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Business of Restaurants: Assignment Brief
Business of Restaurants: Assignment Brief
Introduction
Restaurants in London
Restaurant design
Eating trends
Foodism
Healthy Foods
Fast Food
Ethnic cuisines
Environmental issues
Economic
Social Environment
Gastronomic tourism
Conclusion
Reference
Appendix
Introduction
Today it is very difficult to walk down a street in London without finding an eatery, in the
form of restaurants, fast foods, bistros, pubs or take-aways. These eateries, have not only
multiplied in number (Akbar, 2007), but London has managed to turn around the prejudiced
label of “eateries serving revolting food”, to one of the best gourmet capitals in the world.
This paper aims to explore the economic impact the restaurant industry has on London. It
examines the influence on the capital’s economy, its weigh on the environment, the
developing of gastronomic tourism, its investment potential and social issues, whilst
assessing how it is coping with the current economic crisis. Moreover, within the Londoner
restaurant industry context, eating trends, the increasing importance of design, the spreading
of ethnic cuisines as well as the sustainability of the market, are also analyzed.
A conclusion that summarizes the main points ends the article.
Restaurants in London
The restaurant industry plays an important role London as the city is the place to be for food
for the postmodern 21st century consumer. London is considered to be the most multicultural
city in the world and this is reflected onto the different cuisines on offer. Its restaurant
industry has caught up with the largest player in the restaurant industry, the US. “John
Willoughby, Executive Editor of Gourmet, said: "We were hoping to find good food, but we
didn't expect to find so much of it. We were blown away and more than one in five of the top
restaurants in the world are in London, according to an annual survey of 500 chefs, critics
and food writers (London2012.com, 2005). “I'll bet what motivated the British to colonize so
much of the world is that they were just looking for a decent meal” (Martha Harrison, 2009).
“The variety of cuisines on offer is by far the most exiting aspect of eating out in the capital –
according to 82 per cent of respondents” (TimeOut Eating and Drinking 2009). 42% of
visitors come to London for pleasure (Mintel, 12/2008). London depends heavily on these
tourists.
Impact of Restaurants Business
Focus will be on the impact of recession and the steps restaurants are taking to battle
downturn and improve tradability an example of this is discounting. It has been reported that
businesses are making rash decisions in a panicked reaction to the climate. To support this
argument public spending trends and the idea of the time-poor, cash-rich Londoner will be
considered. Cultural diversity has shaped the London restaurant scene. The domestic
Londoner and tourist alike seldom challenge London eateries with demand for revolution of
taste.
Restaurant design
Nowadays food is not the star of the meal anymore and design, as other factors that build up
the dining experience, have increased their importance. Design plays a fundamental role in
the restaurant ambience and entrepreneurs can choose to spend heavily on it, for instance the
Tokyo-style with an open kitchen L’Atelier and £4.2 million invested for the minimalistic
Yauatcha (Moir, 2004), or to spend the minimum, thus making it a more functional design
(e.g. Pellicci café).
Certain restaurant designs can be considered real artifacts, such as the artistic Sketch which
also features extravagant egg-shaped toilettes. Metrogusto in Islington is another example,
offering modern dining rooms with British surreal paintings, which give a gallery-like
atmosphere. These establishments might represent an attraction for tourists who are
particularly interested in arts.
In facts London offers countless types of designs to please all kinds of taste. The gastro pub
Eagle is an example of distressed design, Allbarone’s was aimed to attract female consumers,
Balans’ appeals to homosexuals, the Rainforest Café is a classical example of a themed
restaurant and a few Conran restaurants were conversions, built on garage venues, e.g.
Bluebird. Whilst design tends to attract a certain type of customer (and exclude others), its
final goal is always to ultimately increase profits.
Another amazing designer is Philipe Starck who has created breathtaking restaurant designs
all over the world (www.starck.com, see The Sanderson, St Martins Lane). For Phillipe
Starck “emptiness is more important than fullness creating spaces which visitors will then
inhabit and transform” when designing a restaurant (BBC, 2009). To experience and believe
the impact restaurant design has one must experience it! Sketch is a good start to do so.
Menu design
Interesting points on menu design include leaving out the pound sign as it reminds people
that they are spending money. As a result the average spend had gone up. They also went
mention what they call “staggering prices”, placing the price directly after the dish description
to avoid people looking for a cheaper dish. “Kevin Moll, CEO of Denver’s National
Restaurant Consultants, says staggering the prices on a menu leads to a 10% increase in
sales” (Primum, 2009). The highest profit items are placed at the top and bottom of the menu
as the first and last section is always the easiest to remember. “Those dishes sell 25% better
than the ones in the middle of the menu” (Primum, 2009). What also increases sales are
bold typed items as well as “elaborate descriptions, particularly those that trigger nostalgia.”
(Primum, 2009).
Design psychology
Design psychology holds our past environments and influences our decisions later in life.
Our behaviour, tastes, and choices are affected not only by our psychological histories but
our ‘environmental histories’ as well" (Boston.com, 2004). This is where comfort foods come
into play. Particularly in the economic crisis when people are seek to refuge in food
influenced by their mothers cooking.)
Marketing, media and consumer influences
Since the beginning of 2009, restaurant promotion coupons and vouchers, such as 2 for 1,
50% off, second main course for £1 to name a few, have started spreading like wildfire, on
the internet, in newspapers or on leaflets. The most common are offered by chains: e.g.
Prezzo, Strada and GBK. Recession-hit consumers are looking for value for money. Michelin
star restaurants have also chosen the discounting strategy, with most of London
establishments offering 2-3 course set lunch menus (or sometimes dinner) for about £25 to
£35.
Apart from value for money, consumers have also become more sensitive to hygiene and the
environment. As a consequence, it has already been a couple of years that the Food Standard
Agency has made the results of restaurants hygiene inspections available to the public and
some restaurants have exposed the results on their windows (Figure 3) (Buckingham, 2007).
With regard to the environment, the Evening Standard has launched a campaign to induce all
London restaurants to offer tap water. Tap water would not only make diners save money but,
as Thames Water claims, a 750ml bottle of water has up to 300 times more carbon footprint
than a jar of tap water (Prigg, 2008). Aldo Zilli, proprietor of Zilli Fish and Zilli Gree, is one
of the forerunners of this movement.
(“In Modernism, reality used to validate media. In Postmodernism, the media validate reality.
If you don't believe this, just think how many times you've described some real event as being
'just like a movie.'”
Celebrities are increasingly used as a means of marketing and influence our choice of
restaurant and food (see Appendix 8a, b). One of these chefs stands out: Heston Blumenthal.
He currently ticks all the boxes in our postmodern world (watch Heston’s Victorian Feast on
Channel4). He creates unusual exciting dishes (√) with interesting and beautiful flavours and
textures (√) for celebrities (√). Also he is young (√) and displays himself in public as a
friendly (√) and humorous (√) person. Gordon Ramsey in Ramsay’s Kitchen Nightmares is
another example.
Restaurants with emphasis on one particular ingredient might propose a future trend like
Moonstruck (chocolate) currently operating in the US or Teapalace. Local, seasonal and fresh
foods are considered to be a valuable marketing tool. The design of the menu as well as the
restaurant is an important tool to attract customer (Laduree Cafe, Sketch). Menu design
stands in 3rd place when it comes to what influences the consumers’ choice of restaurant.
Mac Cannell (1992) believes “tourist’s who experience staged cultural productions are being
misled. He argues that the real culture happens backstage”.
“Culture is the set of beliefs, values and learned ways of managing the organisation. Each
organisation has a culture that is unique. In analysing culture, there are four main areas:
Environment
Cultural factors specific to the organisation
The basic cultural type of the organisation
The strategic implications”.(Lynch 2005)
Culture has also played a role in shaping the London restaurant scene. The diversity within
London’s restaurant scene is reported to be London’s strongest assets rivaling the likes of
Paris and New York. The cultural diversity also contributes to the lavish and varied design of
city’s restaurants.
Human capital is a measure of the economic value of an employee’s skill set. The concept of
human capital recognises that not all labour is equal and that the quality of employees can
be improved by investing in them.
Knowledge management:
“In organizations, knowledge management is often embedded not only in documents and
presentations but also in organizational routines, processes, practices, and norms,"
(Davenport and Prusak, 1998)
Knowledge management may be severely affected by the relationships and processes of the
London restaurants.
Different practitioners have given different models for knowledge management. Some of the
models are - the cognitive model of Knowledge management (Swan and Newell, 2000).
Internal customers
Staff: In London restaurants, the staff are constantly training and working on how to
communicate with the customers, always training to maintain their expectations and how
they can improve. There are different training courses they have to take part of and these
are how to present with confidence, they have to learn how to present with confidence.
Staff Benefits: The employees at London restaurants also get staff benefits like holidays,
Pay structure, promotion opportunities, and pension schemes.
External customers
School groups:
Study days and educated fun. Cadbury world is not only a fun day, while you learn how to
make the chocolate you also learn the history, and give you an educational talk.
Business groups:
Conference facilities
Meeting rooms
Conference rooms
Special events
Other:
Wedding reception
The global success of this fast-food giant can best be attributed to its ability to adapt to local
cultures and resources. Problems of globalization can quickly be turned into opportunities
by the company's continued sensitivity to local cultures.
Eating trends
London diners, more sensitive to the environment, seasonality and flavors, are now searching
for local, seasonal and fresh ingredients and the chefs are constantly creating menus with this
focus.
According to Harden’s (2009), tapas-style restaurants, with high quality and stylish food, and
steakhouses are going through mini-booms. Furthermore, East London is emerging as an
eating destination (particularly Shoreditch), whereas Canary Wharf is finally also improving
its restaurant offering.
Examples of tapas restaurants are the fashionable Moro and The Salisbury Pub. Buen Ayre in
Hackney, boasts a traditional Argentinean steakhouse atmosphere, due to the on-view parrilla
(grill) and the Argentinean staff, although, unfortunately, as per the author, the meat is
nowhere close to the genuine mainland. Goodman Restaurant and the newly opened The
Palm are American-style (pricey) steakhouses.
A survey undertaken by the Time Out London (2009) shows that Londoners’ favorite cuisine
is the Italian (15%), closely followed by Modern European (12%), then Thai (12%), Japanese
(11%) and Gastropubs (10%) follow. Surprisingly, French only ranked a mere 5%. Asian
cuisines are getting more popular with the Thai Busaba Ethai and Chinese Hakkasan in
Tottenham Court Road voted as best favorite restaurants, whilst the Japanese Wagamama is
in fourth place.
Finally, the recession saw the blossoming of pop-up restaurants. People with culinary passion
have turned their living room into a e.g. 1-evening-per-week restaurant and they have
registered at supper clubs. Alternatively, celebrity chefs have set up temporary restaurants in
chic venues for an upper class clientele. Pierre Koffman’s temporary restaurant, in
collaboration with Eric Chavot and Bruno Loubet, was set up on the Selfridges roof last
October. The Summerhouse represents another pop-up restaurant; nautically-themed, it is
located in Little Venice.
Ethnic cuisine
Along with being seen as new and trendy, these Asian fusion dishes also appeal to many
customers because London restaurants tend to be lighter and are perceived to be healthier
than other types of "ethnic" cuisine. In fact, many westerners only now understand the health
benefits of many Asian foods. Many nutritionists point out that UK's biggest health problems
heart disease, obesity, diabetes, and many cancers -- are seen far less often in Asian
countries. One reason is, not only is physical activity that blends spirituality with fitness (such
as tai chi) more common in Asian societies, but experts are finding that Asian diets also play
a key role.
The Chinese rely heavily on grains, fruits, and vegetables. Meat is rarely the main ingredient
in a meal; instead, small amounts are offered up in dishes composed mainly of vegetables
and rice.
Environmental issue
Environmental issues are of increasing concern nationally and globally. Consumers expect
restaurents to be environmentally friendly which is found to influence their purchasing
decisions. Consumers rely on hotel labelling to clearly inform them of the companies
contribution. The increasing perception that consumers are influenced by labelling has lead
to an increase in faux eco-tourism or ‘green washing,’ as a method to gaining competitive
advantage, mainly through the use of misleading ‘green’ claims.
Environmental issues are of increasing concern for government; high on the agenda now for
all political parties (Mintel 2007).
Supply-side initiatives such as the UK restaurant Environment Initiative and increasing client
requirements have created greater awareness and demand for change, for transparency
regarding tourism companies’ action.
Economic issues
The global financial crisis has had a big effect on the restaurant industry .Unemployment has
risen resulting in more cash poor people. Food inflation is at an all time high and restaurants
have to come up with new and innovative ideas to add extra value and attract customers
whilst at the same time not spending too much money. In a poll made by Cate research 70%
were of the opinion that a VAT cut on restaurant meals would boost the industry (2009). The
original intention of coupons, discounts and loyalty cards was to boost the industry. 61% of
respondents mentioned that the pressure on cost cutting has affected their levels of service
(Caterersearch, 2008).
Not all in the restaurant industry is reported as doom and gloom and it can be argued that
Londoners love to enjoy themselves. 83 per cent of respondents eat out more than three
times a month of those 30 per cent eat out more than twice a week (TimeOut E&D, 2009).
London is ranked the highest for international arrivals in 2007.
Social Environment
“As a child my family's menu consisted of two choices: take it or leave it” (Hackett B., 2009)
This idea of eating and drinking has very obviously changed and we tend to make a
statement about ourselves based on the foods we consume. What we are eating, how it is
prepared, the flavours and textures and what the food contains are all factors. People tend
to increasingly prepare their sandwiches at home than buying out and Mintel (March 2009)
blame this on changing work patterns, the current economic crisis and the increasingly older
population. A survey by market analyst Buckingham Research, which questioned almost 600
consumers across the UK, found that 75% of families with children will be less likely to eat or
drink out over the next 12 months” (Caterersearch, 2009). The future still looks positive and
remains sustainable as many people live by themselves and therefore tend to go out to eat.
The Independent mentions “Workaholic Britain” and that people are time constraint giving
them more reason to eat out and relax. A report by Mintel (2008) mentions that convenience
to Londoners still matters. Many people are unable to cook. Richard Ehrlich the Glenfiddich
award-winning writer mentions Britain to be unknowledgeable when it comes to food and its
preparation. He goes on saying: “I'm not talking only about the poor. I'm talking about the
affluent, many of whom know nothing and care less about feeding themselves and their
children a wholesome, balanced and adventurous diet” (The Independent, 2003). He
mentions that the wealthy tend to give their children lunch money which they will in return
spend on crisps and chocolate whereas poorer families will take their children to fast food
outlets like McDonalds. Alfred E Newman says that we are living in a world today where
lemonade is made from artificial flavours and furniture polish is made from real lemons.
Sex in the city
The soap “Sex and the City” has created a picture of a group of friends gossiping in a
restaurant over a bottle of wine. The idea of Sex and the City seems to work very well as
Women like to dress up, they like to see and be seen. Eye candy and restaurant design
(open space) is important as it gives them more things to talk about. The decrease in family
and the increasing spending power of females overall are factors that make the ‘illusion’ of
Sex and the City reality. A picture of Gwenth Paltrow and Madonna illustrates this. “Out on
the town” is a headline in the Evening Standard (Craig, 2009). It article mentions: “Job on the
line? Scales just tipped over nine stone? It could be time for a girl date.” Women like to
gossip and chat and as Elliot and Bede say: “One can say everything best over a meal”.
Women and men enjoy being in group as it gives a feeling of belonging and identity so large
tables to share are important (Busaba Eathai). Dr Peacock mentions that “if Hofstede is
connected to discussion of 'uncertainty avoidance' then attitudes and groups are a key part
of that discussion” (martinpeacock.org, 2009).
Gastronomic tourism
Gastronomic tourism is often referred to exclusively as the art of travel habit; however, this is
only one part of this discipline. Others have suggested that gastronomy is the study of the
relationship between culture and food.
In recently years nourishing food have played an increasingly more important role in
gastronomy. Not only are that featured in tourism promotions, but nourishing food has
become a significant part of gastronomy in general in the past few decades (Scarpato,
2002).
Gastronomy therefore refers to rules or norms in respect of eating and drinking habit in the
tourist . From this derivation the scope of gastronomy can be extrapolated to include advice
or guidance on what to eat or drink, how much, how, where and when, why, in what form
and in which combinations (Santich, 2004).
Well-Being menu is a part of UK gastronomic cultural, people contend that food tonic is
much better than medicine tonic in fortifying one's health.
Restaurants are also protagonists of several important London food festivals that further
attract tourists. In June the capital will host Taste of London 2010, considered “The World’s
Greatest Restaurant Festival” (Taste of London, 2010). In March the London Restaurant
Week takes place: many top restaurants offer menus at a fraction of the normal price. In
addition, the British Food Fortnight is scheduled in September, with celebrations all across
the UK.
Sustainability of the market and investment potential
“People don’t know what they want until they are offered it.” Sir Terence Conran
(Hardingham, 1999, p.45)
The recession represents a great tool to measure the stability and strengths of the London
restaurant industry. A survey of Zagat London Restaurant guide suggested that Londoners
defeated the credit crunch as they spent 76% more than the previous year (Huber, 2008). This
result shows the importance that eating out has acquired for Londoners as it just became a
necessity. The One Planet Dining report (Dalmeny, Reynolds & Longfield, 2007) confirmed
the trend, indicating that Londoners spend more money on eating out than on buying food for
home. If a decline in cooking skills is also added, a bright future for the restaurant industry
and potential investors is guaranteed.
However, Joseph (2009) criticizes the restaurateurs, who have not yet understood that
Londoners eat out to avoid cooking, to meet up with friends or snack after a movie, not for
the food or the restaurants themselves. This would explain how fast food establishments such
as Domino’s and KFC have blossomed through the recession offering value for money. With
McDonalds UK profits also up by 23% in the last quarter of 2009 (BBC, 2010), fast food
seems to be a secure bet for investments.
Whereas London’s middle and high restaurant markets are fairly saturated and very difficult
to penetrate, the best opportunities, driven by an increasing demand for cheap meals, are
offered by affordable eateries or bistros. Alan Yao, a forerunner with regards to restaurant
investments, put together very successful concepts with the Thai eatery Busaba Ethai, which
now boasts five branches in London, and the recently opened Cha Cha Moon.
Even though the opening of eateries is difficult to finance, there are still opportunities for
investment. Punch Taverns (7,000 pubs in the UK) has lately launched the innovative Capital
Builder agreement, which allows graduates to start up a pub with as little as £5,000 (Walsh,
2010). The scheme is very attractive and represents one of the most inexpensive opportunities
to own a business; nevertheless the pub market is collapsing. 2,325 pubs closed in the UK in
2009, which are about 45 pubs per week (British Beer and Pub Association, 2010). There are
no doubts on the countless opportunities for investing in pubs, but much courage is needed to
gamble into such a sinking market.
Moreover, the credit crunch signed an unprecedented tightening of financing for restaurants.
Worrall Thompson went into administration as Lloyds Banking Group refused to lend him an
additional £200,000 (Wearden, 2009) and he had to close four restaurants, among which were
Notting Grill and Barnes Grill in London.
The high number of restaurant insolvencies, combined with the collapsing of financial
markets, is at the base of this tightening. However, the government, through the Enterprise
Finance Guarantee project, aims to aid small businesses with insufficient or no credit
security. With this scheme, the Government provides the lenders a guarantee for 75% of the
loan (Anon, 2010).
The Capital for Enterprise Fund and the European Investment Bank also offer alternative
ways for credit. Financing a London restaurant, although very compelling is not as daunting
as it seems.
Present and future economic climate
The general consensus is that lack of bank finance availability is one of the most inhibiting
factors towards growth and expansion in the future. Despite this, operators will still seek to
lend, with over one-third of businesses saying they will need additional funding in the next
twelve months, and half needing more in 2010/11.
David Phillipson is the Sales Manager at the Capital Group, and an expert in the field of
securing finance for business projects. Given that banks’ lending criteria are more stringent in
the current market, he feels that London restaurant operators looking to improve their chances
of raising funds for expansion should consider presenting a sound business plan to banks and
investors.
"There are a multitude of benefits for London hosting the Olympics, for the sport sector in
particular it provides a unique opportunity for the UK to develop world-class facilities to
enable the country to host future first rate service in the restaurant industry”.
Alex Kyriakidis, Global head of Tourism, Hospitality and Leisure at Deloitte, comments: As
proven by previous host cities, the Olympics generate opportunities across the entire job
market, which in turn, would be of significant benefit for the UK economy. It would also
provide a huge boost for the tourism industry.
Conclusion
More restaurants were opened in 2007 in London than in any other city but at the same time
the number of restaurants closing was up by a third, with 89 closures in 2007 according to
the Independent UK (2007). 70% of respondents in a poll made by Caterersearch are
concerned about their jobs (2009). Although the credit crunch is affecting restaurants heavily
at present, Mintel predicts that the industry will remain strong and “grow by 18% over the
next five years to be worth £7.8b by 2013” (Caterersearch, 2008). In 2007 researchers
predicted that in the next few years Britons will be spending a third of their household budget
on eating out.
[7] FoxBusiness (26/03/2009) More Americans “Live to work” than “Work to live” [online]
Available from http://www.foxbusiness.com/story/americans-live-work-work-live/
(31/03/2009)
[8] Gadget Lab (11/03/2009) London Restaurant Uses Touch pads for Orders, Projectors for
Mood Alteration [online] Available from http://blog.wired.com/gadgets/2009/03/inamo-
restauran.html (31/03/2009)