Lisa Winfield, a 27-year old property lawyer from Derby, sums it up: “It’s a
no-brainer. Why go to a place where you have to pay for both meals when you
can go to another nearby and get one for free?” Her thoughts are echoed by
Kimberly Richardson, 25, a PA in the City who always keeps a couple of
vouchers in her handbag “for emergencies”. She said: “If someone offers you
something for free, you’d be an idiot to say no.”
The two women are part of a growing army of diners who have discovered that
judicious surfing of the internet allows you to pick up some great deals at
most of Britain’s big restaurant chains. A host of websites allow customers
to print off vouchers entitling them to two meals for the price of one or a
free bottle of wine with their dinner. Some schemes go for a no-nonsense
approach, simply offering 50% off the bill.
The secret price war among Britain’s main dining-out chains, while great for
drumming up trade, threatens to undermine profitability and potentially
devalue their brands if they become better known as bargain-basement places.
Many of the discount schemes are not advertised, but available only through
mailshots or websites – just try typing “voucher codes” into a search engine
to see an extensive list. It has become commonplace for friends to e-mail
the vouchers to each other, and it seems everyone is after a bargain these
days, even the super-rich. Last weekend it emerged that Wayne Rooney, the
Manchester United and England star, had used a half-price voucher at a local
eaterie to pay for him and wife Coleen to have dinner.
There’s no need to feel coy about asking for some money off either, as
restaurant staff are used to deal-hungry diners.
Sophie Duterne, manager of a City branch of Pizza Express near St Paul’s
Cathedral, said the vouchers were “generating a lot of business” – and
helped keep staff motivated, too. “They’re busy,” she said.
January is traditionally a quiet month for the £24 billion eating-out market.
As people attempt to get over the excesses of the festive season by saving
money or dieting – or both – it has become customary for the big chains to
try various forms of promotions.
This year, against the backdrop of the recession, the pressure has become more
intense, and so has the discounting. The situation has only been exacerbated
by increased competition from pub chains that now routinely serve food. JD
Wetherspoon, Sizzling Pub Co and Brewers Fayre, for example, all compete
fervently on price.
Simon Kossoff, managing director of Carluccio’s, the Italian restaurant chain,
said: “We’ve always done a certain amount of discounting in January. We’ve
done much more this year. It’s driving volume. Customers are out there
looking for things that they see as great value.”
The challenge for the industry is to make sure promotions are calculated so
that they still allow an operator to make money.
Graham Turner, chief executive of Tragus, the private company behind the Café
Rouge, Bella Italia and Strada chains, said the big restaurant companies
were good at monitoring promotions “down to the last penny” to make sure
marketing activity delivered an incremental profit. “It needs to be at least
making you more money than if you had not done it,” he said. “We’re very
careful to make sure that this is not about keeping restaurants busy for the
sake of it.”
Not that the City seems especially convinced. Paul Hickman, a leisure analyst
at KBC Peel Hunt, the stockbroker, said he was “worried” about the
widespread discounting.
“They will sacrifice some gross margin to keep up activity levels,” Hickman
said, although he pointed out that concerns over the sector were largely
already priced into the value of companies’ shares.
For example, shares in Carluccio’s have dropped 54% over the last year,
Clapham House Group has fallen 61% and Prezzo has gone down by 48%. Even The
Restaurant Group, whose sites are away from the high street and which has
not been heavily engaged in discounting, has seen its shares fall 24%.
Equally, restaurant brands risk losing something if they are viewed by
customers as somewhere to go purely for a cheap meal. Ian Edward, a
corporate financier who regularly advises restaurant groups, said: “If
you’re a relatively smart place and you start offering two-for-ones, you’re
not as smart as you were.”
Harvey Smyth, chief executive of Gondola Group, the company that owns Pizza
Express and Ask, plays down such worries. “Of course we are aware of that,”
he said. “If it was damaging the brand it’s not something we’d do. By being
clever about it, giving customers things that they want rather than some
blanket discount scheme, that will build loyalty.”
Despite the concerns, the UK still has some way to go before discounting
reaches the level recently touched on the other side of the Atlantic. On one
day this month, the US diner chain Denny’s offered its customers free
breakfast. An estimated 2m people turned up to claim their meal; some
outlets apparently ran out of pancake syrup, such was the frenzy of demand.
The giveaway marked the first time an American restaurant chain had pulled
such a stunt. No-one in the UK has yet followed Denny’s lead, though there
will undoubtedly be marketeers on this side of the pond furiously studying
the feasibility.
What may deter British restaurateurs from starting to simply give food away –
albeit in a one-off deal – is that they acknowledge the danger of
promotional pricing becoming the norm. Although they are engaged in heavy
combat to keep business ticking over, they already have one eye on the
eventual recovery and want to make sure they will be able to wean customers
off the deals and restore their margins.
“We don’t want to be running these deals day in, day out and see these things
become permanent,” said the chief executive of one chain. The notion that
customers come to regard special offers as anything but is one to be
avoided.
This may already be a forlorn hope. An area manager of one big chain, who
preferred to remain anonymous, said that he had sat in on focus groups
conducted by his employer where it was obvious that customers now had an
expectation of being given something for nothing. “They all say they expect
an offer,” said the manager.
Some companies think that this psychology can be turned to their advantage.
Clapham House, owner of Gourmet Burger Kitchen, has been experimenting with
loyalty schemes. It has run tests with its smaller chains Tootsies and The
Real Greek, and is poised to launch a loyalty programme for its main brand,
GBK Gang.
Paul Campbell, chief executive of Clapham House, said: “It’s a more
satisfactory way of doing it. It gives us good information on the success of
particular promotions and allows us to track what customers like.”
Experts point to the success of loyalty cards used by some of the coffee-bar
chains as an example of how these things can succeed – and without anyone
thinking of a skinny latte as a drink for bargain-hunters.
How long the price war will last remains to be seen, but one thing is certain:
it has probably never been so cheap to eat out.
Lost appetites
RESTAURANTS of all stripes are being hit by the slump, not just the big
chains.
Last weekend, celebrity chef Antony Worrall Thompson said the closure of four
of his restaurants, with the loss of 60 jobs, had made him cry. He is the
highest-profile casualty in the dining-out market, which also saw chef Tom
Aikens place his central London eaterie into administration last year,
before buying it back, allowing it to reopen.
According to Price Waterhouse Coopers, the accountant, 141 restaurants went
bust in the last quarter of 2008. Last month 108 collapsed.
Des Gunewardena, chief executive of D&D London, the group behind top
venues such as Le Pont De La Tour, said the sector was suffering: “The top
end restaurants are not doing two-for-one deals, but the fact is that the
top end is in a recession in the same way as the bottom end is. Everybody is
focusing on giving value for money, [whether] through fixed-price menus or
prices that are slightly lower than they were a year ago.”
