway, McDonalds, Kentucky FriedChicken (KFC), Pizza Hut, Dominos Pizza and Burger King are increasingtheir presence at the expense of smaller businesses in the market.

NUMBER OF COMPANIESIn 2011, there were 61,365 companies engaged as restaurants and takeawaysin the UK. This figure was down by 1% compared with 2010, reflecting toughmarket conditions, as a result of the economic crisis and fierce competitionwithin the industry. The majority of restaurants and takeaways earn between50,000 and 500,000 a year. The number of businesses with a turnover of50,000 or less declined by 13.5% in 2011. This reflects the fact that smallerrestaurants and takeaways are finding it difficult to survive the economic crisis.Still, the number of companies earning 1m or more increased by 2.1% overthe course of the year. This figure reveals the buoyancy of the industry andreinforces the fact that companies are actually benefitting from the crisis.

Fast-Food & Home-Delivery Outlets Industry Background


Table 3.1: Number of UK VAT- and/or PAYE-Based EnterprisesEngaged as Restaurants, Cafs and Takeaways by Turnover

Sizeband (000, number and %), 2010 and 2011

2010 2011 % of 2011 TotalTurnover Sizeband (000)0-49 3,185 2,755 4.550-99 19,650 19,250 31.4100-249 25,480 25,750 42.0250-499 8,165 8,150 13.3500-999 3,350 3,275 5.31,000-4,999 1,830 1,865 3.05,000+ 310 320 0.5

Total 61,970 61,365 100.0

Note: figures include licensed and unlicensed restaurants plus fast-food and takeawayoutlets.

Source: UK Business: Activity, Size and Location 2010 and 2011, National Statisticswebsite Crown copyright material is reproduced with the permission of theController of HMSO (and the Queens Printer for Scotland)

EMPLOYMENTThe number of workers employed in the restaurant industry in the UK hasfallen by 5.8% between 2007 and 2011. The figure grew until 2009, when itstalled and began to decline. In 2011, it fell by 6.2%, more than any other yearduring the time period. In total, 604,000 employees worked in the restaurantindustry in 2011.



Table 3.2: Number of Employees in the Restaurant Industryin Great Britain (000), 2007-2011

2007 2008 2009 2010 2011

Employees 641 660 662 644 604% changeyear-on-year - 3.0 0.3 -2.7 -6.2

Source: Employee Jobs by Industry, July 2012, National Statistics website Crowncopyright material is reproduced with the permission of the Controller of HMSO(and the Queens Printer for Scotland)

Key Note estimates that roughly one third of these workers were hired byfast-food companies. Based on their latest financial statements, the biggestemployers in the industry are McDonalds (39,296), Greggs (19,504) and PizzaHut (16,247). However, it is important to note that the workers covered bythese figures are solely the ones hired directly by the companies and excludesthose who work under franchises.Table 3.3 shows that the majority of enterprises engaged as restaurants andtakeaways employ 4 workers or fewer (59%). Few companies employ 50workers or more. This reflects the fact that businesses can boost profit bykeeping operational costs, including labour forces, low. Moreover, the numberof companies that employ 4 workers or fewer declined by 3.3% during thecourse of the year. This supports the fact that smaller enterprises are strugglingwithin the market. The employee sizebands that recorded the highest rise inthe number of restaurants and takeaways in 2011 were those which employed50 to 99 workers (9.2%), 250 or more workers (6.7%) and those whichemployed 5 to 9 workers (4%).

Table 3.3: Number of UK VAT- and/or PAYE-Based EnterprisesEngaged as Restaurants, Cafs and Takeaways by Employment

Sizeband (number and %), 2010 and 2011

2010 2011 % of 2011 TotalNumber of Employees0-4 37,415 36,180 59.05-9 15,315 15,925 26.010-19 5,955 5,970 9.7

Table continues...



Table 3.3: Number of UK VAT- and/or PAYE-Based EnterprisesEngaged as Restaurants, Cafs and Takeaways by Employment

Sizeband (number and %), 2010 and 2011...table continued

2010 2011 % of 2011 Total

20-49 2,405 2,375 3.950-99 490 535 0.9100-249 240 220 0.4250+ 150 160 0.3

Total 61,970 61,365 100.0

does not sum due to roundingNote: figures include licensed and unlicensed restaurants plus fast-food and takeawayoutlets.

Source: UK Business: Activity, Size and Location 2010 and 2011, National Statisticswebsite Crown copyright material is reproduced with the permission of theController of HMSO (and the Queens Printer for Scotland)

REGIONAL VARIATIONS IN THE MARKETPLACEThere are more restaurants and takeaways in London than any other region inthe UK, with the region accounting for 18.3% of such companies in 2011, theequivalent of 11,205 firms. This reflects the fact that more people live in themetropolis than elsewhere in the UK. After London, there are more businessesin the South East (13.3%), followed by the North West (9.6%). In 2011, theregions with the fewest restaurants and takeaways were Northern Ireland andthe North East, with these regions accounting for 3.4% and 3.5% of allenterprises involved in the industry in the UK, respectively.



Table 3.4: Number of UK VAT- and/or PAYE-Based EnterprisesEngaged as Restaurants, Cafs and Takeaways by Government

Office Region (number and %), 2011

2011 % of TotalGovernment Office RegionNorth East 2,120 3.5North West 5,900 9.6Yorkshire and Humberside 4,445 7.2East Midlands 3,585 5.8West Midlands 4,500 7.3East 5,380 8.8Greater London 11,205 18.3South East 8,175 13.3South West 5,595 9.1Wales 2,880 4.7Scotland 5,490 8.9Northern Ireland 2,090 3.4

Total 61,365 100.0

does not sum due to rounding at sourceNote: figures include licensed and unlicensed restaurants plus fast-food and takeawayoutlets.

Source: UK Business: Activity, Size and Location 2011, National Statistics website Crown copyright material is reproduced with the permission of the Controllerof HMSO (and the Queens Printer for Scotland)

Table 3.5 shows that the majority of adult consumers in the UK ate fast foodor takeaways in the 12 months ending March 2012. However, consumers in allregions are more likely to have eaten take-away foods than having eaten in afast-food restaurant during the time period. The difference between the twocategories is 24 percentage points. Those living in Greater London are morelikely to have purchased food in these outlets than other residents in the UK(80.1% and 60.4%, respectively), followed by those in East Anglia (79.4% and59.2%). Consumers who live in the North West are the least likely to have eatentakeaway and fast foods in the year to March 2012 (76.8% and 53.7%,respectively). Those in the West Midlands were the least likely to have eatenfast food in a restaurant during the same time period (49%).



Table 3.5: Adults Who Have Eaten Takeaway Foods and AdultsWho Have Eaten Fast Foods in Outlets in the Last 12 Months

by Region (% of adults), 2012

Takeaway Foods Fast Foods (Eat-In)

All adults 77.9 53.9

Scotland 77.4 54.1North West 76.8 53.7North 77.5 52.9Yorkshire Humberside 77.6 49.8East Midlands 78.7 54.0East Anglia 79.4 59.2South East 78.5 56.1Greater London 80.1 60.4South West 77.1 49.8Wales 74.2 49.2West Midlands 77.2 49.0

Source: Target Group Index (TGI) Kantar Media, Quarter 3 (April 2011-March2012) 2012

DISTRIBUTIONThere are more sandwich shops than any other type of fast-food and takeawayoutlet in the UK. Moreover, in 2011, Greggs overtook Subway in terms ofvenues. It now owns 1,600 bakeries across the UK, 200 more premises than itscompetitor. Burger King trails behind McDonalds when it comes to restaurantcount in the UK. There are more than twice as many McDonalds outlets thanthose of Burger Kings.Although the company has struggled in recent times, there are still more PizzaHuts than any other pizza restaurant in the UK. Still, Dominos Pizza narrowedthe gap between the companies over the course of 2011 and is likely to surpassits rival in 2012. The number of Pizza Perfect venues has declined by 37.5%during the equivalent period, further demonstrating the difficulties beingexperienced by smaller companies in the industry in the UK. With Subway, it isthe only major chain to have declined in terms of the number of venues in 2011.



Table 3.6: Selected UK Fast-Food and Takeaway Chainsby Sector and Estimated Number of Outlets, 2011

Number of OutletsSandwichesGreggs 1,600Subway 1,400

BurgersMcDonalds 1,200Burger King 500

PizzaPizza Hut 700Dominos Pizza 690Papa Johns 120Perfect Pizza 80

ChickenKFC 800

includes the Republic of IrelandKFC Kentucky Fried Chicken

Source: Key Note

HOW ROBUST IS THE MARKET?The majority of restaurants and takeaways are well-established in the UK. Notonly are chains recognised nationwide, but Table 3.7 shows that the majorityof companies are 4 years old or more (64.3%), resulting in strong foundationsin the industry. Restaurants and takeaways presently account for 2.9% of allbusinesses in the UK.



Table 3.7: Number of UK VAT- and/or PAYE-Based EnterprisesEngaged as Restaurants and Takeaways by Age of Business

(number and %), 2011

Number ofOutlets % of Total

% of AllIndustries

Less than 2 years 11,585 18.9 3.82 to 3 years 10,300 16.8 3.84 to 9 years 21,190 34.5 3.710 or more years 18,290 29.8 2.0

Total 61,365 100.0 2.9

Note: figures include licensed and unlicensed restaurants plus fast-food and takeawayoutlets.

Source: UK Business: Activity, Size and Location 2011, National Statistics website Crown copyright material is reproduced with the permission of the Controllerof HMSO (and the Queens Printer for Scotland)

The fast-food and home deliveries market is robust. In spite of health concernsassociated with the industry, demand and sales remain strong. The industry hascontinued to grow in spite of the economic crisis, demonstrating its strongroots and resilience. Moreover, in spite of the downturn, entrepreneurs havecontinued to invest in the market, as this type of business accounts for a largerpercentage of all enterprises that are 3 years old and under in the UK than theindustrys overall average in the economy. This means that companies haverecently opened restaurants and takeaways, demonstrating their faith in theindustry for now and in the future.

LEGISLATIONCompanies in the fast-food and home-delivery industry must abide by anumber of laws in the UK that regulate different issues, including health andsafety, product quality and employment laws. The primary document is theFood Safety Act 1990, which holds companies responsible if their products areinjurious to consumers health. It additionally states that it is illegal toinaccurately describe or present food that misleads consumers in terms of thenature, substance and quality of food.



In 2012, the Government amended the Food Hygiene Regulations (England)2006, with effect from 30th July 2012. The law was updated to comply witharticle 9 of Regulation (EC) No. 178/2002, which lays down procedures inmatters of food safety. Other laws that apply to the industry include EUWorking Time Directive; National Minimum Wage; Immigration, Asylum andNationality Act 2006; and Waste Controls (England and Wales) Regulation2009. These aim to protect both customers and employees by detailing specificrequirements and holding companies accountable, as well as providing aframework for businesses to follow.

KEY TRADE ASSOCIATIONSBritish Hospitality Association

The British Hospitality Association (BHA) is the leading representativeorganisation in the hospitality industry in the UK. Members include fast-foodand home-delivery companies, as well as hotels, foodservice providers andother types of restaurants. The Association acts on behalf of the industry anddeals with the Government, as well as other associations and organisations. In2010, the BHA identified five key issues at its core: economy, employment,intelligent regulation, sustainability and health.

Hotels, Restaurants and Cafs in EuropeHotels, Restaurants and Cafs in Europe (HOTREC) is an umbrella associationthat unites national trade associations in the hospitality industry within the EU.HOTREC speaks and acts on behalf of the overall business vis--vis the EUinstitutions. It is registered under Belgian law as a non-profit organisation.According to its website, its primary objectives are: the promotion and defenceof the interests of the hospitality industry towards the EU institutions and theenhancement of the cooperation between the national hospitalityassociations. Its main task is to monitor and analyse the effect of policydevelopment, at EU level, on the hospitality industry within the community.

The Pizza, Pasta and Italian Food AssociationThe Pizza, Pasta and Italian Food Association (PAPA) is the only formal tradebody that represents the general pizza, pasta and Italian food and drinkindustry in the UK. It undertakes various commercial activities on behalf of itsmembers under the name J&M Group Ltd. This company is solely liable for themanagement and financial administration of the business. In addition, PAPAoffers its members specialist advice based on their particular problems andorganises support activities to boost their businesses. Finally, it keeps membersinformed about changes in legislation and other issues that could potentiallyaffect the industry.



4. Competitor AnalysisTHE MARKETPLACE

The fast-foods and home-delivery industry is highly competitive. It isdominated by chains, although independent operators do exist. The latter havestruggled in recent times as a result of the economic crisis, rising commodityprices and pressure from other companies in the market. Still, overall, theindustry has remained resilient as restaurants offer good value forcash-strapped consumers.The market can be separated into three principle categories: multinational brand and outlet operators, e.g. Burger King, Kentucky Fried

Chicken (KFC) and Pizza Hut national brand and outlet operators, such as Greggs small local brands or unbranded operators, including fish and chips shops.Subway is the biggest fast-food and home-delivery franchise in the UK,followed by McDonalds. It operates roughly 1,400 outlets across the country.Most chains in the fast-food and home-delivery industry operate using thefranchise system.

MARKET LEADERSBurger King (UK) LtdCompany Structure

Burger King Ltd is the UK subsidiary of the global fast-food chain Burger KingWorldwide. The US enterprise was founded in 1953 under the nameInsta-Burger King. In 2010, the Burger King franchise was purchased for$3.26bn (2.1bn) by 3G Capital, a private-equity firm backed by three of Brazilsleading businessmen. In June 2012, the company merged with Justice HoldingsLtd, a London investment firm, in order to create a single Delaware-basedholding company following a deal made that April. The business is trading onthe New York Stock Exchange (NYSE) under the name Burger King Worldwide.The fast-food chain is most famous for its Whopper burger.Overall, Burger King has approximately 12,700 restaurants dispersed across 73countries. The majority of these are privately owned and operate undercompany licences through franchise agreements. The first Burger King in theUK was opened in Coventry Street, London, in 1977. With over 500 outlets, itis the UKs second-largest burger brand after McDonalds.

Fast-Food & Home-Delivery Outlets Competitor Analysis


Current and Future DevelopmentsIn March 2012, the fast-food chain debuted Lamb Flatbread burgers in the UK,for a limited time only, to coincide with Easter. The burgers were served on arosemary flatbread and topped with spices, salad, chilli ketchup and mintyoghurt sauce. The launch was supported by a marketing campaign with theslogan Hungry like the wolf?. In its press release, Burger King Ltds MarketingDirector UK, Jo Blundell, commented:

The launch of the Lamb Flatbread is a really exciting momentfor the Burger King Ltd brand. Not only does this prove that weare continuously leading the way when it comes to productinnovation, it also underscores our commitment to premiumand fresh food.

In April 2012, Burger King introduced a new customer feedback tool in 489outlets in the UK. Guest Trac was developed by customer insight agency SMGand assesses food quality, cleanliness and speed of service. Consumers wereasked to follow the instructions printed on the back of their Burger Kingreceipts and fill out a web-based survey. They were given free fries and drinksfor their participation. This reflects the companys commitment toameliorating customer experience in an attempt to revive the fast-food chainand increase sales.To celebrate the Queens Diamond Jubilee, Burger King rolled out itsCoronation Chicken Royale on 1st June 2012. The product consists of a 100%chicken breast coated and cooked in crumbs in a toasted sesame-seeded bunand is a variation of the Burger King classic. It comes with iceberg lettuce andis topped with a curry-style sauce. The addition is a first of a series for itstemporary British-inspired summer menu that seeks to capitalise on the UKsmajor events during the season. Other additions include a fish finger sandwich,ploughmans burger, and jelly and ice cream. The menu is called Summer isServed.In June, Burger King began introducing Cokes Freestyle drink dispensingsystem to selected restaurants in the UK, following an endorsement inDecember. The touch-screen machines allow consumers to select one ofCoca-Colas soft drink brands, such as Sprite or Fanta, and mix it with an arrayof new flavours including cherry, vanilla, raspberry and peach. They weredesigned in collaboration with the Italian automotive company Pininfarina andhave already proven successful in the US. Their introduction in Burger Kingoutlets is a trial run and will test consumer reaction to the innovation in theUK.

Financial ResultsBurger King (UK) Ltd has been struggling to cope with falling sales in recenttimes. In its latest financial report, covering the year ending 30th June 2010,the company reported a decline in sales of 17.5% to 7.1m. Since 2007, thisfigure has shrunk by 26.8%. Profit dropped by 15.9% during the equivalentperiod. In 2010, however, it rose by 20.9% to 491m. It is important to notethat only restaurants run directly by the company (roughly 10% of outlets) arecovered by these figures, due to the nature of Burger Kings franchising system.



On 1st August 2012, Burger King Corporation published a press releasereporting a total rise in adjusted earnings before interest, taxes, depreciationand amortization (EBITDA) of 29% to $585m for the year ending31st December 2011.

Dominos Pizza Group PLCCompany Structure

Dominos Pizza UK & Ireland Ltd changed its name to Dominos Pizza GroupPLC on 1st May 2012. The business consists of restaurants in the UK and theRepublic of Ireland and, since April 2011, Germanys 6 outlets. As of25th March 2012, Dominos Pizza had 732 stores in the three countriescombined. The company is listed on the London Stock Exchange (LSE).Dominos Pizza Group PLC is part of Dominos Pizza, Incorporated, a globalenterprise that is headquartered in Ann Arbor, Michigan, in the US. Theoriginal Dominos Pizza was established in 1960 and is now made up of morethan 9,700 corporate and franchised restaurants in 70 countries.The first Dominos Pizza in the UK was opened in 1985 in Luton. It has grownto become the leading pizza home-delivery and takeaway company in thecountry. Over 90% of its restaurants in the UK are franchised. Dominos Pizzaemploys more than 21,000 workers in both the UK and the Republic of Ireland.

Current and Future DevelopmentsAs part of its strategy to focus on quality, Dominos Pizza introduced a Gourmetrange in August 2011. The three-strong range is made with a thin crust baseand variants are topped with a sundried tomato and garlic sauce, as well as100% mozzarella cheese. The first pizza is made using chicken breast strips,naturally smoked bacon rashers, baby spinach and sun-blushed baby plumtomatoes. The second consists of Ventricina salami, pepperoni and Peruvianroquito peppers. Greek feta cheese, baby spinach and sun-blushed baby plumtomatoes make up the third pizza. A fourth version was introduced in October2011: Quattro Fromaggio. It combines mozzarella, Greek feta cheese, BavarianBlue and Gran Moravia cheeses.October also saw the release of the Meatilicious pizza by Dominos. It is madewith pepperoni, ham, chicken breast strips, smoked bacon rashers andCumberland sausage. The sauce uses vine-ripened tomatoes and the cheese is100% mozzarella. A crust which is stuffed with mozzarella cheese, garlic andherbs was additionally introduced.In February 2012, Dominos Pizza introduced two new products. The first isSaucy BBQ Crust, which is made like Dominos other stuffed crusts, withmozzarella cheese, garlic and herbs, as well as Dominos classic Texas BBQsauce. The second is a spicy side order: Boneless Ribs. These are also served witha BBQ dip.



In June 2012, Dominos unrolled a Mexico pizza range in the UK. It is availablein chicken, beef and vegetarian flavours. The meat variants include chorizo,red and green chillies, tomatoes, onions, a vine-ripened tomato sauce and100% mozzarella cheese. Instead of chorizo, the vegetarian option comes withsweetcorn and spinach. All three versions are topped with a drizzle of cool sourcream. Consumers can also opt for the Mexicano Stuffed Crust, which is filledwith green and red chillies, mozzarella and garlic and herbs. In its press releaseon 21st June 2012, Dominos Sales and Marketing Director Simon Walliscommented: We wanted to inject a bit of Mexican sunshine and bring a bit ofheat to pizza lovers. He added: There is a strong trend for Mexican food atthe moment.

Financial ResultsIn the year ending 25th December 2011, Dominos Pizza Group PLC recordeda turnover of 209.9m, an increase of 11.5% on the 188.1m generated in theprevious year. The companys pre-tax profit also increased, rising by 10.2% to38.8m in 2011.

Greggs PLCCompany Structure

Greggs PLC traces its roots back to the 1930s when John Gregg begandelivering eggs and yeast on his pushbike to homes in Newcastle Upon Tyne.The first bakery was opened in 1951. The business grew in 1970s with theacquisition of regional bakery retailers across the UK. By 1984, the company,which by now had 260 shops scattered throughout the country, was listed onthe LSE. Nowadays, Greggs owns almost 1,600 branches in the UK and iscontinuing to expand. Products, which include sandwiches, pastries andpasties, are baked in local bakeries. Greggs is the largest specialist retail bakerychain and the biggest food chain in terms of number of stores in the UK. It isclassified under the takeaway outlets category.

Current and Future DevelopmentsIn September 2011, the company opened its first coffee shop, Greggs Moment,in its hometown of Newcastle. Unlike at its bakeries, consumers will be able todecide their own sandwich fillings and can choose from a variety of breads,including focaccias, paninis and wraps, in the caf. Other products include arange of Gourmet Square Pies, porridge, and yoghurt and fruit. Moreover, theconcept has a darker colour scheme and a new coffee cup logo and targets thepremium market, while still offering good value. Outdoor seating and freeWi-Fi is available in store. If the trial shop is successful, Greggs plans to openother outlets across the UK.



In October, Greggs signed a deal with Moto Hospitality to open shops inmotorway service stations. The Grocer revealed the companys plans to opentwo trial shops on the M6 near Lymm in Cheshire in December in an article on19th October 2011. If the pilot is successful, a further 30 stores will be addedto the Moto network. These outlets will charge slightly more than Greggsbakeries on the high street.In July 2012, Greggs opened a new concept store: Greggs the Bakery. The pilotsite was opened

fast-food & home-delivery outlets 2012

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