MCA RESTAURANT MARKET REPORT

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2 Disclaimer Copyright: MCA, September All rights reserved. No part of this publication may be reproduced or stored in a retrieval system, in any form or by any means, electrical, mechanical, photocopying or otherwise without the prior consent of the publishers. The views and forecasts presented in this report represent independent findings and conclusions drawn from a study of the Restaurant market by MCA. Main sources of information include published information, opinions and information shared by interviewees with MCA during the period of study. This report has been produced under significant time constraints to ensure that the information contained is as up-to-date as possible. Great care has been taken to ensure that all information contained in this report is accurate, free from bias, and fully describes the latest developments in the UK Restaurant market, as of September However, MCA can accept no responsibility for any investment decision made on the basis of this information or for any omissions or inaccuracies that may be contained in this report. This report has been produced in good faith and independently of any operator or supplier to the industry. We trust that it will be of significant value to all readers. MCA 10 Ely Place London EC1N 6RY Part of William Reed Business Media Ltd. 2

3 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 3

4 Introduction and background INTRODUCTION AND BACKGROUND Report scope Detailed market sizing of the UK Restaurant market current and projected. Analysis of the size and growth of different Restaurant market segments. Analysis of consumer participation, frequency, spend and behaviours over time. Comprehensive overview of competitive landscape, including physical expansion and financial performance of leading brands over time, KPI rankings and operator profiles. Consumer typology analysis. Bespoke consumer survey on restaurant visit habits. Research methodology 36,000 online surveys (6,000 per month) through MCA Eating Out Panel TM, Q and Q ,000 online interviews with UK consumers on their eating out habits. Extracts from MCA Brands & Corporates service and synthesis with wider market sizing databases. Desk research: news articles and trade press, company websites and industry associations. Publish details 30 September

5 Key terms and definitions INTRODUCTION AND BACKGROUND Term All-day dining Branded contemporary fast food Branded delivery-focused fast food Branded restaurant market Branded traditional fast food Branded/managed pubs Branded service-led restaurants / Casual restaurants / Chain restaurants Coffee shops, sandwich bars, cafés Contract catering Fine dining restaurants Grab & Go Independents Leisure NPS Revisit Intention Service-led restaurants Small chain Street food Tenanted/leased pubs Travel Definition Food and drink offer from breakfast through to late-night. Food served quickly at the counter and has healthy or newer cuisine focus, e.g. Itsu, Leon, Pod and Wasabi. Branded fast food operators with no or very limited seating in outlets, e.g. Domino s, Papa John s and Pizza Hut Delivery. Branded/managed/franchised pubs, branded fast food and branded full-service restaurants. Food served quickly; typically served at the counter; predominantly burger, chicken or pizza, e.g. Domino s, KFC, McDonald's. Owned by managed pub groups and restaurant groups, with consistent brand and/or menu, e.g. Beefeater, JD Wetherspoon. Sit-down meal in a casual environment; fast efficient table service or counter ordering, e.g. Nando's, PizzaExpress, Prezzo. Brands and independents serving espresso-based beverages and food, e.g. Caffè Nero, Costa, Pret, Starbucks. On site catering provided within public sector and workplace environments. Typically canteen restaurant catering. High quality establishments; staff are highly trained and wear more formal attire. Michelin starred or AA Rosette. Food that can be purchased off the shelf and taken out to eat, typically from supermarkets and convenience stores. Owned by one person or group; not part of a branded chain and often ethnic cuisine or fast food. Food offer secondary to activity e.g. cinema, hotels, fitness. Net Promoter Score is a customer recommendation metric. It can be as low as -100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive is felt to be good, and an NPS of 50+ is excellent. Consumers are asked How likely are you to revisit on a scale of 1-10, where 1 = not at all likely and 10 = extremely likely. This is a customer loyalty metric. A score over 8 is good and over 9 is excellent. Branded, independent and fine dining restaurants with table service or at the very least semi-counter service. Five or less outlets with consistent branding and/or food offer. Also applies to international brands with five or less UK outlets. Freshly prepared, authentic, good quality food sold in a street, often from a portable stall and at value prices. Owned by pub companies and leased/licensed to individuals or small franchisees. The manager is often tied to the brewery. Motorway service areas, petrol stations, train stations, airports and ferry ports. 5

6 Key terms and definitions consumer insight channels INTRODUCTION AND BACKGROUND Channel Chain restaurants/branded casual restaurants Coffee shops/cafés Contemporary chains Department Stores/Garden Centres/Supermarket Cafés Fast Food Restaurants Fine Dining Restaurants Hotels Leisure Facilities Independent Restaurants Pub Restaurants Sandwich Retailers Street Food Vendors Supermarkets To-Go Vending Machines Workplaces Operator Examples Carluccio s, Gourmet Burger Kitchen, Nando s, PizzaExpress, Prezzo, Wagamama, etc. Caffè Nero, Costa Coffee, Starbucks, Independent coffee shops, etc. Branded restaurant chains that launched after 2006, e.g. Byron, Franco Manca and Wahaca. M&S Café, Debenhams Café, Tesco Café, etc. Burger King, KFC, McDonald s, Wasabi, Independent take-away/fast food, etc. Michelin starred, AA Rosette, Premium dining experience venues, etc. Independent and group managed hotels Facilities where dining was not the primary activity: at a cinema, leisure centre, sports centre, gym, etc. Chinese, Indian, Italian, Thai, etc. Beefeater, Brewers Fayre, Gastro Pub, Harvester, Wetherspoon, Toby Carvery, Local pub, etc. Boots, Greggs, Pret A Manger, petrol station operators, etc. Stall vendors in food courts, markets, festivals and other outdoor locations Food To-Go sections of Asda, M&S, Sainsbury's, Tesco, Waitrose, etc. Standard Vending Machine (e.g. Klix, Cold Drinks machine, snack machine, etc.) Gourmet Vending Machine (e.g. Starbucks To-Go, Costa Express, Simply Coffee, etc.) Offices, industrial units and schools/universities: restaurant, canteen, on-site café, etc. 6

7 Key terms and definitions consumer insight terms INTRODUCTION AND BACKGROUND Term Average spend Breakfast Day-parts Dinner Average number of visits per head per month Incidence Lunch Definition Typical spend per person per eating out occasion, including food and drink (based on bill/receipt). Food and/or beverage consumed, usually first meal of the day. Six defined times of day when food is typically consumed: breakfast, morning snack, lunch, afternoon snack, dinner and late night snack. Food eaten in the evening, usually third meal of the day. The average number of visits per person per month, derived from asking consumers how often they visit different types of establishment and for different meal times (day-parts). By day-part: share of visits on which a food or drink item is consumed. Food consumed in the middle of the day, usually second meal of the day. Millennials Adults currently aged Missions Needs NPS Participation Revisit Intention Derived from the following single choice question: Which of the following best describes the primary reason for eating/drinking out of the home on this occasion?. Derived from the following multiple choice question: Why did you choose this establishment for your breakfast/lunch/dinner/snack? (Please rank the Top 3 reasons). Net Promoter Score: taken from consumers ranking the likelihood of recommending a brand/operator from 0-10; scoring 0 = highly unlikely to 10 = highly likely; scores of 7 &8 are removed, the detractor sub-total score (ranked 0-6) is subtracted from the promoter sub-total score 9+10 to give a net figure. Number of consumers who eat out (defined as all except those claiming to rarely or never eat out). Consumer scoring to indicate how likely they are to revisit a brand/operator; scoring 1 = highly unlikely to 10 = highly likely. This is a customer loyalty metric. A score over 8 is good and over 9 is excellent. 7

8 Key terms and definitions consumer typology INTRODUCTION AND BACKGROUND Term Millennials The Explorers Definition year olds across different social grades and with or without children. Millennials The New Parents year olds across different social grades with children. Millennials The Home Builders year olds across different social grades with or without children. Generation X Established families year olds in the ABC1 social grade with children. Generation X Humble households Generation X Aspiring Child Free Generation X Functional Child Free year olds in the C2DE social grade with children year olds in the ABC1 social grade without children year olds in the C2DE social grade without children. Grey Pound Greying Generation year olds across different social grades and with or without children. Grey Pound Golden Oldies 65+ year olds across different social grades and with or without children. 8

9 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 9

10 Executive summary Road to growth changing lanes from expansion to contemporary experiences and execution. Growth continues for Branded restaurant market, but at slowing rates of physical expansion, indicating the space race has peaked. The Branded restaurant market is forecast to grow by an annual turnover growth rate of 4.7% in 2016 to reach a value of 21.1bn, significantly ahead of the 1.1% for the total Restaurant market, and a total value of 53.9bn. Branded traditional and contemporary fast food, branded restaurants and managed pubs are all seeing robust growth this year, outpacing independent segments. Yet growth in the Branded restaurant market is expected to slow down, from a turnover growth rate of 5.5% in 2015 to 4.7% in 2016, in part due to outlet growth declining from 3.8% to 3.3%. Many pub and restaurant brands have expanded rapidly in recent years and are curbing growth, indicating the space race of the last few years may have peaked. As expansion rates falter, restaurant operators must place greater emphasis on delivering a contemporary experience and better execution to drive growth, particularly those brands looking to appeal to the lucrative and more youthful, millennial market. Branded restaurant growth waning as expansion falters and competition tightens. Turnover growth for Branded service-led restaurants is set to decrease from 6.8% in 2015 to 5.3% in Similarly, outlet growth is set to slow down from 4.0% to 2.9%. A number of established players not least Café Rouge, Frankie & Benny s and Strada are the focus of estate rationalisation this year. Competition in the market is tighter than ever, and established brands need to refresh their offers to meet contemporary demands. Macroeconomic factors around weakening business confidence are contributing to operators scaling back expansion plans, as is the increasing difficulty of securing sites. Yet growth in the branded segment is still among the strongest in the Eating Out market, fuelled by a sizeable group of rapidly expanding, newer players. Emerging brands showing strongest growth, increasing marketplace dynamism. Brands with less than 100 outlets are set to grow turnover and outlets by 9.7% and 7.8% on average, respectively, compared with an average of 5.8% and 3.5% for all leading brands in the market. In contrast, brands with over 200 outlets are in line to grow by 4.2% and 2.0% for turnover and outlets, respectively, underperforming against the average. The fastest growing brands CAU, Five Guys, Franco Manca, Turtle Bay and Leon are examples of brands offering a contemporary experience through specialisation in a product, adventurous cuisine or healthier eating focus. Service, environments and atmosphere are equally important to capture the minds of contemporary consumers. EXECUTIVE SUMMARY Key consumer metrics rise for restaurants and pubs, with contemporary restaurant brands stealing share of visits. Average visit spend has risen in all restaurant channels at all day-parts, with fine dining at lunch the only exception. Higher spend levels relate, in-part, to a more affluent customer profile in all key restaurant channels. Female spend has increased most, with 25-49s driving rising levels in chain restaurants. Contemporary chain restaurants (opened in the last 10 years) have played a crucial role in growth of the restaurant chain channel, accounting for a rising share of lunch and dinner visits. Contemporary chains, such as Byron, Côte and Wahaca, attract a larger share of 18-24s and higher earning consumers than chains in general, with the food quality, environment and atmosphere being much bigger draws. 22% of contemporary chain visits are get togethers, but it is special occasions that stand out, accounting for 18% of contemporary chain visits, which is double the proportion in total chain restaurants. The brands are providing the experiences that modern consumers seek. Millennials and Established Families are the most valuable customers. Three Millennial segments (18-34s) account for 29% of UK adult population but represent 46% of the total visits and 43% of the total spend in the restaurant market. Established Families (ABC , children at home) account for 10% of adult population but contribute 14 % of total visits and 14% of total expenditure. 55+ account for 36% of adult population however only contribute 18% of total visits and 21% of the total spend. Experience and execution increasingly important as expansion rates decline. MCA expects the Branded restaurant market to continue seeing annual sales growth of c.4.7% between , but this is down from the 2015 peak of 5.5%. The slowing 3.3% average annual outlet growth is significant and will focus more attention on existing store growth and passing on price rises to offset increasing cost pressures. The impact of rising National Living wage rates, higher business rates and food input costs will highlight the need for more skilful management of menu prices and also, of consumers value perceptions of restaurant brands. Contemporisation, both in terms of proposition execution and consumer experience, is becoming increasingly central to driving growth. Exploring new trading formats, hybridisation, premiumisation and faster NPD will also become more important levers for growth in the post-space race market. 10

11 Contents Introduction and background Executive summary Market Section summary Market analysis Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 11

12 Market section summary Growth continues for Branded restaurant market, but at a slowing rate. The Branded restaurant market is forecast to grow by an annual turnover growth rate of 4.7% in 2016 to reach a value of 21.1bn, compared with 1.1% for the total Restaurant market, and a total value of 53.9bn. Branded traditional and contemporary fast food, branded restaurants and managed pubs are all seeing robust growth this year, outpacing independent segments. Yet growth in the Branded restaurant market is expected to slow down, from a turnover growth rate of 5.5% in 2015 to 4.7% in 2016, and an outlet growth rate of 3.8% to 3.3%. Many pub and restaurant brands have expanded very rapidly in recent years and are now slowing down, indicating the space race of the last few years may have peaked. Overall the Total Restaurant market continues to experience a net decline in outlets, with outlets set to decrease by -0.8% to 119,491 in This is driven by ongoing closures at independent restaurants and tenanted & leased pubs, two large segments that have a major impact on the overall market. Brands beating independents across all segments. Branded segments account for 16.2% of outlets and 39.2% of turnover in the total Restaurant market, up from 15.5% and 36.9% in 2015, respectively. Managed pubs in particular have increased their share of the market, driven primarily by accelerating conversions of tenanted pubs. Branded segments continue to achieve considerably higher sales per store, on the back of greater economic resources of parent companies, better capabilities for attracting investment, and consequently, greater access to more expensive, higher-footfall sites. Fast food winning share from pubs and restaurants. Fast food accounts for 22.4% of total value in the Restaurant market, up 1.2pp year-on-year. The low-ticket segment s share of outlets is also up 1.9pp to 32.4%. The fast food channel is buoyed by a relatively better-performing independent component. The continuing net decline in outlets of independent restaurants and tenanted & leased pubs is dragging down their respective segments. Pubs are still the largest segment, claiming c.40% of both outlets and turnover. Service-led restaurants account for 28% of outlets and 38% of sales. MARKET Growth slowing down for restaurant chains as established brands see mixed performance. Turnover growth for Branded service-led restaurants is set to decrease from 6.8% in 2015 to 5.3% in A number of established players not least Café Rouge, Frankie & Benny s and La Tasca are rationalising their estates this year. Competition in the market is tighter than ever, and established brands need to refresh their offers to meet contemporary demands. Macroeconomic factors around weakening business confidence are also contributing to operators scaling back expansion plans, as is the increasing difficulty of securing sites. Yet growth in the branded segment is still among the strongest in the Eating Out market, fuelled by a sizeable group of rapidly expanding, newer players. Latin American cuisine to see strongest growth, followed by South East Asian and Burger brands. Branded operators serving food from Latin/South America are expected to see outlet growth of 35% in 2016, reaching a total of 135 outlets. The formidable growth in this segment is spearheaded by Rodizio Preto, expected to double in outlets to 10, CAU, set to grow by 57% to 22 outlets, and Turtle Bay, expected to expand by 48% to 37 outlets. However, Latin American food is still only expected to account for 2.8% of the Branded casual restaurant market. Strong growth is also forecast for South East Asian (22%) and Burgers (20%). The largest cuisine segment continues to be Pizza/pasta, which holds a 30% share of the total Branded service-led market. All leading brands in this segment are expected to continue to expand this year, including PizzaExpress, Pizza Hut Restaurants and Prezzo, as well as smaller players Franco Manca and Wildwood. MCA expects the appetite for more exotic cuisines to continue over the next few years, fuelled by greater consumer food knowledge and demand for adventurousness. 12

13 Contents Introduction and background Executive summary Market Section summary Market analysis Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 13

14 UK Eating Out market landscape MARKET UK Eating Out market value to reach 87bn in MCA forecasts the total UK Eating Out market to reach a value of 87.2bn in 2016, comprising a total of 331,293 outlets by December The market consists of three main sub-sectors: Retail, Travel & Leisure; Hotels, Pubs & Restaurants; and Contract Catering. Hotels, Pubs & Restaurants is easily the largest sub-sector, accounting for 72% of total turnover. UK Eating Out Market 2016E: 87.2bn 331,293 (Value Outlets) Retail, Travel & Leisure: 19.5bn 100,825 Hotels, Pubs & Restaurants: 62.9n 167,383 Contract Catering: 4.8bn 63,084 Retail Travel Leisure Hotels Pubs & Bars Restaurants Business & Industry Public Sector Coffee Shops Roadside & MSA Sports Clubs Full Service Managed, Branded & Franchised Service-Led Fast Food Contracted Defence Sandwich Bars Petrol Forecourts Event Catering Budget Tenanted and Leased Fine Dining Branded Traditional In-House Justice Bakery Stores Railway Stations Stadia Guest Houses Independent & Free of tie Independent Branded Contemporary Healthcare Dep t Stores/ Supermarket Cafés Airports Visitor Attractions Holiday Parks Social clubs Branded Independent inc. Street Food Local Authorities Supermarket Grab & Go Ports Entertainment Venues Conference Centres Oil Rigs Convenience Store Grab & Go Education 14

15 UK Eating Out market Hotels, Pubs & Restaurants MARKET The largest sector in the Eating Out market. The Hotels, Pubs & Restaurants sector is valued at 62.9bn in 2016, comprising 167,383 outlets. The sector accounts for 72% of turnover in the Eating Out market. Restaurants, including fast food and service-led restaurants, are the largest component, making up 52% of value in the sector. Hotels, Pubs & Restaurants 62.9bn 167,383 (value outlets) Hotels 9.0bn 47,893 Pubs & Bars 21.5bn 47,458 Restaurants 32.4bn 72,033 Full service 7.7bn 10,618 Managed, Branded & Franchised 9.9bn 9,318 Service-Led 20.3bn 33,348 Fast Food 12.0bn 38,685 Budget 0.6bn 3,675 Tenanted & Leased 4.2bn 17,510 Fine Dining 0.8bn 350 Branded Traditional 4.0bn 3,031 Guest houses & lodges 0.6bn 30,832 Independent & Free of tie 7.3bn 17,900 Independent 14.4bn 28,273 Branded Delivery- Focused 1.3bn 1,776 Holiday parks 0.1bn 2,410 Social Clubs 0.2.bn 2,730 Branded / Casual restaurants 5.2bn 4,725 Branded Contemporary 0.7bn 560 Conference centres 0.01bn 358 Independent inc. take-away 4.9bn 25,834 Note: Hotels are not including in the Restaurant market analysis. Totals are affected by rounding. Street Food & Mobile Vans 1.1bn 7,483 15

16 Analysis of growth in UK Restaurant market vs branded restaurants Branded restaurants outperform wider market but growth slowing down. The Branded restaurant market is forecast to reach an annual turnover growth rate of 4.7% in 2016, compared with 1.1% for the total Restaurant market. Branded contemporary fast food is enjoying the strongest growth in the Eating Out market, and the Managed, branded & franchised pubs segment is expanding on the back of accelerating conversions of Tenanted pubs. However, growth of Branded casual restaurants is expected to slow down, from a turnover growth rate of 6.8% in 2015 to 5.3% in 2016, having an impact on the overall Branded market. Many casual restaurant brands have expanded very rapidly in recent years, and are now slowing down or in some cases rationalising their estates, indicating the space race of the last few years has peaked. Comparative analysis of growth in outlets and turnover across the UK Restaurant market and branded restaurant market, E Outlets Turnover 5.5% MARKET 3.3% 3.2% 3.8% 3.3% 4.5% 3.9% 4.5% 4.7% 2.6% E % -0.4% -0.8% 1.4% 1.1% 0.1% 0.2% 0.6% E -1.5% UK Restaurant market Branded restaurant market UK Restaurant market Branded restaurant market 16

17 Analysis of growth in Eating Out market MARKET Market growth rate to slow down in After years of incremental growth, turnover growth in the Eating Out market is slowing down from 2.5% to 2.2% in The market is being hit by weakening business and to an extent, consumer confidence. The Eating Out market is outperforming the total Restaurant market, which is seeing turnover growth of 1.1% and outlet growth of -0.8% in However, the Branded restaurant market is experiencing considerably stronger growth, at rates of 4.7% and 3.3%, for turnover and outlets respectively. Comparative analysis of growth in outlets and turnover across the total Eating Out market, E 2.5% 2.2% 1.9% 1.4% 1.6% 0.9% 1.0% 0.9% 1.0% 0.8% 0.3% 0.4% 0.1% -0.1% % E -1.1% Outlet growth Turnover growth 17

18 Market growth matrix, E MCA has identified the following sources of growth in the current market. Internal factors are ones which operators can control internally. External factors are outside the control of operators, and are shaped by the economy, by technological developments and by changing consumer preferences. HIGH IMPORTANCE MARKET PHYSICAL EXPANSION INFLATION INTERNAL LONGER TRADING HOURS MARKETING INITIATIVES DISCOUNTS & PROMOTIONS EXPERIENTIAL SHARE OF SPEND FOODIE CULTURE EXTERNAL NEW TRADING FORMATS PREMIUMISATION HYBRIDISATION DELIVERY TRADING-UP TOURISM & STAYCATIONS PACE OF NPD SOCIAL MEDIA LOW IMPORTANCE ALTERNATIVE FUNDING SOURCES POPULATION GROWTH EARLY CAPTURE OF DIGITAL NATIVES 18

19 Share of UK total Restaurant market by segment MARKET Fast food gaining share in Restaurant market. Fast food accounts for 22.4% of total value in Restaurant market, up 1.2pp year-on-year. The low-ticket segment s share of outlets is also up 1.9pp to 32.4%. This growth is coming at the expense of pubs in particular, and to a lesser extent, service-led restaurants. Pubs are still the largest segment, claiming c.40% of both outlets and turnover. Service-led restaurants are dragged down by independent restaurants, set to see net closures in 2016, but also to an extent by the slowing growth of branded restaurants. Share of total Restaurant market outlets and turnover, with year-on-year changes, Dec 15-Dec 16E Market sector UK Restaurant market Pubs Service-led restaurants Fast food outlets Outlets Total no. of outlets Dec 16E 119,491 47,458 33,348 38,685 Annual growth Dec 15-Dec 16E -0.8% -2.9% -1.0% 2.2% Share of UK Restaurant market 100% 39.7% -1.7pp 27.9% -0.2pp 32.4% +1.9pp Turnover Total turnover 2016E 53,853 21,469 20,337 12,048 Annual growth E 1.1% 0.7% -0.2% 4.3% Share of UK Restaurant market 100% 39.9% -0.9pp 37.8% -0.3pp 22.4% +1.2pp 19

20 UK Restaurant market outlets, E MARKET Slowdown in net closures. The CAGR of the Total Restaurant market for is -0.6%, up from -1.0% between The market continues to experience a net closure of outlets, driven by Tenanted & leased pubs and Independent restaurants in particular. Yet the rate of closures has slowed down, with Branded casual restaurants and Branded fast food having accelerated their physical expansion over the last three years. Operators have been racing to secure sites before their competitors do, but slowing growth at several leading operators this year suggests this pace may have been too high for some. CAGR CAGR E Total outlets of UK Restaurant market by segment, 2010, 2013 & 2016E Total Restaurant market 125, % -0.6% 3, , , ,491 4, , ,987 28,273 Branded service-led restaurants Fine dining Independent restaurants 2.7% 3.6% 5.7% 5.6% -3.0% -1.9% 2,571 1,179 2,770 1,475 3,031 1,776 Branded traditional fast food 2.5% 3.1% 25,162 25,475 25, , , ,483 Branded delivery-focused fast food Independent fast food/takeaway Branded contemporary fast food 7.8% 6.4% 0.4% 0.5% 12.8% 17.0% 24,780 22,370 17,510 Street food & Mobile vans 8.6% 8.7% 18,757 17,345 17,900 Tenanted & leased pubs Independent & Free of tie pubs -3.4% -7.8% -2.6% 1.1% 8,100 8,688 9,318 3,060 2,901 2, E Managed, branded & franchised pubs Social clubs 2.4% 2.4% -2.1% -2.6% 20

21 UK Restaurant market turnover, E MARKET Strong growth for contemporary fast food, delivery-focused fast food and street food. The three lower-ticket segments have all seen double-digit growth on average between The fastest turnover growth has been seen at Branded contemporary fast food, an impressive annual average rate of 21%. Concepts such as Leon and Itsu have tapped into the growing demand for healthier and more adventurous products at affordable prices, and Five Guys has expanded at an astronomical rate. Delivery-focused fast food brands, not least Domino s, have benefitted from the growing demand for convenience and from longer working hours. CAGR CAGR E Total turnover of UK Restaurant market by segment, 2010, 2013 & 2016E 53,853 52,094 52,182 3,712 5,150 4, Total Restaurant market Branded service-led restaurants Fine dining 0.1% 1.1% 5.1% 6.1% 8.2% 6.2% 16,775 15,292 14,410 Independent restaurants Branded traditional fast food -3.0% -2.0% 5.4% 3.4% 4,035 3,121 3, ,275 4,800 4,857 4, ,094 5,699 5,145 4,177 Branded delivery-focused fast food Independent fast food/takeaway Branded contemporary fast food Street food & Mobile vans 9.5% 10.8% 0.4% 0.6% 14.9% 21.3% 14.0% 14.8% 7,690 7,059 7,213 Tenanted & leased pubs -3.4% -6.7% 8,141 8,992 9, E Independent & Free of tie pubs Managed, branded & franchised pubs Social clubs -2.8% 0.6% 3.4% 3.4% -0.5% 0.3% 21

22 Share of branded restaurants within market segments MARKET Brands winning share across all segments. Branded segments account for 16.2% of outlets and 39.2% of turnover in the total Restaurant market, up from 15.5% and 36.9%, respectively. Managed, branded & franchised pubs in particular have increased their share of the Pub market, driven primarily by accelerating conversions of tenanted pubs. Branded segments continue to achieve considerably higher sales per store across segments, on the back of greater economic resources of parent companies, better capabilities for attracting investment, and consequently, greater access to higher-footfall sites. Share of branded restaurants within market segments, 2016E, with year-on-year changes Market segment Service-led restaurants 2016E outlet numbers 2016E annual turnover m Fast food Market segment 2016E outlet numbers 2016E annual turnover m Independents 28,273 14,410 Fine dining Branded service-led 4,725 5,150 Total 33,348 20,337 Branded share of segment 14.2% 25.3% +0.6pp +1.3pp Pubs Tenanted/leased 17,510 4,177 Independents/free of tie 17,900 7,196 Branded/managed/franchised 9,318 9,932 Social clubs 2, Total 47,458 21,469 Branded share of segment 19.6% 46.3% +1.4pp +2.7pp Independents 25,834 4,942 Street food & mobile vans 7,483 1,094 Branded traditional fast food 3,031 4,035 Branded delivery-focused fast food 1,776 1,275 Branded contemporary fast food Total 38,685 12,048 Branded share of segment 13.9% 49.9% +0.4pp +2.4pp Total Restaurant market Independents/Non-branded/Nonmanaged 100,081 32,759 Branded/Managed 19,410 21,094 Total 119,491 53,853 Branded share 16.2% 39.2% +0.7pp +2.3pp 22

23 Service-led restaurant market landscape MARKET Service-led restaurant market valued at 20.3bn in Service-led restaurants, which comprise branded, independent and fine dining restaurants with table service or at the very least semi-counter service, are estimated to reach a value of 20.3bn in 2016, comprising 33,348 outlets. Independent restaurants remain the largest segment in the market, despite ongoing closures, and account for 85% of all outlets and 71% of sales. Service-led Restaurant market 2016E: 20.3bn 33,348 Branded restaurants 5.2bn 4,725 Independent restaurants 14.4bn 28,273 Fine dining 0.8bn

24 Analysis of growth in Service-led restaurant market MARKET Growth slowing down for Branded service-led restaurants, but still outpacing wider market. Turnover growth for Branded casual restaurants is set to decrease from 6.8% in 2015 to 5.3% in A number of established players not least Frankie & Benny s, Giraffe and La Tasca are rationalising their estates this year. Competition in the market is tighter than ever, and established brands need to refresh their offers to meet contemporary demands. Macroeconomic factors around weakening business confidence are also contributing to operators scaling back expansion plans, as is the increasing difficulty of securing sites. Yet growth in the branded segment is still among the strongest in the Eating Out market, fuelled by a sizeable group of rapidly expanding, newer players. Comparative analysis of growth in outlets and turnover in the service-led restaurant market, E 6.3% 6.8% 5.2% 5.3% 3.4% 3.4% 3.8% 4.0% 2.9% 1.4% 1.0% -0.7% -0.6% -0.3% -0.2% E -0.7% -1.7% -1.6% -1.1% -2.9% Total service-led outlet growth Branded service-led outlet growth Total service-led turnover growth Branded service-led turnover growth 24

25 Service-led restaurant market outlets MARKET Net closures to continue, but at a slowing pace. The rate of outlet closures at service-led restaurants has slowed down from a CAGR of -2.3% between to a CAGR of -1.2% between The expansion of Branded restaurants accelerated between , as brands aggressively set out to secure sites before their competitors did. The rate of closures at independent restaurants, fuelled by a growing consumer preference for brands and a chef shortage affecting many ethnic restaurants in particular, has also slowed down in recent years, but continues to drag down the wider restaurant market. Analysis of growth in outlets across the service-led restaurant market, E 36,996 3,920 34,532 4,249 33,348 4,725 Branded restaurants Segment Total Service-led restaurants CAGR CAGR E -2.3% -1.2% Independent restaurants Branded restaurants 2.7% 3.6% 32,825 29,987 28,273 Fine dining Independent restaurants -3.0% -1.9% Fine dining 5.7% 5.6% E 25

26 Service-led restaurant market turnover MARKET Very modest positive sales growth emerging, driven by branded restaurants. The CAGR for turnover growth in the Service-led restaurants market is 0.1% between E, up from -1.2% between E. The strong turnover growth at Branded restaurants, estimated at a CAGR of 6.1% for E, has been fuelled primarily by rapid physical expansion, but also rising consumer numbers and visit frequencies driving like-for-like growth. Analysis of growth in turnover across the service-led restaurant market, E 20,999 20,249 20,337 Segment CAGR CAGR E 3,712 4,308 5,150 Branded restaurants Total Service-led restaurants -1.2% 0.1% Independent restaurants Branded restaurants 5.1% 6.1% 16,775 15,292 14,410 Fine dining Independent restaurants -3.0% -2.0% Fine dining 8.2% 6.2% E 26

27 Analysis of service-led restaurant market by segment, 2016E MARKET Independents losing share to branded restaurants. Independent restaurants remain the mainstay of the service-led market, accounting for 85% of outlets and 71% of sales, but they are losing share in both. Branded operators now account for over a quarter of turnover in the market. Chain restaurants typically have access to better sites and higher sales per store. Fine dining, defined as either Michelin-starred or AA Rosette awarded, is a minor part of the market. Share of service-led restaurant market outlets and turnover by segment, 2016E Market segment 2016E outlet numbers Share of service-led restaurant market 2016E annual turnover m Share of service-led restaurant market Service-led restaurant market 33, % 20, % Branded restaurants 4, % +0.6pp 5, % +1.3pp Independent restaurants 28, % -0.6pp 14, % -1.5pp Fine dining % +0.0pp % +0.1pp 27

28 Analysis of annual outlet growth by cuisine, 2016E MARKET Latin/South American cuisine seeing strongest growth. Branded concepts serving food from Latin/South America are expected to see outlet growth of 35% in 2016, reaching a total of 135 outlets. The formidable growth in this segment is spearheaded by Rodizio Preto, expected to double in outlets to 10, CAU, set to grow by 57% to 22 outlets, and Turtle Bay, expected to expand by 48% to 37 outlets. However, Latin American food is still only expected to account for 2.8% of the Branded casual restaurant market. Strong growth is also forecast for South East Asian (22%) and Burgers (20%). Pizza/pasta is the largest cuisine segment by outlets, holding a 30% share. Annual outlet growth of branded service-led restaurants by leading cuisine, with share of outlets of branded service-led market, 2016E Cuisine segment 2016E outlet growth rate Number of outlets, December 2016E Share of Branded service-led restaurant market outlets, 2016E American (excluding fast food) 5.0% % Asian (excluding Japanese or South East Asian) 8.8% % British 9.4% % Burger 19.9% % Chicken 11.3% % French 4.2% % Italian 1.6% % Japanese 6.0% % Latin/South American 35.0% % Mexican (excluding burrito fast food chains) 2.8% % Pizza/Pasta 7.9% 1, % South East Asian 22.3% % Steak house 18.9% % Others -21.3% % TOTAL 2.9% 4, % Note: Outlet counts for segments listed above only include brands with 5 or more outlets. The Others segment includes smaller brands as well (2 or more outlets) pp +0.04pp +0.23pp +0.62pp +0.55pp +0.03pp -0.05pp +0.11pp +0.67pp -0.02pp +1.14pp +0.50pp +0.34pp -4.21pp 28

29 Contents Introduction and background Executive summary Market Competitive landscape Section summary Financial performance and outlet growth Key performance indicators Profiles of the top 20 restaurant brands Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 29

30 Competitive landscape Section summary Lower ticket brands top the restaurant market. McDonald s is the leading brand by sales, with turnover expected to reach 2.1 billion in 2016, attributed to ongoing expansion and refurbishments, including rolling out table service to selected stores. Wetherspoon and KFC follow in turnover, with 1.4 and 1.0 billion estimated for 2016, respectively. Growth at Wetherspoon is set to slow this year, with the brand recently putting 90 pubs on the market. In casual restaurants, Nando s continues its winning streak, expected to overtake Burger King in turnover and forecast to reach 579 million in The brand continues to have widespread appeal amongst consumers. Fault lines are opening up in bigger brands, with the Top 10 brands by turnover all set to lose market share this year, aside from Nando s. Emerging brands showing strongest growth. Brands with less than 100 outlets are set to grow turnover and outlets by 9.7% and 7.8% on average, respectively, compared with an average of 5.8% and 3.5% for all leading brands in the market. In contrast, brands with over 200 outlets are in line to grow by 4.2% and 2.0% for turnover and outlets, respectively. This is resulting in growing dynamism in the Restaurant market, with a number of newer brands expanding rapidly while the establishment is slowing down. Brands appealing to millennial consumers by offering ethnic cuisine or specialisation are seeing the most robust growth. Latin/South American themed brand, Turtle Bay, is set to see 66% sales growth to 42 million, and pizza brand, Franco Manca, is expected to grow by 50% to 27 outlets. Contemporary fast food is teaching traditional new tricks. Contemporary fast food brands Itsu, Five Guys, Leon and Wasabi are all gaining market share in outlets through rapid physical expansion. In contrast, McDonald s, KFC, Burger King and Wimpy are losing share. Five Guys is set to see the highest percentage sales growth of any restaurant brand, of 67% to 70 million in 2016, led by strong outlet growth of 50% to 60 outlets. The contemporary fast food brand is on track to increase turnover market share from 1.0% to 1.5% this year in the fast food segment. COMPETITIVE LANDSCAPE Côte, Cosmo and Five Guys outperform in KPIs. Eating Out Panel data shows customers rate Côte and Cosmo highly among restaurant brands, with the brands achieving the highest NPS scores. Cosmo s Pan-Asian cuisine and extensive menu appeal to a wide demographic. Côte, known for its French bistro style, offers all-day service, a key growth area. Among fast food brands, Five Guys tops the KPI charts for overall experience. The brand appeals to an extensive customer base with its mid-market prices and high food quality perceptions. In pub brands, O Neill s preforms well, attaining top position for overall experience and food quality. Sizzling Pubs, the family-friendly pub chain, scores 8.8 in value for money, ranking highest among pub brands. Premium growing at the expense of value in pubs. The Branded pub market is experiencing a shift away from the heavy value focus seen in previous years, to more premium pubs. Greene King has identified Chef & Brewer as a growth brand, and is converting Fayre & Square outlets to the format. M&B is converting Crown Carveries pubs into its new, more premium Sizzling Pubs format, Stonehouse Pizza & Carvery. Net closures are expected for value-led Wetherspoon and low-mid market Harvester. In contrast, premium brand, Vintage Inns, makes the list of Top 10 fastest growing restaurant brands with outlets. Similarly, Miller & Carter ranks eighth for outlet grow among restaurant brands with less than 100 sites. Dynamism and premiumisation key growth trends for next few years. The Restaurant market competitive landscape is marked by three key current trends: fault lines emerging in the establishment, growing dynamism from small brands expanding rapidly, and a shift from value to premium in the pub and, to an extent, fast food space. MCA expects these trends to accelerate over the next few years, resulting in a more fragmented, more competitive and, ultimately, more diverse marketplace, where physical expansion will increasingly involve brands growing at the expense of each other, rather than alongside each other. 30

31 Contents Introduction and background Executive summary Market Competitive landscape Section summary Financial performance and outlet growth Key performance indicators Profiles of the top 20 restaurant brands Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 31

32 Turnover Top 10 fast food, pub and restaurant companies COMPETITIVE LANDSCAPE Positive growth seen across the Top 10 groups. All leading groups, with the exception of Marston s and Enterprise Inns, are seeing turnover growth year on year. McDonald s is the leading restaurant company in the UK by sales, with 2016 turnover expected to reach 2.12bn, up from 2.09bn in Greene King will see the strongest growth among the Top 10 groups over 2016, of 1,072m, primarily due to the acquisition of Spirit Pub Company. Top 10 fast food, pub and restaurant groups by turnover, m, E McDonald's Mitchells & Butlers Greene King Wetherspoon YUM! Brands The Restaurant Group Marston's Enterprise Inns Nando's Stonegate FY ,944 1, ,197 1, FY ,967 1, ,281 1, FY2014 2,026 1, ,409 1, FY ,085 2,101 1,001 1,514 1, FY 2016E 2,116 2,106 2,073 1,595 1, Note: Turnover is reported total group turnover to financial year, and estimated where 2016 results are not yet available. YUM! Is an estimate based on combined turnover of its individual brands. 32

33 Turnover Top 10 brands COMPETITIVE LANDSCAPE Traditional fast food brands lead in top five. McDonald s, KFC and Burger King all feature in the Top five brands by turnover, with Wetherspoon representing the leading pub brand. Growth is slowing down at Wetherspoon, which has put a total of 90 pubs on the market in the last 12 months. Chicken brand Nando s is set to overtake Burger King in turnover in All the leading brands are forecast to enjoy net turnover growth in Top 10 fast food, pub and restaurant brands by turnover, m, E McDonald's Wetherspoon KFC Nando's Burger King PizzaExpress Harvester Frankie & Benny's Hungry Horse Pizza Hut Restaurants ,944 1, ,967 1, ,026 1, ,085 1, E 2,116 1, Note: Turnovers are annualised estimates based on average weekly sales. 33

34 Market share Top 10 brands COMPETITIVE LANDSCAPE Top 10 brands make up 35% of the branded restaurant market. McDonald's leads with a turnover of over 2.1 billion making up 10.1% of the branded market, down from 10.4% in Nando s, forecast to grow to 375 outlets in December 2016, holds an impressive 2.8% market share compared to 452-outlet PizzaExpress s 2.0% share. Nando s is the only leading brand in the Top 10 expected to see market share growth, highlighting the growing dynamism and fragmentation in the market. Top 10 fast food, pub and restaurant brands by turnover, m, with total branded restaurant market share shown in percentages, 2016E 0.3pp 10.1% 0.4pp 6.8% 0.1pp 4.7% 0.2pp 0.0pp 2.8% 2.7% 0.0pp 2.0% 0.0pp 0.1pp 0.0pp 1.6% 1.5% 1.4% 0.0pp 1.1% 2,116 1, McDonald's Wetherspoon KFC Nando's Burger King PizzaExpress Harvester Frankie & Benny's Hungry Horse Pizza Hut Restaurants Turnover 2016E Percentage market share & Movement YoY Notes: Turnover figures estimated for calendar year. Branded restaurant market includes fast food, pub and restaurant brands. 34

35 Operating margin Top 10 groups COMPETITIVE LANDSCAPE Higher operating margins at pub groups. Young s and Whitbread have achieved consistently high operating margins, above 20% every year since Young s recorded an impressive operating margin of 24% in its FY 2016, the highest among surveyed groups, driven by positive like-for-like sales and cost management. The Restaurant Group has achieved the highest operating margin for restaurant companies for the past four years, but this has decreased to 10.5% in H due to operational difficulties and decreasing like-for-likes. Operating margins of leading pub and restaurant companies, Operating margins of leading pub and restaurant companies, Whitbread Young's Greene King Mitchells & Butlers The Restaurant Group Fuller's Prezzo Group Azzurri Group* Wetherspoon FY % 23% 19% 16% 13% 11% 13% 8% 10% 0% FY % 21% 19% 16% 13% 12% 13% 7% 9% 5% FY % 22% 19% 17% 13% 11% 12% 5% 9% 4% FY % 22% 20% 16% 13% 11% 12% 8% 8% 4% FY % 23% 19% 16% 13% 11% 11% 9% 7% 6% Stonegate FY % 24% 19% 11% 7% N/A N/A N/A N/A N/A Notes: Pub group operating margins are based on the following: M&B total group revenue; JD Wetherspoon sales of food, beverages, hotel rooms, and machine income; Young s sales of drink, food and accommodation for managed pubs; Greene King retail; Whitbread hotel and restaurant division. Only companies with official figures available were considered. Figures are to financial year. *Note: Azzurri Group was Gondola Group prior to

36 COMPETITIVE LANDSCAPE Sales growth Top 10 brands with over 200 outlets, E Nando s leading sales growth. The five brands expected to see the strongest growth in 2016 in absolute terms are all value-led, including Nando s, leading ahead of fast food giants, McDonald s and KFC. Nando s is expected to see impressive percentage growth of 10.7% and absolute growth of 55.8 million. Sizzling Pubs is set to see the second highest percentage turnover growth of 9.4%, benefitting from conversions of Crown Carveries sites. Top 10 brands with over 200 outlets ranked by UK sales growth in absolute terms with percentage growth rates, E 10.7% % 9.4% 8.3% % 4.9% 2.7% 3.1% % 1.8% 9.8 Nando's McDonald's KFC Hungry Horse Sizzling Pubs Burger King PizzaExpress Prezzo Wetherspoon Pizza Hut Restaurants Absolute growth Percentage growth Turnover growth Brand Nando's McDonald's KFC Hungry Horse Sizzling Pubs Burger King PizzaExpress Prezzo Wetherspoon Pizza Hut Restaurants 10.7% 2.7% 3.1% 8.1% 9.4% 4.0% 4.9% 8.3% 0.9% 1.8% Outlet growth 10.0% 1.6% 2.2% 8.2% 8.7% 1.6% 2.3% 7.8% -2.0% 1.8% Crude like-forlike 0.7% 1.1% 0.9% -0.1% 0.7% 2.4% 2.6% 0.5% 2.9% 0.0% 36

37 COMPETITIVE LANDSCAPE Sales growth Top 10 brands with outlets, E Bella Italia ranks highest. Bella Italia is expected to see turnover percentage growth of 34%, on the back of 22 new openings predominantly in retail parks. Flaming Grill Pubs is seeing to a see high crude like-for-like score, 5.3%, and is third highest for absolute turnover growth of 9.4 million. Top 10 brands with outlets ranked by UK sales growth in absolute terms with percentage growth rates, E 33.6% % % % 4.5% 6.8% % 3.5% 4.0% % Bella Italia Wagamama Flaming Grill Toby Carvery Beefeater Carluccio's Zizzi Brewers Fayre Chef & Brewer Vintage Inns Absolute growth Percentage growth Bella Italia Wagamama Flaming Grill Toby Carvery Beefeater Carluccio s Zizzi Brewers Fayre Chef & Brewer Vintage Inns Turnover growth 33.6% 10.5% 7.4% 3.6% 4.5% 6.8% 5.3% 3.5% 4.0% 2.5% Outlet growth 22.9% 5.1% 2.1% 0.0% 5.6% 6.1% 5.8% 3.1% 3.7% 3.1% Crude likefor-like 10.7% 5.4% 5.3% 3.6% -1.1% 0.7% -0.5% 0.4% 0.3% -0.6% 37

38 COMPETITIVE LANDSCAPE Sales growth Top 10 brands with under 100 outlets, E Five Guys leading sales growth for smaller brands. Five Guys is set to see impressive percentage turnover growth of 67% in 2016 to 70.2 million. The brand continues to expand rapidly throughout the UK. Miller & Carter s turnover is expected to increase by 27% to 14.2mn, driven by conversions of Harvester units. Top 10 brands with under 100 outlets ranked by UK sales growth in absolute terms with percentage growth rates, E % % 54.9% % 63.2% % 12.5% 16.5% % % Five Guys Côte Leon T.G.I. Fridays Turtle Bay Jamie's Italian Absolute growth Miller & Carter Percentage growth Bill's Loungers Byron Five Guys Côte Leon T.G.I. Fridays Turtle Bay Jamie's Italian Miller & Carter Bill s Loungers Byron Turnover growth 66.7% 20.1% 54.9% 9.1% 63.2% 12.5% 26.8% 16.5% 27.9% 20.2% Outlet growth 50.0% 12.3% 48.5% 6.9% 48.0% 9.5% 30.8% 5.6% 16.7% 12.7% Crude like-forlike 16.7% 7.8% 6.4% 2.2% 15.2% 3.0% -4.0% 10.9% 11.2% 7.5% 38

39 Sales growth summary, E COMPETITIVE LANDSCAPE Highest growth seen in brands with less than 100 outlets. Brands with less than 100 sites are set to grow turnover and outlets by 9.7% and 7.8%, compared with an average of 5.8% and 3.5% for all leading brands in the market. In contrast, brands with over 200 outlets are in line to grow by 4.2% and 2.0% for turnover and outlets, respectively, this year. Average outlet and sales growth for brands by outlet count, turnover in billions, E 9.7% AVG TURNOVER GROWTH AVG OUTLET GROWTH 3.5% 5.8% 7.8% 0.9% 4.8% 2.0% 4.2% Average < >200 Outlet growth Turnover growth < >200 Total brands Total outlets 3,250 1,838 5,974 Total turnover 3,992 2,231 7,853 Note: Brand performance is focused on MCA s Brands & Corporates database of 110 leading operators, with inclusion requiring a minimum of 5 outlets and a distinct, single brand consistency 39

40 Market share of leading restaurant brands by outlets Fast food, pub and restaurant brands by market share, E Turnover market share 1.6% 1.8% 2.6% 2.9% 2.0% 3.1% 6.0% 7.3% 7.9% Outlet market share COMPETITIVE LANDSCAPE Top 10 brands losing market share. The Top 10 brands by outlets are seeing continued decrease in both turnover and outlet market share. Brands with outlets are seeing highest increase in turnover and outlet market share. The smaller groups are both also set to increase their share of sales and outlets in the total market this year, highlighting growing dynamism in the Restaurant market. 1.4% 1.5% 1.5% 2.5% 2.7% 3.0% 5.9% 6.4% 6.9% 16.9% 17.6% 17.5% 16.6% 17.4% 17.1% 35.3% 34.6% 32.4% 27.9% 27.6% 27.4% E Top 10 Next 25 Next 25 Next 25 Bottom E Top 10 Next 25 Next 25 Next 25 Bottom 25 Top 10 Next 25 Next 25 Next 25 Bottom 25 Outlet numbers Brand examples Note: Brand performance is focused on MCA s Brands & Corporates database of 110 leading operators, with inclusion requiring a minimum of 5 outlets and a distinct, single brand consistency. 40

41 Percentage sales growth Top 10 brands, E COMPETITIVE LANDSCAPE Five brands seeing turnover growth of over 50%. The fastest growing brands CAU, Five Guys, Franco Manca, Turtle Bay and Leon are examples of brands offering a contemporary experience through specialisation in a product, adventurous cuisine or healthier eating focus. Service, environments and atmosphere are equally important to capture the minds of contemporary consumers. Top 10 fastest growing brands ranked by percentage growth rates with UK sales growth in absolute terms, E 67% 67% 64% 63% 55% 48% 45% 42% 41% 38% CAU Five Guys Franco Manca Turtle Bay Leon Cosy Club Coast To Coast Koh Thai Tapas Barburrito MEATliquor Absolute Growth Percentage Growth 41

42 COMPETITIVE LANDSCAPE Outlets Top 20 restaurant, fast food and pub brands by outlets Fast food brands and Wetherspoon stand out. McDonald s has the highest number of outlets and is set to experience continued strong expansion over Chicken giant Nando s is set to see the highest percentage growth of 10%, on the back of 34 net new openings. Top 20 fast food, pub and restaurant brands by outlets, December 2015-December 2016E Brand Segment Outlets Dec-15 Outlets Dec-16E Net New openings % growth McDonald's Traditional fast food 1,277 1, % KFC Traditional fast food % Wetherspoon Pub restaurant % Burger King Traditional fast food % PizzaExpress Casual restaurant % Nando's Casual restaurant % Pizza Hut Restaurants Casual restaurant % Frankie & Benny's Casual restaurant % Hungry Horse Pub restaurant % Harvester Pub restaurant % Sizzling Pubs Pub restaurant % Prezzo Casual restaurant % Vintage Inns Pub restaurant % Toby Carvery Pub restaurant % Fayre & Square Pub restaurant % Brewers Fayre Pub restaurant % Two for One Pub restaurant % Flaming Grill Pubs Pub restaurant % Beefeater Pub restaurant % Zizzi Casual restaurant % Sub-total 6,914 7, % 42

43 Outlet growth Top 20 brands Dec 2015-Dec 2016E COMPETITIVE LANDSCAPE Nando s leads in outlet growth, followed by Bella Italia and Hungry Horse. Bella Italia is growing on the back of Café Rouge conversions, and also a revitalised offer. Barburrito is seeing the strongest growth, though from a relatively low base. Top 20 fast food, pub and restaurant brands by forecast net outlet growth, Dec 2015-Dec 2016E, with percentage growth rates 34 67% 10% 22 23% 50% % 9% 2% % 8% 48% 16 48% 22% % 10 2% 50% 23% 9 12% % % 2% Outlet growth Percentage growth 43

44 COMPETITIVE LANDSCAPE Top 20 casual restaurant brands with under 60 outlets, E Emerging brands lead casual restaurants. Turtle Bay, Coast to Coast and Franco Manca are among newer brands set to see strong outlet growth. Both Turtle Bay and Coast to Coast have well-developed cocktail menus alongside their food offers. La Tasca and Strada are undergoing estate rationalisation. Top 20 casual restaurant brands under 60 outlets, ranked by outlets with turnover, E Brand: Outlets Dec- 15 Outlets Dec-16E Year on Year % growth Turnover FY 2015 (m) Turnover FY 2016E (m) Year on year % growth Ed's Easy Diner % % Byron % % Las Iguanas % % Jamie's Italian % % Strada % % Loch Fyne % % Harry Ramsden's % % Chimichanga % % La Tasca % % Wildwood % % Le Pain Quotidien % % Handmade Burger Company % % Turtle Bay % % Piccolino % % Wahaca % % Brasserie Blanc % % Coast To Coast % % Cosmo % % Franco Manca % % Giggling Squid % % Sub-total % % UK Branded casual restaurant market 4,590 4,725 4,890 5,150 44

45 Contents Introduction and background Executive summary Market Competitive landscape Section summary Financial performance and outlet growth Key performance indicators Profiles of the top 20 restaurant brands Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 45

46 Top 15 Casual restaurant brands by outlets market positioning map High Price COMPETITIVE LANDSCAPE Narrow Focus Broad focus Low Price 46

47 Market share of Top 15 casual restaurant brands COMPETITIVE LANDSCAPE PizzaExpress and Nando s fight for leadership. PizzaExpress and Nando s top the charts by outlets, with 452 and 375 respectively, Nando s leading by turnover, holding an 11.2% market share. At 0.6pp Nando s has seen the biggest increase in turnover share from 2015, attributed to continued rapid expansion. Top 15 branded casual restaurants, market share by UK store numbers and turnover, December 2016E Outlets December 2016E Turnover 2016E Casual Restaurant brand UK Dec 16E Share of Branded casual restaurant market Change in % from 2015 Est. Turnover ( m) Share of Branded casual restaurant market Change in % from 2015 PizzaExpress % 0.0pp % 0.0pp Nando's % 0.4pp % 0.6pp Pizza Hut Restaurants % -0.1pp % 0.0pp Frankie & Benny's % -0.2pp % -0.3pp Prezzo % 0.2pp % 0.1pp Zizzi % 0.1pp % 0.0pp Wagamama % 0.0pp % 0.1pp Bella Italia % 0.4pp % 0.5pp ASK Italian % 0.0pp % 0.0pp Carluccio's % 0.0pp % 0.0pp Café Rouge % -0.2pp % -0.3pp Chiquito % 0.0pp % 0.0pp Côte % 0.1pp % 0.3pp Gourmet Burger Kitchen % 0.1pp % 0.1pp T.G.I. Friday's % 0.0pp % 0.1pp Sub-total 2, % 1.0pp 3, % 0.3pp UK Branded casual restaurant market 4, % 5, % 47

48 Restaurant brands NPS lunch & dinner, 2016 COMPETITIVE LANDSCAPE Côte performs well in NPS score. Côte, Cosmo and Loch Fyne top the charts for NPS scores. Loch Fyne and La Tasca receive high NPS scores despite having modest or negative turnover growth, highlighting a loyal core customer base. At the other end of the spectrum are Key: Harry Ramsden s, Chiquito and Jamie s Italian. High sales growth Medium sales growth Low sales growth Leading restaurant chains ranked by Revisit Intention and NPS, lunch & dinner combined, 2016 Top 10 Net Promoter Scores 2016 Score Bottom 10 Net Promoter Scores 2016 Score Côte 62 Harry Ramsden's 0 Cosmo 59 Chiquito 9 Loch Fyne 53 Jamie's Italian 9 La Tasca 42 Giraffe 9 Las Iguanas 41 Gourmet Burger Kitchen 10 Bella Italia 39 Ed's Easy Diner 12 Nando's 38 Bill's 19 Prezzo 36 T.G.I. Friday's 21 Wagamama 36 ASK 24 Carluccio's 35 Handmade Burger Co. 24 Source: MCA Eating Out Panel, 12 months to June 2016 & minimum sample size of 30 applies. Note: Sales growth is categorised as turnover percentage growth, less than 5% is low, 5-10% medium and more than 10% is high. 48

49 KPIs of casual restaurant brands (1 of 2) lunch & dinner, 2016 COMPETITIVE LANDSCAPE Among restaurant chains, Cosmo ranks highest. Most notably, Cosmo scores 8.7 for value for money and 9.0 for speed of service. YO! Sushi achieves the highest score for food quality/taste. KPIs of restaurant brands lunch & dinner combined, 2016 Rank Convenient location Atmosphere/ environment Value for money Low Prices Speed of Service Friendly service Food quality/ taste 1 Côte 8.9 Loch Fyne 8.7 Cosmo 8.7 Cosmo 8.5 Cosmo 9.0 Côte 8.8 YO! Sushi Las Iguanas 8.8 Côte 8.6 Côte 8.2 Las Iguanas 7.5 Las Iguanas 8.6 Las Iguanas 8.8 Côte Prezzo 8.7 Café Rouge 8.4 Las Iguanas 8.2 Bella Italia 7.5 Wagamama 8.6 La Tasca 8.7 Cosmo Cosmo 8.7 Las Iguanas 8.4 La Tasca 8.1 Pizza Hut Restaurant 7.5 Wasabi 8.3 Bella Italia 8.6 Wagamama Bella Italia 8.7 Bella Italia 8.4 Loch Fyne 8.1 La Tasca 7.4 Côte 8.1 Wagamama 8.6 La Tasca ASK 8.6 Zizzi 8.3 Bella Italia 8.1 Nando's 7.4 YO! Sushi 8.1 Zizzi 8.5 Las Iguanas Jamie's Italian 8.6 Cosmo 8.2 Wagamama 7.9 Wasabi 7.3 Prezzo 8.1 Cosmo 8.5 Bella Italia Chiquito 8.5 Prezzo 8.2 Prezzo 7.9 Prezzo 7.2 Nando's 8.0 Loch Fyne 8.5 Prezzo Zizzi 8.5 Frankie & Benny's 8.2 Pizza Hut Restaurant 7.9 ASK 7.2 Bella italia 8.0 Carluccio's 8.5 Loch Fyne PizzaExpress 8.5 ASK 8.2 Nando's 7.9 PizzaExpress 7.1 La Tasca 8.0 Café Rouge 8.5 Nando's 8.5 Source: MCA Eating Out Panel, 12 months to June Minimum sample size of 30 applies. KPIs are based on a scale of 1-10 (from very poor to excellent). 49

50 KPIs of casual restaurant brands (2 of 2) lunch & dinner, 2016 COMPETITIVE LANDSCAPE Cosmo ranks highest for overall experience. Cosmo achieves continually high scores across the board, including outperforming other branded restaurants in overall experience. Loch Fyne follows in second place for overall experience and is also ranked first for freshness. KPIs of restaurant brands lunch & dinner combined, 2016 Rank Drink quality/ taste Freshness Menu Choice Cleanliness Ethical practice/ products Family friendly Overall experience 1 Cosmo 8.8 Loch Fyne 9 Cosmo 9.3 Côte 8.9 Loch Fyne 7.9 Cosmo 8.8 Cosmo La Tasca 8.8 Côte 8.8 Wagamama 8.6 Loch Fyne 8.9 Wagamama 7.9 Ed's Easy Diner 8.4 Loch Fyne Ed's Easy Diner 8.6 Wagamama 8.7 YO! Sushi 8.5 Cosmo 8.8 Cosmo 7.8 Pizza Hut Restaurants 8.4 Côte Côte 8.6 YO! Sushi 8.7 Bella Italia 8.5 La Tasca 8.7 Jamie's Italian 7.8 Frankie & benny's 8.4 Las Iguanas Las Iguanas 8.5 Bella Italia 8.6 Las Iguanas 8.5 Prezzo 8.6 Bella Italian 7.8 Nando's 8.3 Bella Italia Café Rouge 8.5 Zizzi 8.5 Loch Fyne 8.5 Wagamama Bella Italia 8.4 Las Iguanas 8.5 Côte 8.5 Las Iguanas 8.6 Handmade Burger Co. Ed's Easy Diner 7.7 Wagamama 8.2 La Tasca Bella Italia 8.2 Wagamama Wagamama 8.4 Cosmo 8.5 La Tasca 8.5 Zizzi 8.5 Nando's 7.6 PizzaExpress 8.1 Prezzo Prezzo 8.4 Prezzo 8.5 Prezzo 8.4 Bella Italia 8.5 Las Iguanas 7.6 T.G.I. Fridays 8.1 Zizzi Zizzi 8.4 Jamie's Italian 8.5 PizzaExpress 8.2 Café Rouge 8.5 YO! Sushi 7.5 Jamie's Italian 8.1 Café Rouge 8.3 Source: MCA Eating Out Panel, 12 months to June Minimum sample size of 30 applies. KPIs are based on a scale of 1-10 (from very poor to excellent). 50

51 COMPETITIVE LANDSCAPE KPI case study Top 10 restaurant brands, lunch & dinner, 2016 Cosmo achieves the highest combined score. Cosmo achieves the highest combined score for the key metrics of food quality and value for money. Côte and Wagamama achieve the same scores as Cosmo in food quality, but Wagamama underperforms in value for money. Top 10 restaurant brands, lunch & dinner combined, KPIs of food quality and value for money, ranked combined score, Cosmo Côte La Tasca Las Iguanas Bella Italia Wagamama Loch Fyne Prezzo Nando's Zizzi Food quality/taste Value for money Source: MCA Eating Out Panel, 12 months to June 2016 & minimum sample size of 30 applies 51

52 Top 10 Fast food brands by outlets market positioning map COMPETITIVE LANDSCAPE High Price Traditional Emerging Low Price 52

53 Market share of branded fast food chains COMPETITIVE LANDSCAPE Traditional fast food brands losing share. McDonald s, KFC and Burger King are all expected to see a decrease in both the market share of outlets and turnover. McDonald s alone is forecast to see a drop of 1.2pp in turnover share. Although contemporary fast food is a rapidly growing segment, it is still a relatively minor player in the total fast food market, with five largest brands making up less than 6% of outlets. Top 10 branded fast food restaurants, market share by UK store numbers and turnover, December 2016E Outlets December 2016E Branded Chains Traditional/Cont. Outlets Share of UK Branded fast food market Change in % from 2015 Turnover 2016E Turnover ( m) Share of UK Branded fast food market Change in % from 2015 McDonald's Traditional 1, % -1.1pp 2, % -1.2pp KFC Traditional % -0.6pp 1, % -0.5pp Burger King Traditional % -0.2pp % 0.0pp Wimpy Traditional % -0.2pp % -0.1pp Itsu Contemporary % 0.1pp % 0.2pp Five Guys Contemporary % 0.5pp % 0.5pp Leon Contemporary % 0.4pp % 0.4pp Wasabi Contemporary % 0.1pp % 0.1pp Roosters Piri Traditional % -0.1pp % 0.0pp Tortilla Contemporary % 0.1pp % 0.1pp Sub-total 3, % -1.0pp 4, % -0.5pp UK Branded fast food market (excl. delivery segment) Note: Contemporary fast food is defined as food served quickly at the counter and has healthy or newer cuisine focus. 3, % 4, % 53

54 Fast food NPS lunch & dinner, 2016 COMPETITIVE LANDSCAPE Wasabi tops the charts. Out of leading brands, Wasabi holds the highest score for NPS, followed by Five Guys and KFC. The top 2 brands are also set to enjoy strong sales growth of over 10% this year. Leading fast food chains ranked by revisit intention and NPS, lunch & dinner combined Net Promoter Score 2016 Score Wasabi 24 Five Guys 15 KFC 15 Key: High sales growth Medium sales growth Low Sales growth McDonald's 14 Burger King -1 Source: MCA Eating Out Panel, 12 months to June 2016 & minimum sample size of 30 applies. Note: Sales growth is categorised as turnover percentage growth, less than 5% is low, 5-10% medium and more than 10% is high. 54

55 KPIs of fast food brands (1 of 2) lunch & dinner, 2016 COMPETITIVE LANDSCAPE Wasabi ranks highest for food quality. Wasabi achieves the highest scores for speed of service and food quality. McDonald's performs highest in value for money and low prices, with entry menu prices starting at 0.89 for a Hamburger. KPIs of fast food brands lunch & dinner combined, 2016 Rank Convenient location Atmosphere/ environment Value for money Low prices Speed of service Friendly service Food quality/ taste 1 McDonald's 8.4 Five Guys 7.7 McDonald's 8.0 McDonald's 7.8 Wasabi 8.3 Five Guys 8.2 Wasabi KFC 8.2 Chicken Cottage 7.6 KFC 7.8 Dixy Chicjken 7.7 Five Guys 8.1 McDonald's 7.8 Five Guys Five Guys 8.2 Dixy Chicken 7.6 Dixy Chicken 7.7 Chicken Cottage 7.6 McDonald's 8.0 KFC 7.8 KFC Burger King 8.1 KFC 7.5 Wasabi 7.7 KFC 7.5 KFC 7.9 Chicken Cottage 7.8 McDonald's Wasabi 8.1 McDonald's 7.4 Chicken Cottage 7.6 Burger King 7.3 Burger King 7.7 Wasabi 7.7 Burger King 7.8 Source: MCA Eating Out Panel, 12 months to June Minimum sample size of 30 applies. KPIs are based on a scale of 1-10 (from very poor to excellent). 55

56 KPIs of fast food brands (2 of 2) lunch & dinner, 2016 COMPETITIVE LANDSCAPE Five Guys ranks highest in overall experience. The fast growing burger brand also outperforms in freshness and cleanliness. McDonald s achieves the highest rating for menu choice and family friendliness. KPIs of fast food brands lunch & dinner combined, 2016 Rank Drink quality/ taste Freshness Menu choice Cleanliness Ethical practices/ products Family friendly Overall experience 1 Five Guys 8.1 Five Guys 8.2 McDonald's 8.0 Five Guys 8.1 Dixy Chicken 7.7 McDonald's 8.0 Five Guys McDonald's 7.9 KFC 8.0 KFC 8.0 McDonald's 7.8 Chicken Cottage 7.6 Five Guys 7.9 Wasabi KFC 7.9 Wasabi 8.0 Five Guys 8.0 KFC 7.8 Five Guys 7.6 KFC 7.9 McDonald's Dixy Chicken 7.8 McDonald's 7.8 Wasabi 7.9 Wasabi 7.7 Wasabi 7.6 Chicken Cottage 7.7 KFC Burger King 7.7 Burger King 7.7 Burger King 7.7 Dixy Chicken 7.6 KFC 7.3 Burger King 7.7 Chicken Cottage 7.8 Source: MCA Eating Out Panel, 12 months to June Minimum sample size of 30 applies. KPIs are based on a scale of 1-10 (from very poor to excellent). 56

57 KPI Case study Top 5 fast food brands, lunch & dinner, 2016 COMPETITIVE LANDSCAPE KFC leads in combined score. KFC achieves the highest score, though this is virtually on par with Wasabi and McDonald s. Five Guys scores well for food quality but underperforms in value for money. Leading fast food brands lunch and dinner KPIs of food quality and value for money, ranked by combined score, KFC Wasabi McDonald's Five Guys Dixy Chicken Food quality/taste Value for money Source: MCA Eating Out Panel, 12 months to June 2016 & minimum sample size of 30 applies 57

58 Leading pub restaurants market positioning map High Price COMPETITIVE LANDSCAPE Local Focus Destination Focus Low Price 58

59 Market share of pub brands COMPETITIVE LANDSCAPE Wetherspoon leads in outlets and turnover. Wetherspoon has the largest estate with 773 outlets (not including Lloyds No. 1 or JJ moons pubs) and a turnover of 1.4 billion, but its turnover share has decreased by 1.5pp year-on-year on the back of pubs being put on the market. Although ranking fourth for outlet numbers, Harvester has the second highest turnover of 329 million. Top 10 pub brands, market share by UK pub numbers and turnover, December 2016E Outlets December 2016E Turnover 2016E Pub Brands UK Dec 16E Share of UK Pub market Change in % from 2015 Est. Turnover ( m) Share of UK Pub market Change in % from 2015 Wetherspoon % -0.8pp 1, % -1.5pp Hungry Horse % 0.1pp % 0.1pp Sizzling Pubs % 0.1pp % 0.1pp Harvester % -0.2pp % -0.1pp Vintage Inns % 0.0pp % 0.0pp Toby Carvery % -0.1pp % 0.0pp Brewers Fayre % 0.0pp % 0.0pp Beefeater % 0.0pp % 0.0pp Flaming Grill Pubs % 0.0pp % 0.1pp Two for One % -0.1pp % 0.0pp Subtotal 2, % -0.9pp 3, % -1.3pp Managed, branded & franchised pub market 9, % 9, % 59

60 Pub NPS lunch & dinner, 2016 COMPETITIVE LANDSCAPE Eating Inn performs well. Eating Inn attains the highest NPS score of 51, followed by Miller & Carter, 49, and Sizzling Pubs, 48. The bottom 10 NPS scores are almost exclusively made up of low or medium sales growth brands. Key: High sales growth Medium sales growth Low Sales growth Leading pub chains revisit intention and NPS, lunch & dinner, 2016 Net Promoter Score top Score Net Promoter Score bottom Score Eating Inn 51 Fuller's 6 Miller & Carter 49 Chef & Brewer 17 Sizzling Pubs 48 Beefeater 22 Toby Carvery 47 Fayre & Square 23 Crown Carveries 46 Yates's 23 O'Neill's 43 Ember Inns 23 Table 41 All Bar One 26 Vintage Inns 41 Harvester 26 Marston's 39 Two for One 28 Slug & Lettuce 38 Flaming Grill 33 Source: MCA Eating Out Panel, 12 months to June 2016 & minimum sample size of 30 applies. Note: Sales growth is categorised as percentage turnover growth, less than 0% is low, 0-5% medium and more than 5% is high. 60

61 KPIs of pub brands (1 of 2) lunch & dinner, 2016 COMPETITIVE LANDSCAPE Sizzling Pubs leads in value for money. Miller & Carter performs well in atmosphere and food quality, scoring 8.5 and 8.7 respectively. KPIs of pub brands lunch & dinner combined, 2016 Rank Convenient location 1 Eating Inn 9.0 Atmosphere/ environment Miller & Carter Value for money Low prices Speed of service Friendly service Food quality/ taste 8.5 Sizzling Pubs 8.7 Crown Carveries 8.6 Toby Carvery 8.3 Table 8.7 Miller & Carter Sizzling Pubs 8.9 Eating Inn 8.5 Crown Carveries 8.7 Wetherspoon 8.5 Crown Carveries 8.2 Marston's 8.7 O'Neill's Ember Inns 8.9 Vintage Inns 8.4 Eating Inn 8.6 Sizzling Pubs 8.5 Yates's 8.2 Sizzling Pubs 8.7 Sizzling Pubs Flaming Grill 8.8 Marston's 8.4 Wetherspoon 8.6 Toby Carvery 8.4 Sizzling Pubs 8.2 Eating Inn 8.7 Marston's Marston's 8.8 O'Neill's 8.4 Toby Carvery 8.6 Yates's 8.3 Wetherspoon 8.1 Fuller's 8.5 Eating Inn Table 8.7 Table 8.4 Flaming Grill 8.5 Flaming Grill 8.2 Eating Inn 8.1 Flaming Grill 8.5 Toby Carvery Wetherspoon 8.7 Two for One 8.3 Marston's 8.5 Hungry Horse 8.2 Marston's 8.1 Vintage Inns 8.5 Table Crown Carveries 8.7 Fuller's 8.2 Hungry Horse 8.4 Fayre & Square 8.1 Fuller's 8.1 Two for One 8.5 Slug & Lettuce Slug & Lettuce 8.7 Sizzling Pubs 8.2 Fayre & Square 8.4 Eating Inn 8.1 Flaming Grill 8.1 Brewers Fayre 8.4 Crown Carveries Vintage Inns 8.6 Flaming Grill 8.2 Brewers Fayre 8.3 Marston's 8.1 O'Neill's 8.0 Crown Carveries 8.4 Flaming Grill 8.3 Source: MCA Eating Out Panel, 12 months to June Minimum sample size of 30 applies. KPIs are based on a scale of 1-10 (from very poor to excellent). 61

62 KPIs of pub brands (2 of 2) lunch & dinner, 2016 COMPETITIVE LANDSCAPE O Neill s ranks highest for overall experience. Among branded operators, Miller & Carter and O Neill s rank highly for key metrics including freshness and overall experience. Value pub chain, Sizzling Pubs, comes second for overall experience and first for menu choice. KPIs of pub brands lunch & dinner combined, 2016 Rank Drink quality/ taste Freshness Menu choice Cleanliness 1 Fuller's 8.6 Miller & Carter 8.8 Sizzling Pubs 8.5 Miller & Carter Ethical practices/ products 8.7 O'Neill's Sizzling Pubs 8.6 Table 8.6 Flaming Grill 8.5 Eating Inn 8.6 Yates's 7.9 Family friendly Two for One Sizzling Pubs Overall experience 8.6 O'Neill's Sizzling Pubs Marston's 8.6 Sizzling pubs 8.4 Marston's 8.4 Marston's 8.6 Two for One 7.6 Marston's 8.5 Miller & Carter Flaming Grill 8.5 Marston's 8.4 O'Neill's 8.4 Table 8.6 Fuller's Table 8.5 O'Neill's 8.4 Hungry Horse 8.4 Fuller's 8.5 All Bar One 7.6 Hungry Horse Toby Carvery 8.4 Eating Inn Marston's Eating Inn 8.5 Toby Carvery 8.4 Eating Inn 8.3 Vintage Inns 8.5 Miller & Carter 7.6 Crown Carveries 8.4 Toby Carvery Toby Carvery 8.4 Vintages Inns 8.4 Chef & Brewer 8.3 Slug & Lettuce 8.4 Marston's 7.5 Fayre & Square 8.3 Table O'Neill's 8.4 Eating Inn 8.3 Wetherspoon 8.3 Sizzling Pubs 8.4 Sizzling Pubs 7.5 Eating Inn 8.3 Brewers Fayre Wetherspoon 8.4 Crown Carveries 8.3 Fayre & Square 8.3 O'Neill's 8.4 Table 7.5 Table 8.3 Wetherspoon Vintage Inns 8.4 Slug & Lettuce 8.3 Slug and Lettuce 8.3 Flaming Grill 8.4 Beefeater 7.5 Brewers Fayre 8.3 Crown Carveries 8.3 Source: MCA Eating Out Panel, 12 months to June Minimum sample size of 30 applies. KPIs are based on a scale of 1-10 (from very poor to excellent). 62

63 KPI case study pub brands, lunch & dinner, 2016 COMPETITIVE LANDSCAPE Sizzling Pubs achieves the highest combined score for value for money and food quality/taste. O Neill s performs well in food quality but has one of the lowest scores for value for money. Crown Carveries performs well in value for money but scores comparatively low in food quality. Leading pub brands, lunch & dinner combined, KPIs of food quality and value for money, ranked by combined score, Sizzling Pubs Eating Inn Toby Carvery Crown Carveries Marston's O'Neill's Flaming Grill Wetherspoon Table Table Hungry Horse Food quality/taste Value for money Source: MCA Eating Out Panel, 12 months to June 2016 & minimum sample size of 30 applies 63

64 Contents Introduction and background Executive summary Market Competitive landscape Section summary Financial performance and outlet growth Key performance indicators Profiles of the top 20 restaurant brands Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 64

65 Profiles of the top 20 restaurant brands by turnover COMPETITIVE LANDSCAPE Rank Brand 1 McDonald's 2 Wetherspoon 3 KFC 4 Nando's 5 Burger King 6 PizzaExpress 7 Harvester 8 Frankie & Benny's 9 Hungry Horse 10 Pizza Hut Restaurants 11 Toby Carvery 12 Sizzling Pubs 13 Vintage Inns 14 Brewers Fayre 15 Beefeater 16 T.G.I. Friday's 17 Prezzo 18 Chef & Brewer 19 Wagamama 20 Zizzi 65

66 McDonald s COMPETITIVE LANDSCAPE Fast food burger brand with a global presence, McDonald s is the largest UK restaurant brand. Approximately 30% of UK restaurants are company owned, and the rest franchised. McDonald s is a UK fast food pioneer in local sourcing, with a commitment to using British and Irish farmers for its ingredients. Restaurants are located across UK High Streets, in airports, out-of-town sites, service stations and shopping centres. In early 2016 McDonald s announced plans to roll out table service to 400 UK restaurants. Company and management Cuisine Category Service style Parent company Head office Website Ownership Burger Senior Management UK Traditional fast food Counter service McDonald s Corporation High Road East Finchley London N2 8AW Company owned and franchised CEO, Paul Pomroy COO, Richard Forte Chief Marketing Officer, Alistair Macrow Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets 1,230 1,255 1,277 1,297 London outlets Regional outlets ,002 1,018 Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend E 1,967 2,026 2,085 2,116 Turnover figures include companyowned and franchised stores, and are based on average weekly sales. 31,600 Q Q YoY growth NPS % Revisit intention % Pricing and marketing activities Entry Typical Exit Starter dish N/A N/A N/A Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Yes McCafé Loyalty Card Chicken legend range Premium ranges Launching smartphone coupon app across Europe Doubling the number of restaurants using digital menus Refranchise at least 1,500 restaurants by

67 Wetherspoon COMPETITIVE LANDSCAPE Wetherspoon is the leading UK branded chain of pubs offering traditional pub food and drink at highly competitive prices. The group has extended its menu to include premium burgers and international cuisine dishes. Outlets have extended opening hours, opening from 7am, serving coffee and breakfast options. Sites are located on High Streets in town and city centres, and appeal to a wide, value-conscious demographic. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub food Tim Martin, Chairman John Hutson, CEO Pub restaurant Semi-counter service JD Wetherspoon Plc Wetherspoon House Reeds Crescent Watford, WD24 4QL Company owned Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 10 NPS Revisit intention E 1,080 1,199 1,413 1,426 Outlet and turnover figures do not include Lloyds No. 1 bars. 35,100 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Yes Various weekday clubs Give feedback online and claim a free drink Deli deals, deli item and a drink for 3.99 available all day every day Wetherspoon looking to dispose of a further 33 pubs in 2016 Wetherspoon staff to keep bonuses and free shares despite living wage increase 67

68 KFC COMPETITIVE LANDSCAPE American fast food chicken concept, owned by YUM! Brands and famed for its Colonel logo and Kentucky Fried Chicken product. KFC was the first US fast food brand to enter the UK, when it opened in Restaurants are situated on major UK High Streets, in airports, motorway service stations and in out-of-town locations (increasingly with drive-thru facilities). KFC s bucket deals have strong appeal among families and young and middle-aged adults. In 2015 KFC began to roll out a major refurbishment programme across its UK estate. Company and management Cuisine Category Service style Parent company Head office Website Ownership Chicken Senior Management Traditional fast food Counter service YUM! Brands International 32 Goldsworth Road Woking Surrey, GU21 6BR Company owned and franchised Martin Shuker, MD, KFC UK David Timm, Marketing Chief, KFC UK Russel Smith, Chief Operating Officer, KFC UK Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend E Turnover figures are for companyowned and franchised restaurants. 22,700 Q Q YoY growth NPS % Revisit intention % Pricing and marketing activities Entry Typical Exit Starter dish N/A N/A N/A Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Selected stores only Colonel s Club: collect Chicken Stamps to earn rewards KFC Fast Track mobile ordering app 10% off for Armed Forces Smaller footprint concept for city center, intention of opening up to 200 new sites 68

69 Nando s COMPETITIVE LANDSCAPE Renowned casual chicken concept with an almost cult following. Nando s sits between a fast food and casual concept, with semi-counter service, competitive prices and a relaxed and fun environment, attracting young (18-35-year-old) customers. Restaurants are located across the UK in leisure parks, premium shopping centres and high-footfall High Streets. Company and management Estate size and financials Pricing and marketing activities Cuisine Category Chicken Casual restaurant Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets Entry Typical Exit Starter dish Service style Semi-counter service London outlets Main course Parent company Head office Website Ownership Senior Management Nando s Group Holdings St Marys House, 42 Vicarage Crescent, London SW11 3LD Company owned in the UK Robbie Brozin, Co-founder and CEO Robby Enthoven, Principal, Capricorn Ventures UK Andrew Rayner, Marketing Director Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 12 NPS Revisit intention E Turnover figures are based on company accounts. 31,100 Q Q YoY growth % % Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes No (except airport sites) Nando's Card: earn points and redeem rewards 20% off for all British Emergency Services and military forces employees Further focus on regional expansion 69

70 Burger King COMPETITIVE LANDSCAPE American fast food chain, Burger King, is the UK s second largest burger brand. All UK restaurants are owned and operated by independent franchisees. The business aims to differentiate itself from leading rivals by focusing on high quality burgers and, as a result, is less family-orientated. Restaurants are located in prime locations throughout the UK. In 2016 Burger King began serving alcohol at selected UK sites and rolled out delivery to 40 stores. Company and management Cuisine Category Service style Parent company Head office Website Ownership Burger Senior Management Traditional fast food Counter service Restaurant Brands International/Burger King Corporation 15 Bath Road, Slough Berkshire SL1 3UF Franchised Bruno Lino, President EMEA Daniel S. Schwartz, CEO Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 6 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 21,500 Q Q YoY growth 0-1 N/A % Pricing and marketing activities Entry Typical Exit Starter dish N/A N/A N/A Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Yes Sign up to database to receive latest offers Mobile app for ios and Android: Vouchers, store locator and menu Exploring options of alcohol and delivery after successful trials 70

71 PizzaExpress COMPETITIVE LANDSCAPE PizzaExpress is the leading UK Italian pizzeria, with the greatest number of outlets of any UK casual restaurant brand. PizzaExpress is a high profile user of promotional discounting, and is combining this with more sophisticated customer relationship management. In July 2014, Pizza Express was sold by the Gondola Group to Beijing based private equity firm Hony Capital for 900m. In 2016 PizzaExpress acquired the fledgling premium pizza delivery chain, Firezza. Company and management Estate size and financials Pricing and marketing activities Cuisine Category Italian Pizza/Pasta Casual restaurant Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets Entry Typical Exit Starter dish Service style Table service London outlets Main course Parent company Head office Website Ownership Senior Management Hony Capital 5th Floor, 2 Balcombe Street London, NW1 6NW Company owned Richard Hodgson, CEO, PizzaExpress Andy Pellington, Chief Financial Officer, PizzaExpress Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend E Turnover figures are based on estimated average weekly sales. 18,400 Q Q YoY growth NPS % Revisit intention % Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Selected international outlets Starter & main for % off food bill 3 courses for O2 priority: 5 main course every week Expanding delivery at both PizzaExpress sites and by growing Firezza 71

72 Harvester COMPETITIVE LANDSCAPE Long-established farmhouse-style pub restaurant, owned by Mitchells & Butlers. Harvester is a favourite among families and older consumers, with traditional pub food and its famous salad bar. Restaurants are located across the UK in out-of-town locations, with some branches close to an Innkeeper s Lodge, also owned by M&B. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub food Pub restaurant Table service Mitchells & Butlers Plc 27 Fleet Street Birmingham B3 1JP Company owned Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend E Turnover figures are based on estimated average weekly sales. 28,100 Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Yes Yes Register address and/or mobile number to receive news and offers Harvester app: exclusive offers and rewards Phil Urban, CEO, M&B Bob Ivell, Non-Executive Chairman, M&B Catriona Kempston, Marketing Director, M&B Tim Jones, Finance Director, M&B NPS Revisit intention Q Q YoY growth % % Future plans Invest in digital technology after launching contactless payments across sites Continue selected site conversions to Miller & Carter 72

73 Frankie & Benny s COMPETITIVE LANDSCAPE Frankie & Benny s serves classic Italian-American cuisine in a 1950s New York themed atmosphere. The restaurant chain is family-friendly with its wide menu choice and lively environment. Frankie & Benny s outlets are found in out-of-town retail and leisure park sites across the UK. Company and management Estate size and financials Pricing and marketing activities Cuisine Category Italian American Casual Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets Entry Typical Exit Starter dish Service style Parent company Head office Table service The Restaurant Group Plc 5-7 Marshalsea Road Borough London, SE1 1EP London outlets Regional outlets Annualised estimated turnover (m) Notes E Turnover figures are based on estimated average weekly sales. Main course Side dish Dessert Take-away Yes Website Ownership Senior Management Company owned Danny Breithaupt, CEO, TRG Stephen Critoph, Financial Director, TRG Alan Jackson, Non-executive chairman, TRG Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 15 NPS Revisit intention 24,700 Q Q YoY growth % % Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes F&B Rewards, sign up online Midweek Menu: 2 courses for Greater focus on arresting like-for-like sales decline 73

74 Hungry Horse COMPETITIVE LANDSCAPE Greene King s family-friendly, value-focused pub/restaurant chain. With renowned weekly themed promotions, Hungry Horse pubs have a strong value for money proposition. With entertainment including televised events, pub quizzes and children s play areas, establishments have broad appeal across the mass middle market. The brand has a predominantly regional focus, with outlets situated on large out-of-town sites with extensive car parking. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub food Pub restaurant Table service Greene King Plc Westgate Brewery Bury St Edmunds Suffolk, IP33 1QT Company owned Rooney Anand, CEO, GK Kirk Davis, Finance Director, GK Ian Durant, Non Executive Director Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 12 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 22,500 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans No Yes Themed daily specials e.g. Curry Club Wednesday Sign up online and get a 5 giftcard 2 meals for 9.99 Monday to Friday Free soft drinks for designated drivers Roll out of pizza offer Identified as one of Greene King s growth brands postspirit acquisition 74

75 Pizza Hut Restaurants COMPETITIVE LANDSCAPE Pizza Hut features competitive price points, with the chain targeting families and C1/C2/D consumers. Restaurants are often located in high footfall shopping districts, in leisure parks and at leading airports and high streets across the UK. Pizza Hut UK consists of two separate businesses dine-in restaurants owned by Rutland Partners, comprising approximately 285 units, and a delivery service operated by YUM! Brands Company and management Estate size and financials Pricing and marketing activities Cuisine Category Pizza Casual restaurant Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets Entry Typical Exit Starter dish Service style Table service London outlets Main course Parent company Head office Rutland Partners 1 Imperial Place Borehamwood Hertfordshire, WD6 5XX Regional outlets Annualised estimated turnover (m) Notes E Figures refer to Pizza Hut UK dine in restaurants only Side dish Dessert Take-away Yes Breakfast No Website Ownership Senior Management Company owned Jens Hofma, CEO, Pizza Hut Restaurants UK Victoria Simspson Clarke, Marketing Director, Pizza Hut UK Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 15 NPS Revisit intention 18,700 Q Q YoY growth % % Mailing list/loyalty scheme and recent marketing activity Future plans Sign up to mailing list for latest news and offers Unlimited Lunch Buffet 6.99, Weekdays until 3pm Free unlimited salad Two sday Tuesday: Buy one pizza get one free Completion of refurbishment programme 75

76 Toby Carvery COMPETITIVE LANDSCAPE A market leader in carvery dining for over 30 years, offering traditional British dishes in a relaxed and family-friendly environment. The brand boasts higher than average sales per pub and features extensive vegetarian options as well. Toby Carvery restaurants have a strong nationwide presence, located in out of town sites, with extensive car parking facilities. Company and management Cuisine Category Service style Parent company Head office Website Ownership British Pub restaurant Buffet Senior Management Mitchells & Butlers Plc 27 Fleet Street Birmingham B3 1JP Company owned Phil Urban, CEO, M&B Bob Ivell, Non-Executive Chairman, M&B Tim Jones, Finance Director, M&B Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 12 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 29,900 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Yes 2 courses for 2 people for % off Monday to Thursday Free back to school sundaes Free ice cream sundae when you sign up for offers and news M&B has partnered with South African Winery Gabb Family Vineyards to develop a range of complimentary wines for the menus of its Toby Carvery pubs 76

77 Sizzling Pubs COMPETITIVE LANDSCAPE Individually named family-friendly, local pubs with a community feel. Broad menus offer value-for-money food suited to all tastes. Grilled steaks and burgers sit alongside pastas, fajitas and British pub classics. Sizzling Pubs are located in suburban areas widely spread across the UK with clusters in the midlands. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub food Pub restaurant Semi-counter service Mitchells & Butlers Plc 27 Fleet Street Birmingham B3 1JP Company owned Phil Urban, CEO, M&B Bob Ivell, Non-Executive Chairman, M&B Tim Jones, Finance Director, M&B Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 12 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 21,000 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans No Selected branches Sign up for newsletter and get 5 off food Weekday deals e.g. Thursday Grill club Burger and drink deal from 4.49 M&B is in the process of converting Crown Carveries and Sizzling Pub formats into a broader concept called Stonehouse Pizza & Carvery 77

78 Vintage Inns COMPETITIVE LANDSCAPE Vintage Inns is a mid-upper market country pub chain operated by Mitchells & Butlers. The pubs are predominantly food-led with a traditional menu featuring seasonal pub classics, as well as weekly themed menus such as Wednesday Vintage Pie day. Vintage Inns are destination pubs, usually found in attractive rural areas. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub Classics Pub restaurant Table service Mitchells & Butlers Plc 27 Fleet Street Birmingham B3 1JP Company owned Bob Ivell, Chairman, M&B Phil Urban, Chief Executive Officer, M&B Tim Jones, Finance Director, M&B Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend E Turnover figures are for companyowned and franchised restaurants. 24,000 Q Q YoY growth NPS % Revisit intention % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Selected stores only Sign up and receive a free bar snack voucher 3 courses from 20 on a Saturday Fizz Friday: discounted Champagne, Prosecco and sparkling wine M&B plans to install pizza ovens in all Vintage Inns pubs 78

79 Brewers Fayre COMPETITIVE LANDSCAPE Pub restaurant owned by the Whitbread Group, present in out-of-town locations and often close to partner budget hotel chain, Premier Inn. Pubs are named individually but operate under the Brewers Fayre brand. The chain has a family-friendly focus, with many pub restaurants featuring play areas. Brewers Fayre is most popular with middle aged, C1/C2 consumers, with low prices and themed evenings, such as curry night. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub food Pub restaurant Table service Whitbread Group Plc Whitbread Court Business Park Porz Avenue, Dunstable Bedfordshire, LU5 5XE Company owned Andy Harrison, CEO, Whitbread Paul Flaum, MD of Restaurants Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 12 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 26,100 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Pizza only Selected branches Bonus Club collect points and exchange for vouchers Disco night: Fridays and Saturdays 2 meals for Monday to Friday Kids eat free at breakfast Integration of Taybarn conversions into estate Roll-out of new format 79

80 Beefeater COMPETITIVE LANDSCAPE Mid-market chain of grill restaurants owned by Whitbread. Beefeater pubs have a nationwide presence and are often found in out of town locations, motorways service stations and business parks. Established in the 1970s, Beefeater appeals to middleaged, traditional consumers. In 2015 Whitbread opened the first site of its new-look Beefeater concept, Beefeater Bar + Block, in central Birmingham. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub food Pub restaurant Table service Whitbread Group Plc Whitbread Court Business Park Porz Avenue, Dunstable Bedfordshire, LU5 5XE Company owned Alison Brittain, CEO, Whitbread Paul Flaum, MD of Hotels and Restaurants Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 16 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 27,800 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans No Yes The Reward Club: collect points and turn into vouchers Unlimited Breakfast 8.25 and Kids Eat Free Steak and Unlimited chips from Whitbread is rolling out an evolved version of its Beefeater brand Beefeater Bar + Block to widen appeal to younger demographics 80

81 T.G.I. Friday s COMPETITIVE LANDSCAPE All-American casual restaurant and bar strongly associated with its red and white striped branding. Offering a large cocktail menu and lively atmosphere, the chain is popular with large dining parties of year-olds. T.G.I. has a nationwide presence in both central and out-of-town locations. Restaurants can be found in city centres, retail parks, shopping centres and airports. Company and management Cuisine Category Service style Parent company Head office Website Ownership American Casual Senior Management Table service Electra Partners TGI Friday s (HO) Capability Green Luton Bedfordshire LU1 3LU Company owned Karen Forrester, MD Darrell Wade, Chief Operating Officer Alex Fortescue, Chief Investment Partner of Electra Partners Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex- VAT) Avg. diner spend 15 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 53,600 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Selected branches Sign up for mailing list online Birthday Club membership includes free treats cocktails New generation sites, Generation F, with a wider cocktail menu and live music to be rolled out 81

82 Prezzo COMPETITIVE LANDSCAPE Prezzo restaurants offer a contemporary dining experience with a broad menu including non-italian items, such as burgers and chips, attracting a younger crowd than its direct competitors. Prezzo has a strong regional city bias and targets buildings of architectural interest. Company and management Estate size and financials Pricing and marketing activities Cuisine Category Service style Italian Casual Table service Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Entry Typical Exit Starter dish Main course Parent company Head office TPG 8 Johnston Road Woodford Green Essex IG8 0XA Regional outlets Annualised estimated turnover (m) Notes E Turnover figures are based on estimated average weekly sales. Side dish Dessert Take-away Yes Breakfast Selected branches Website Ownership Senior Management Company owned Jon Hendry-Pickup, CEO Alan J Millar, Finance Director Michael Carlton, Chairman Abel Halpbern, Partner, TPG Capital Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 16 NPS Revisit intention 15,600 Q Q YoY growth % % Mailing list/loyalty scheme and recent marketing activity Future plans Sign up to Prezzo Club for news and offers Prezzo App allows customers to view their bill live and pay with their mobiles 40% off main courses Children s meal deal: 3 courses and a drink for 3.95 Continued expansion via TPG funding 82

83 Chef & Brewer COMPETITIVE LANDSCAPE Owned and managed by Greene King, Chef & Brewer serves pub food with a focus on fresh ingredients, freshly cooked. The traditional pub outlets are individually named and occupy attractive sites across the UK. Chef & Brewer runs various foodthemed evenings, such as Fish Night, as well as everyday meal deals and daily specials alongside British pub drink offerings. Company and management Cuisine Category Service style Parent company Head office Website Ownership Senior Management Pub food Pub restaurant Table service Greene King Sunrise House Ninth Avenue Burton-upon-Trent Staffordshire, DE14 3JZ Company owned Rooney Anand, CEO of Greene King Kirk Davis, CFO of Greene King John Forrest, COO of Greene King Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend 16 NPS Revisit intention E Turnover figures are based on estimated average weekly sales. 26,000 Q Q YoY growth % % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans No Selected branches Join club and get free starter or pudding Evening set menu: 2 courses from from 4pm Monday to Thursday Swap Tesco Clubcard points Fizz Friday: 5 off a bottle of fizz Identified as a growth brand by parent company, Greene King. Expected to expand estate to sites over the next five years 83

84 Wagamama COMPETITIVE LANDSCAPE Pan-Asian noodle concept created by restaurant industry tycoon, Alan Yau. Restaurants feature long communal tables and simple industrial-style interiors. The brand appeals to a wide demographic but is particularly popular with young, urban consumers. Restaurants are located in high footfall areas on the High Street and in major shopping centres. Company and management Estate size and financials Pricing and marketing activities Cuisine Category Asian Casual Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets Entry Typical Exit Starter dish Service style Parent company Head office Website Ownership Senior Management Table service Duke Street Capital/Hutton Collins Waverley House 7-12 Noel Street London, W1F 8GQ Company owned David Campbell, CEO Jane Holbrok, Chief Financial Officer London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend E Turnover figures are based on estimated average weekly sales. 29,400 Q Q YoY growth NPS % Revisit intention % Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes Selected airport branches Sign up to the newsletter for exclusive offers Qkr! with Masterpass app, allows customers to pay for meal and split bill Development of flagship site in St Paul s Roll out of new style restaurants 84

85 Zizzi COMPETITIVE LANDSCAPE Italian chain Zizzi offers an upper-middle market dining experience which caters for both couples and families. With a localised strategy, each site has a unique touch in terms of architecture and menu. Restaurants are positioned on major UK high streets and in suburban areas. Brand is targeted at more special and weekend occasions than alternatives such as ASK. Company and management Cuisine Category Service style Parent company Head office Website Ownership Italian Casual Senior Management Table service Azzurri Restaurants Limited 3 rd Floor Capital House Chapel Street London NW1 5DH Company owned Steve Holmes, CEO Johanna Fawcett, Marketing Director Jim Pickworth, Chief Financial Officer Estate size and financials Dec 2013 Dec 2014 Dec 2015 Dec 2016E UK outlets London outlets Regional outlets Annualised estimated turnover (m) Notes Estimated avg. weekly sales per outlet (ex-vat) Avg. diner spend E Turnover figures relate to total sales across all franchised stores. 20,400 Q Q YoY growth NPS % Revisit intention % Pricing and marketing activities Entry Typical Exit Starter dish Main course Side dish Dessert Take-away Breakfast Mailing list/loyalty scheme and recent marketing activity Future plans Yes No 20%-40% off all food in selected outlets Expansion of allergen offering 85

86 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 86

87 Consumer Insight section summary CONSUMER INSIGHT Roaring restaurant trade as all key consumer metrics rise for chains, independents and pubs. Participation and visit frequency have increased in all restaurant channels except for fast food over the past year. The share of UK consumers participating in fast food fell three percentage points to 71.9%, while the average no. of meals per head per month dropped from 2.1 down to 2.0. The rise in restaurant participants has been greatest in chain and fine dining restaurants, up three percentage points for both to 73.4% and 57.3%. Chain, independent and pub restaurants all achieved frequency growth of 0.2 visits per head per month to 1.5, 1.6 and 2.0, with pub levels now equal to fast food. Average visit spend has risen in all restaurant channels at all day-parts, with fine dining lunch the only exception. Higher spend levels relate, in-part, to a more affluent customer profile in all key restaurant channels. Female spend has increased most, with 25-49s driving rising levels in chain restaurants and 18-24s driving growth in independents, fast food and fine dining. Family social and treat occasion opportunity in chain restaurants. The growth in visits to chain restaurants has been driven by a rise in occasions involving 25-49s and women, with a particular increase in family visits with the kids for get togethers and treat occasions. Low prices and fresh products are growing needs for increasingly stretched and health conscious parents, but satisfaction levels have grown, with customer scores rising for the freshness, family friendliness and food quality experienced in chain restaurants. Contemporary chain restaurants (opened in the last 10 years) have played a crucial role in growth of the channel, accounting for a rising share of lunch and dinner visits. Contemporary chains, such as Byron, Côte and Wahaca, attract a larger share of 18-24s and higher earning consumers than chains in general, with the food quality, environment and atmosphere being much bigger draws. 22% of contemporary chain visits are get togethers, but it is special occasions/celebrations that stand out, accounting for 18% of contemporary chain visits, which is double the proportion in total chain restaurants. Pubs can benefit from budding female customer presence. As pubs have become more food-led and restaurant-like, women have become a growing and vitally important part of the customer mix, now accounting for half of all visits, equal to levels in the total Eating Out market. Increases in both pub restaurant visits and average spend have been driven by women, increasingly choosing pubs for low tempo, relaxing meal occasions, citing pubs familiarity and service as key reasons for visiting. Fast food must modernise to win back younger consumers. Falling visitor participation and visit frequency levels in fast food have been due to a decrease among 18-34s. In an Eating Out market rife with intensifying cross-channel competition and a growing variety of options targeting the young and adventurous, traditional and independent fast food operators offering specific, but well-trodden cuisine (e.g. burgers, fish & chips and kebabs) without offering anything new or to differentiate themselves, are losing out as younger consumers are tempted elsewhere. Despite falling participation and frequency, average spend has risen on fast food visits and it is the remaining year old occasions that have driven this the most. Contemporary fast food outlets that offer good quality food, service and an attractive environment are attracting the young to visit and spend more on more premium occasions. Growing diversity of chain restaurant cuisine attracting greater range of consumers, on variety of missions, for wide mix of needs. British food tends to be consumed by an older 50+, low-mid income consumer on more everyday missions, such as when doing other shopping. At the other end of the age scale, Japanese is most likely to be eaten by 18-24s, with a bias to treat missions and a greater need for fresh products. Restaurants offering French and Pan-Asian cuisine appeal more to women and on more sociable missions. South American appeals equally to women, but of a more affluent profile and on more functional shopping missions. 87

88 Eating out participation CONSUMER INSIGHT Participation has increased at all restaurant channels but fast food. The proportion of UK consumers visiting chain, independent, fine dining and pub restaurants has risen over the last year, with the biggest increases for chain restaurants and fine dining, both up by three percentage points to 73% and 57% respectively. The only decrease in restaurant participation has been at fast food outlets, where levels have dropped from 75% to 72%. Participation: % of UK adults visiting Q vs. Q Q Q % 73.4% 75.6% 77.8% 85.0% 85.8% 75.1% 71.9% 54.0% 57.3% Chain restaurants Independent restaurants Fine dining restaurants Pub restaurants Fast food restaurants Note: Data includes all those who claim to visit more often than rarely. 88

89 Average meal frequency CONSUMER INSIGHT Of the restaurant channels, average visit frequency has increased everywhere except fast food. Pubs and fast food outlets are visited most often for a meal, with consumers on average making two visits per head per month. The average number of meals per head per month has grown at chain, independent, fine dining and pub restaurants compared to a year ago, but fallen in fast food. A year ago, fast food was the most frequently visited restaurant channel, but pub restaurants are now visited just as often after levels rose from 1.8 to 2.0 as fast food frequency fell slightly from 2.1 to 2.0. Frequency: average no. of out of home meals per head per month Q vs. Q Q Q Chain restaurants Independent restaurants Fine dining restaurants Pub restaurants Fast food restaurants Note: Data includes breakfast, lunch and dinner. 89

90 Average spend per meal CONSUMER INSIGHT Average spend on a restaurant meal visit has grown over the past year. There has been an 8.7% increase in average restaurant meal visit spend over the last 12 months, just slightly behind total Eating Out market growth of 8.8%. Spend on restaurant meal visits has risen for every channel but fine dining, where levels dropped by 5.5%. Of the restaurant channels, the greatest increase in average meal spend has been in independent restaurants, with levels up 11% to Average spend per head per meal visit Q vs. Q Q Q % % % % % % % Total market Total restaurants Chain restaurants Independent restaurants Fine dining restaurants Pub restaurants Fast food restaurants Note: Data includes breakfast, lunch and dinner. 90

91 Average spend per meal by day-part CONSUMER INSIGHT Average spend rising for all restaurant meals except fine dining lunches. Growth in average meal spend has occurred in all restaurant channels at all dayparts, except fine dining restaurants at lunch. Chain restaurants achieve a higher average meal spend than independent and pub restaurants at breakfast and lunch, but spending levels are higher in independent restaurants at dinner. Fast food is the lowest spend restaurant channel at all day-parts. Average spend per head per meal visit by day-part Q vs. Q Total market Total market Total market Total restaurants Chain restaurants Independent restaurants Fine dining restaurants Pub restaurants Fast food restaurants n/a n/a Total restaurants Chain restaurants Independent restaurants Fine dining restaurants Pub restaurants Fast food restaurants Total restaurants Chain restaurants Independent restaurants Fine dining restaurants Pub restaurants Fast food restaurants Q Q Note: Average meal spend at breakfast unavailable for fine dining restaurants due to low sample size (<100). 91

92 Average spend per meal by gender and age CONSUMER INSIGHT Women and 18-24s key groups driving increase in average meal spend. Across all four of the major restaurant channels, the average amount spent per meal visit has risen faster among women than men. In pubs, fast food and independent restaurants, the biggest growth in average meal spend has been from 18-24s, while levels have increased fastest for 25-49s in chain restaurants. Average spend per head per meal visit by gender and age Q % 7% % 5% Change vs. Q Male Female Male Female 3% 7% 7% 12% 1% 6% 4% % 12% % 11% Male Female Male Female 24% 17% 12% 8% 15% 12% 10% Note: Data includes breakfast, lunch and dinner. 92

93 CONSUMER INSIGHT Average spend per meal by mission (primary reason for eating out) Average spend rising fast on chain restaurant special occasions. The biggest rise in chain restaurant spend has been on special occasions, with levels up 21% to per meal visit. The strongest growth in average meal spend in independent restaurants has been among consumers out shopping, while for pubs it has been on treat missions. Average spend per head per meal visit by consumer mission, ranked by % growth in average spend Q Special occasion % While shopping % Having a treat % Work/study break % Having a treat % Not bothered to cook % Get together % Get together % Get together % Special occasion % Time with partner % While shopping % While shopping % Leisure-based journey % At leisure activity % Leisure-based journey % Spend time with partner Wanted specific cuisine % Not bothered to cook % Because I had to % Change vs. Q Note: Data includes breakfast, lunch and dinner. Only missions with sample size of 100+ included. 93

94 Age of consumer CONSUMER INSIGHT 25-49s becoming more important for chain restaurants. 53% of chain restaurant visitors are aged 25-49, up from 50% a year ago and compared to 49% in total restaurants. Independent and pub restaurants have an older consumer profile, with 51% and 53% of meal visits respectively accounted for by consumers aged 50 and above, compared to 41% for restaurants in total. Chain restaurants and fast food skew towards consumers aged 18-24, but less so than a year ago, with 35-49s key and gaining importance in fast food outlets. Age profile % of meal visits Q vs. Q % 39% 40% 41% 34% 32% 50% 51% 44% 40% 53% 53% 26% 25% 32% 32% 31% 31% 30% 31% 28% 27% 23% 28% 27% 27% 37% 39% % 19% 18% 18% 11% 11% 11% 10% 20% 22% 16% 14% 15% 15% 7% 7% 21% 20% 13% 12% 13% 13% 7% 7% 23% 22% 15% 14% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Total market Total restaurants Chain restaurants Independent Fine dining Pub restaurants restaurants restaurants Fast food restaurants Note: Data includes breakfast, lunch and dinner. 94

95 Gender of consumer CONSUMER INSIGHT Growing share of female consumers in chain restaurants and pubs. Women account for 56% of chain restaurant visits, up from 53% a year ago, and 50% in pub restaurants, up from 48% a year ago. While chain restaurants bias strongly towards female consumers compared to restaurants overall, fast food outlets and fine dining restaurants have a greater than average share of male consumers. Gender profile % of meal visits Q vs. Q % 50% 49% 49% 53% 56% 51% 50% 47% 47% 48% 50% 47% 46% 50% 50% 51% 51% 47% 44% 49% 50% 53% 53% 52% 50% 53% 54% Female Male Q Q Q Q Q Q Q Q Q Q Q Q Q Q Total market Total restaurants Chain restaurants Independent Fine dining Pub restaurants restaurants restaurants Fast food restaurants Note: Data includes breakfast, lunch and dinner. 95

96 Combined household income per annum CONSUMER INSIGHT The consumer profile for restaurants is becoming more affluent. For all restaurant channels except fast food, there has been a growing share of visits accounted for by those living in households earning 40K or above per annum. As you would expect, fine dining restaurants have the most affluent consumer profile of all restaurant channels, while fast food consumers are most likely to live in households earning under 20k per annum. Combined household income profile % of meal visits Q vs. Q % 14% 11% 14% 16% 18% 14% 16% 20% 21% 20% 21% 22% 25% 21% 21% 22% 22% 26% 24% 10% 11% 9% 12% 20% 21% 19% 21% 40% 40% 41% 40% 39% 38% 40% 42% 38% 37% 41% 43% 41% 37% Over 60K 40-60K 20-40K Under 20K 28% 25% 28% 25% 23% 19% 25% 22% 14% 17% 29% 25% 31% 29% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Total market Total restaurants Chain restaurants Independent Fine dining Pub restaurants restaurants restaurants Fast food restaurants Note: Data includes breakfast, lunch and dinner. 96

97 Consumer mission (primary reason for eating out) CONSUMER INSIGHT Growing get together mission in chain and independent restaurants. A get together with friends or family is the key consumer mission for restaurants, particularly pubs in which it accounts for a quarter of meal visits. The importance of the get together mission has increased over the past year for chain and independent restaurants, rising 2pp and 4pp respectively. Fast food has a greater skew to treat missions and when the consumer can t be bothered to cook. Mission profile % of meal visits Q vs. Q % 6% 7% 5% 7% 7% 9% 7% 6% 5% 6% 7% 2% 2% 2% 2% 3% 2% 3% 3% 3% 4% 2% 2% 1% 2% 3% 3% 3% 2% 2% 1% 2% 2% 2% 1% 2% 2% 2% 2% 1% 2% 2% 2% 2% 2% 2% 2% 3% 3% 1% 2% 2% 2% 2% 6% 6% 3% 3% 3% 4% 2% 1% 4% 4% 6% 6% 7% 5% 3% 1% 0% 0% 1% 6% 5% 2% 2% 4% 4% 4% 5% 4% 5% 4% 5% 5% 4% 3% 4% 5% 5% 4% 5% 7% 5% 5% 5% 5% 3% 4% 5% 5% 4% 4% 4% 4% 5% 4% 4% 3% 5% 5% 2% 3% 4% 4% 4% 3% 2% 6% 5% 7% 6% 4% 4% 6% 5% 9% 8% 7% 7% 4% 5% 6% 6% 7% 4% 4% 17% 18% 6% 6% 5% 5% 7% 11% 11% 2% 2% 8% 8% 9% 9% 1% 1% 8% 8% 9% 10% 9% 9% 5% 4% 7% 6% 13% 14% 6% 7% 3% 3% 15% 14% 13% 13% 15% 14% 1% 2% 13% 12% 15% 15% 12% 12% 16% 17% 19% 21% 19% 23% 19% 19% Q Q Q Q Q Q Q Q % 25% Q Q % 18% 5% 6% Q Q Other To have better quality food Promotional offer Work-based journey Break from work/study While shopping for groceries At another leisure activity Wanted specific type of food Leisure-based journey Part of regular routine To wind down or relax Special occasion While doing other shopping Spend time with partner Not bothered to cook Having a treat Get together with friends or family Total restaurants Chain restaurants Independent Fine dining Pub restaurants restaurants restaurants Note: Data includes breakfast, lunch and dinner. Fast food restaurants 97

98 Consumer needs (reasons for choosing meal establishment) CONSUMER INSIGHT Food quality/taste is the most important consumer need for restaurants to deliver. The quality or taste of the food is a key reason for choosing a restaurant on two-fifths of visits, and has remained the most common consumer need over the last four quarters. Having been before/previous experience and cheap/inexpensive prices grew in importance slightly in the latest quarter, in the lead up to and immediate aftermath of the Brexit vote. Needs profile % of meal visits (multiple choice up to 3 per visit) Q Q Food quality/taste Been before Good value Convenient - home Convenient - other Cheap/inexpensive Fast service Atmosphere Wide menu choice Friendly Service Recommendation Product freshness Family friendly Convenient - work Promotion Cleanliness Healthy options Not national chain Beverage quality Outdoor areas Other Loyalty programme Low noise levels No children Additional facilities Q Q Q Q % 33% 29% 22% 22% 19% 17% 14% 14% 13% 10% 9% 9% 7% 6% 5% 5% 4% 4% 3% 3% 3% 3% 2% 2% Food quality/taste Been before Good value Convenient - other Convenient - home Cheap/inexpensive Fast service Wide menu choice Atmosphere Friendly Service Recommendation Family friendly Product freshness Convenient - work Promotion Cleanliness Healthy options Beverage quality Not national chain Low noise levels Loyalty programme No children Additional facilities Other Outdoor areas 40% 33% 28% 22% 22% 19% 17% 14% 13% 13% 10% 9% 9% 8% 7% 5% 5% 4% 4% 3% 3% 3% 2% 2% 2% Food quality/taste Been before Good value Convenient - home Convenient - other Cheap/inexpensive Fast service Wide menu choice Atmosphere Friendly Service Recommendation Family friendly Product freshness Convenient - work Promotion Cleanliness Healthy options Beverage quality Not national chain Low noise levels Loyalty programme No children Other Additional facilities Outdoor areas 39% 33% 28% 22% 21% 19% 19% 14% 14% 14% 10% 9% 9% 8% 7% 5% 4% 4% 4% 3% 2% 2% 2% 2% 2% Food quality/taste Been before Good value Convenient - other Convenient - home Cheap/inexpensive Fast service Atmosphere Wide menu choice Friendly Service Recommendation Product freshness Family friendly Convenient - work Promotion Cleanliness Not national chain Healthy options Beverage quality Outdoor areas Loyalty programme Low noise levels No children Other Additional facilities 39% 34% 28% 21% 21% 20% 17% 14% 14% 13% 10% 9% 9% 8% 7% 5% 4% 4% 4% 3% 3% 2% 2% 2% 2% Note: Data includes breakfast, lunch and dinner. No Q data available due to changes in the questionnaire from Q onwards. 98

99 Consumer needs by restaurant channel CONSUMER INSIGHT Visitors choosing practical experience over perceptions of quality in pub restaurants. For chain restaurants, independent restaurants and fast food outlets, food quality/taste is key to attract customers, but been before/previous experience is most important for pub visitors. Over the past year, food quality has become slightly less important for pubs and independent restaurants, while been before/previous experience is accounting for a growing share of visits. Needs profile % of meal visits (multiple choice up to 3 per visit) Q Q Q Q Q Q Most important: Most important: Most important: Most important: Food quality/taste Been before Good value 44% 39% 42% 43% 34% 34% 35% 34% 23% 24% 24% 24% Food quality/taste Been before Good value 24% 23% 24% 23% 36% 37% 37% 37% 50% 51% 49% 49% Been before Good value Food quality/taste 35% 36% 36% 37% 37% 36% 35% 36% 33% 33% 33% 31% Food quality/taste Fast service Been before 38% 37% 36% 37% 36% 34% 38% 35% 28% 29% 28% 29% Biggest growth: Biggest growth: Biggest growth: Biggest growth: Recommendation 12% 12% 13% 14% Food safety/cleanliness 17% 18% 18% 19% Fast service 8% 9% 9% 9% Cheap/inexpensive prices 24% 24% 25% 26% Biggest fall: Biggest fall: Biggest fall: Biggest fall: Wide menu choice 18% 17% 16% 14% Convenient - to work 20% 20% 17% 17% Convenient - other 24% 22% 23% 22% Convenient - to home 24% 23% 23% 22% Note: Data includes breakfast, lunch and dinner. No Q data available due to changes in the questionnaire from Q onwards.. 99

100 Key performance indicator scores CONSUMER INSIGHT Chains driving greater appeal for freshness, family friendliness, low prices and ethical practices/products. Average customer scores for chain restaurants in freshness, family friendliness, low prices and ethical practices/products all increased slightly by 0.1 points over the past year. Scores for ethical practices/products rose in all restaurant channels and for family friendliness in all but independent and pub restaurants. Independent restaurants achieved slight gains in freshness and cleanliness, pubs in fast and friendly service and for their convenient locations. Average customer scores for key performance indicators (average out of 10) Q Change vs. Q Food quality/taste Value for money Menu choice Atmosphere/environment Speed of service Freshness Low prices Total restaurants Chains Independents Fine dining Pubs Fast food Friendly service Drink quality/taste Ethical practices/products Convenient location Cleanliness Family friendly Overall experience Total restaurants Chains Independents Fine dining Pubs Fast food Note: Data includes breakfast, lunch and dinner. 100

101 Food incidence: Q CONSUMER INSIGHT A standard burger is the most common lunch item to be consumed in a restaurant. A standard burger is consumed on 12% of restaurant lunch visits and 31% in fast food, compared to just 7% in the total Eating Out market. Fish & chips is the 2 nd most popular lunch dish in restaurants and the most popular in independents and pubs. Top 10 lunch food items, incidence % of visits Q Total market Total restaurants Chains Independents Fine dining Pubs Fast food 1 Sandwich 12.7% Burger (standard) 12.4% Pizza 14.2% Fish & chips 8.8% Fish dish 13.1% Fish & chips 13.2% Burger (standard) 30.6% 2 Burger (standard) 6.8% Fish & chips 9.1% Chicken dish 10.5% Chicken dish 5.8% Chicken dish 11.1% Roast 9.3% Chicken (fast food) 18.0% 3 Fish & chips 6.0% Chicken (fast food) 6.8% Pasta 9.9% Curry 5.2% Steak 8.5% Steak 6.7% Burger (premium) 8.6% 4 Baguette 5.0% Ice cream 6.2% Ice cream 7.6% Sandwich 5.1% Ice cream 6.5% Chicken dish 6.5% Ice cream 7.5% 5 Chicken (fast food) 3.7% Burger (premium) 6.2% Burger (premium) 5.6% Ice cream 4.6% Pizza 6.5% Burger (premium) 6.5% Fish & chips 6.9% 6 Ice cream 3.7% Chicken dish 5.1% Fish & chips 4.1% Pizza 4.3% Cheesecake 6.5% Ice cream 5.5% Pizza 3.3% 7 Burger (premium) 3.4% Roast 4.0% Steak 3.3% Pasta 3.7% Seafood dish 5.9% Burger (standard) 3.9% Wrap 2.8% 8 Chicken dish 3.2% Pizza 3.7% Cheesecake 3.3% Vegetarian dish 3.7% Roast 5.2% Cheesecake 3.5% Apple tart 2.2% 9 Cake 3.0% Steak 3.2% Burger (standard) 3.1% Fish dish 3.4% Crème brulee 5.2% Fish dish 3.2% Apple pie 2.2% 10 Salad 2.9% Sandwich 2.7% Roast 3.0% Cake 3.1% Curry 3.9% Baguette 2.6% Baguette 2.1% 101

102 Food incidence: Q CONSUMER INSIGHT Chicken dish most popular for dinner in restaurants. 12.3% of restaurant visits involve a chicken dish and levels rise to 15.3% in independent restaurants and 20% in chains. Steak is the top dish in fine dining and pub restaurants, consumed at 13.8% and 13.1% of visits respectively. Fish & Chips is the key dinner dish in fast food outlets, accounting for 20.4% of visits. Top 10 dinner food items, incidence % of visits Q Total market Total restaurants Chains Independents Fine dining Pubs Fast food 1 Chicken dish 11.5% Chicken dish 12.3% Chicken dish 20.0% Chicken dish 15.3% Steak 13.8% Steak 13.1% Fish & chips 20.4% 2 Fish & chips 9.7% Fish & chips 10.2% Pizza 19.4% Curry 14.4% Chicken dish 11.6% Chicken dish 13.1% Chicken (fast food) 18.0% 3 Pizza 6.8% Pizza 7.5% Bread 10.1% Pizza 6.8% Fish dish 11.3% Fish & chips 10.4% Burger (standard) 17.3% 4 Ice cream 6.4% Ice cream 7.0% Ice cream 9.0% Ice cream 6.5% Soup 10.1% Burger (premium) 8.0% Pizza 11.7% 5 Burger (standard) 6.0% Steak 6.5% Pasta 9.0% Fish & chips 6.3% Seafood dish 9.9% Ice cream 7.6% Ice cream 5.4% 6 Steak 6.0% Burger (standard) 6.2% Burger (premium) 6.3% Fish dish 5.9% Lamb dish 8.9% Roast 7.0% Burger (premium) 4.9% 7 Curry 5.7% Curry 6.1% Cheesecake 5.9% Seafood dish 5.8% Ice cream 8.1% Beef dish 6.7% Chicken dish 4.0% 8 Burger (premium) 5.3% Burger (premium) 5.4% Steak 4.5% Chicken dish 5.7% Beef dish 7.6% Fish dish 4.4% Kebab 3.3% 9 Beef dish 5.0% Chicken (fast food) 5.3% Chicken dish 4.5% Beef dish 5.6% Bread 6.4% Soup 4.4% Curry 2.2% 10 Chicken (fast food) 5.0% Beef dish 4.9% Seafood dish 4.3% Soup 5.2% Curry 6.2% Cheesecake 4.3% Chicken dish 1.9% 102

103 Drink incidence: Q CONSUMER INSIGHT Cola is the No. 1 restaurant lunch drink. 16% of lunch visits to restaurants involve cola, which is particularly key within fast food outlets where it is consumed on 28% of visits. In chain restaurants, diet cola accounts for 15% of lunch visits, ahead of regular cola on 14%. Beer/cider is most popular with lunch in pubs and wine in fine dining restaurants. Top 10 drinks with lunch, incidence % of visits Q Total market Total restaurants Chains Independents Fine dining Pubs Fast food 1 Coffee 16.1% Cola 16.2% Diet cola 15.0% Coffee 17.5% Wine 32.7% Beer/cider 27.6% Cola 27.6% 2 Cola 12.0% Diet cola 12.4% Cola 14.0% Tea 13.0% Bottled water still 13.7% Wine 13.6% Diet cola 15.4% 3 Diet cola 10.1% Beer/cider 11.9% Wine 11.0% Wine 11.1% Cola 13.1% Diet cola 10.4% Coffee 9.2% 4 Bottled water still 8.8% Coffee 10.4% Tap water 10.4% Bottled water still 10.3% Tap water 11.8% Cola 10.3% Bottled water still 6.7% 5 Tea 8.0% Wine 8.8% Coffee 7.6% Diet cola 9.4% Diet cola 9.8% Coffee 8.5% Milkshake/milk drink 5.9% 6 Beer/cider 6.4% Bottled water still 6.8% Bottled water still 6.9% Cola 8.0% Coffee 9.2% Bottled water still 4.4% Lemonade 5.3% 7 Wine 4.9% Tea 5.1% Beer/cider 6.1% Beer/cider 7.9% Bottled water sparkling 9.2% Juice drink 4.1% Tea 3.4% 8 Tap water 3.7% Tap water 4.1% Lemonade 5.1% Tap water 7.2% Beer/cider 5.2% Tap water 3.5% Bottled water sparkling 2.3% 9 Bottled water sparkling 3.1% Lemonade 4.0% Bottled water sparkling 4.8% Bottled water sparkling 4.5% Juice drink 4.6% Tea 3.0% Fruit juice 2.3% 10 Lemonade 2.8% Bottled water sparkling 3.1% Tea 3.3% Fruit juice 3.6% Spirits/cocktails 4.6% Lemonade 2.8% Diet lemonade 1.6% 103

104 Drink incidence: Q CONSUMER INSIGHT Beer/cider and wine are the key drinks in restaurants at dinner. Wine is the top dinner drink in chain restaurants, independent restaurants and fine dining restaurants, but in pubs beer/cider is most important, drunk with a third of all evening meals. A soft drink is only the No. 1 in fast food, where Cola is most popular, consumed on 14% of dinner visits. Top 10 drinks with dinner, incidence % of visits Q Total market Total restaurants Chains Independents Fine dining Pubs Fast food 1 Beer/cider 18.1% Beer/cider 19.7% Wine 17.9% Wine 27.6% Wine 45.3% Beer/cider 33.2% Cola 22.3% 2 Wine 17.9% Wine 19.1% Cola 15.5% Beer/cider 20.4% Beer/cider 16.5% Wine 20.7% Diet cola 12.1% 3 Cola 12.5% Cola 13.0% Beer/cider 14.5% Cola 8.8% Bottled water still 10.1% Cola 9.4% Bottled water still 5.0% 4 Diet cola 9.2% Diet cola 9.4% Diet cola 13.5% Tap water 7.3% Spirits/cocktails 9.4% Diet cola 9.2% Beer/cider 4.6% 5 Coffee 5.9% Tap water 5.3% Tap water 8.5% Bottled water still 6.8% Tap water 9.1% Coffee 5.0% Coffee 4.5% 6 Bottled water still 5.8% Coffee 5.1% Bottled water still 5.2% Coffee 6.0% Cola 6.2% Juice drink 4.4% Tea 4.1% 7 Tap water 5.2% Bottled water still 5.0% Coffee 4.7% Diet cola 5.9% Coffee 5.7% Tap water 4.3% Milkshake/milk drink 4.0% 8 Lemonade 3.4% Lemonade 3.3% Lemonade 4.6% Spirits/cocktails 3.6% Bottled water sparkling 5.7% Spirits/cocktails 3.3% Lemonade 3.6% 9 Juice drink 3.3% Juice drink 3.3% Spirits/cocktails 4.0% Fruit juice 3.5% Diet cola 4.2% Lemonade 2.8% Bottled water sparkling 2.9% 10 Bottled water sparkling 3.1% Spirits/cocktails 3.1% Juice drink 3.5% Tea 3.5% Juice drink 3.2% Bottled water still 2.4% Wine 2.6% 104

105 Chain restaurants drivers of performance Growth in all key metrics for chain restaurants: More customers, visiting more often and paying more on each visit s, women and affluent visitors drive visit growth: 56% of visitors now women, 53% and 43% earning 40k+. CONSUMER INSIGHT More informal social occasions, especially with family: Improvements in quality, freshness, ethical practices and family friendliness encouraging more informal get-togethers and family treat occasions. 70.8% 73.4% Change drivers Age - % of visits 34% 32% 30% 31% 20% 22% 16% 14% Q Q Gender - % of visits 53% 56% Female 25-49s Change drivers Missions % of KPI scores (avg. out of 10) visits 8.2 Get together with friends or family Having a treat Needs Cheap/ inepensive Product freshness 18% 20% 13% 15% 10% 12% 15% 13% 11% 11% 9% 13% Freshness Family friendly Ethical practices/ products Food quality/taste Q Q Q Q Family visits (w/kids) 34% 36% Breakfast Lunch Dinner Q Q % 44% Q Q % 18% 22% 25% 39% 38% 23% 19% Q Q Male Total household income - % of visits Over 60K 40-60K 20-40K Under 20K 40k+ Change drivers Note: Profile data includes breakfast, lunch and dinner. Change drivers shown selected based on greatest year on year change. Missions % of visits Get together with friends or family Time with partner KPI scores (avg. out of 10) 9% 12% 16% 18% Ethical practices Conv. location Family friendly Food quality/ taste Drink quality/ taste Freshness 105

106 Pub restaurants drivers of performance Positive period for pub restaurants: Pubs competing strongly on meal visits, with growing participation, frequency and average spend. Pubs growing appeal to female customers and those earning higher incomes: Half of pub restaurant meal visitors are now women, while the proportion earning 40k+ per annum has also increased. Missions % of visits CONSUMER INSIGHT Low tempo wind down missions gaining popularity in pubs: Consumers increasingly choosing pubs they have been to before, with good service and a clean environment, where they will be able to wind down and relax. 85.0% 85.8% Change drivers Gender - % of visits 48% 50% 52% 50% Q Q Female Male Female Change drivers Wind down or relax Needs % of visits Been before Friendly Service 11% 13% 14% 13% 4% 6% 35% Q % 38% Q % Q Q Total household income - % of visits Missions % of visits Needs % of visits Breakfast Lunch Dinner 30% 32% 70% 68% Q Q K+ Under 40K 40k+ Change drivers Wind down or relax At another leisure activity 3% 4% 6% 8% Been before Fast service KPI scores (avg. out of 10) 31% 32% 34% 34% 7% 10% 9% 10% Q Q Q Q Q Q Note: Profile data includes breakfast, lunch and dinner. Change drivers shown selected based on greatest year on year change. Friendly service Cleanliness Ethical practices/ products 106

107 Independent restaurants drivers of performance Average spend rising fastest in independent restaurants: 11% overall rise in average meal spend is unmatched, while participation and frequency have also increased. CONSUMER INSIGHT 25-34s, women and mid-income consumers visiting for price and value-led occasions: Despite average spend rises, independent restaurants are increasingly chosen for gettogethers due to low prices and good value. Age % of visits Gender % of visits 75.6% 77.8% Breakfast Lunch Dinner Change drivers Growing get together occasion driving more and higher spend visits: Almost a quarter of all independent restaurant occasions are now sociable get-togethers. Mission: Get together with friends or family - % of visits 19% 23% Get together Change drivers k 13.0% Needs % of visits Good value Cheap/ inexpensive 14.4% Income % of visits 39.1% 40.6% 8% 9% 9% 12% Female KPI scores (avg. out of 10) 22% 24% 23% 26% % 62.1% Q Q Q Q Q Q Note: Profile data includes breakfast, lunch and dinner. Change drivers shown selected based on greatest year on year change. Convenient location Low prices Menu choice Drink quality/taste 107

108 Fast food drivers of performance Participation and frequency down for fast food: Fewer consumers visiting and those who do are visiting less often, but average spend has risen. 75.1% 71.9% Change Causes drivers of decline Millennials and less affluent consumers causing decrease in fast food visits: Consumers aged account for a falling share of visits to fast food outlets, as do those earning under 40k per annum. Age - % of visits 62% 64% 38% 36% Q Q Total household income - % of visits Change drivers CONSUMER INSIGHT Fewer visits for the specific cuisine and quality of food on offer: Among 18-34s and less affluent customers, fewer are choosing a fast food outlet for a particular type of food with independents (e.g. fish & chips, kebab shops) some of the hardest hit. Missions % of visits Wanted a specific cuisine Because I had to Needs % of visits Food quality/ taste 3.7% 2.6% Missions % of visits 4.7% 38% 40% 36% 36% 7.0% Q Q Q Q Breakfast Lunch Dinner Q Q % 12% 19% 21% 41% 37% 31% 29% Q Q Over 60K 40-60K 20-40K Under 20K Under 40K Change drivers Wanted a specific cuisine Needs % of visits Convenient location - to home 6.6% 5.4% 24% 23% 23% 23% Q Q Q Q Note: Profile data includes breakfast, lunch and dinner. Change drivers shown selected based on greatest year on year change. 108

109 Contemporary chains Y/E June 2016 Contemporary chains playing key role in restaurant growth s and more affluent consumers are being attracted into modern chains by the food quality and environment. Contemporary brands have greater appeal on special occasions and celebrations, but less so for treats and family visits. 5.1% Q Q % share of total chain restaurant visits WHO? 6.7% 44% 42% 4.0% 56% 58% Female 31% 32% 21% 14% 18% 18% Male 34% 32% % 22% 25% 28% 39% 32% 20% 18% Total chains Contemp. chains Over 60K 40-60K 20-40K Under 20K 6.6% MISSIONS? 11% 11% 4% 4% 2% 4% 4% 3% 3% 3% 3% 2% 4% 4% 6% 7% 7% 12% 7% 7% 8% 9% 9% 18% 21% 22% Total chains Contemp. chains WHO WITH? 3% 22% 6% 23% 33% 30% 34% 34% 7% 7% Total chains With kids Other Contemp. chains 16% 25% Contemporary Chains = opened in past 10 years Leisure-based journey Discount/promotion Try something new Better quality food Wanted specific cuisine Not bothered to cook Wind down or relax Doing other shopping Having a treat At other leisure activity Time with my partner Special occasion/celebration Get together Total chains Other Colleagues Friends Family Partner Alone Contemp. chains NEEDS? Food quality/taste Been before Nice environment Convenient - other Recommendation Good value Wide menu choice Convenient - to home Friendly Service Product freshness Voucher/promotion Convenient - to work Drink quality/taste Cheap/inexpensive Fast service Family friendly Healthy food options PROMOTIONS? On promotion Note: All data is from the year ending June 2016 combining lunch and dinner, except for the share of visits data from Q vs. Q and split by day-part. 16% CONSUMER INSIGHT 43% 54% 34% 34% 17% 28% 24% 25% 14% 20% 24% 20% 17% 14% 15% 14% 12% 14% 10% 11% 16% 11% 6% Total 6% chains 3% 6% 11% Contemp. 6% chains 11% 6% 11% 5% 7% 3% 27% Total chains Contemp. chains 109

110 Demographics by cuisine type in chain restaurants CONSUMER INSIGHT British and French cuisines attract an older consumer, Asian, South American and French are more appealing for women. Over half of British and French cuisine consumers are aged 50 or above, compared to just a third in total chain restaurants. 62% of Asian, South American and French cuisine consumers are women, compared to 56% in chain restaurants on average. South American consumers are the highest earners, with a third making 60k+. Gender, age and total household income profiles % of meal visits Year to end of June 2016 Total British American Pan-Asian S.American French Italian Japanese Mexican 56% 57% 57% 62% 62% 62% 57% 56% 54% Female 44% 43% 43% 38% 38% 38% 43% 44% 46% Male 34% 57% 31% 21% 28% 14% 13% 3% 24% 24% 18% 36% 51% 34% 34% 40% 32% 23% 21% 26% 28% 18% 19% 21% 16% 14% 7% 13% 12% 19% % 27% 36% 35% 26% 19% % 14% 13% 25% 33% 21% 19% 23% 19% 25% 24% 24% 16% 20% 28% 20% 34% 28% 39% 52% 42% 39% 22% 35% 37% 29% 36% 20% 10% 21% 20% 25% 23% 17% 14% 16% Note: All data is from the year ending June 2016 combining lunch and dinner. Over 60K 40-60K 20-40K Under 20K 110

111 Missions by cuisine type in chain restaurants CONSUMER INSIGHT Shopping trips are most important for British cuisine, whereas French, Asian and Italian are eaten on more sociable missions. A fifth of British food is eaten by consumers out shopping, which is also the main mission for South American cuisine. 18% of French, 17% of Asian and 16% of Italian meals respectively are eaten on get together occasions. Japanese food is most likely to be chosen for a treat and also more often picked due to a desire for the specific type of food than other cuisines. Mission profile % of meal visits Year to end of June 2016 Total British American Pan-Asian S.American French Italian Japanese Mexican 3% 2% 2% 3% 1% 2% 2% 0% 2% 1% 3% 1% 4% 1% 2% 1% 5% 4% 1% 2% 1% 2% 0% 4% 4% 3% 2% 4% 3% 3% 3% 4% 0% 4% 2% 3% 2% 2% 4% 1% 3% Other 2% 2% 3% 1% 4% 4% 6% 4% 3% 2% 2% 2% 3% 1% 5% 4% 4% 4% 5% 4% 5% 6% 1% 0% 3% 3% 4% 4% 2% 1% 3% 4% 4% 4% 3% 3% 4% 4% 5% 4% 5% 5% 5% 3% 9% 5% 4% 3% 5% 2% 3% 4% 2% 4% 4% 2% 5% 4% 4% 4% 2% 5% 9% 4% 4% 6% 6% 4% 2% 2% 5% 5% 5% 5% 5% 5% 4% 7% 5% 2% 5% 6% 4% 5% 5% 5% 11% 7% 4% 4% 4% 3% 8% 2% 6% 6% 4% 7% 8% 9% 10% 7% 13% 8% 15% 11% 12% 11% 10% 8% 10% 11% 19% 11% 13% 16% 11% 11% 14% 16% 8% 8% 15% 14% 17% 18% 12% 12% 16% 10% 12% Business meeting/meal To try something new Had to To have better quality food Promotion Work-based journey Wind down or relax Wanted a specific cuisine Grocery shopping Special occasion Leisure-based journey Not bothered to cook At another leisure activity Spend time with partner Part of regular routine Work/study break Having a treat Doing other shopping Get together Note: All data is from the year ending June 2016 combining lunch and dinner. 111

112 Needs by cuisine type in chain restaurants Total CONSUMER INSIGHT Food quality is the most common consumer need for all the major cuisine types. Food quality accounts for the greatest share of visits for each of the major cuisine types within chain restaurants, especially Asian food, selected for its quality on 48% of visits. American cuisine consumers skew to choosing a place they have been to before, while British cuisine over-indexes for good value relative to the average for chain restaurants. Good value is least important for Japanese cuisine, for which freshness is relatively more important, accounting for a fifth of visits. Index 80 Index 120 Top 10 consumer needs, % of visits and index relative to chain restaurants Year to end of June 2016 British American Pan-Asian S.American French Italian Japanese Mexican Food quality 37% Been before 32% Good value 27% Close to other* 26% Cheap/inexpensive 17% Fast service 17% Close to work 16% Atmosphere 14% Close to home 13% Wide choice 13% Food quality 32% (87) Been before 32% (100) Close to other* 31% (120) Good value 29% (105) Cheap/inexpensive 17% (99) Close to work 15% (98) Close to home 15% (110) Atmosphere 15% (104) Friendly service 14% (121) Fast service 13% (79) Food quality 36% (95) Been before 34% (106) Good value 26% (94) Close to other* 25% (99) Fast service 20% (119) Close to work 17% (106) Cheap/inexpensive 16% (92) Close to home 15% (111) Atmosphere 15% (105) Wide choice 14% (108) Food quality 48% (128) Been before 29% (92) Good value 26% (96) Close to other* 24% (93) Cheap/inexpensive 19% (108) Wide choice 18% (143) Fast service 16% (92) Close to work 15% (99) Recommendation 14% (144) Freshness 13% (131) Food quality 44% (120) Been before 27% (86) Good value 24% (90) Wide choice 21% (170) Close to work 18% (117) Close to home 16% (120) Fast service 15% (90) Atmosphere 15% (107) Close to other* 15% (57) Recommendation 12% (127) Food quality 41% (111) Been before 35% (111) Close to other* 28% (109) Good value 24% (89) Atmosphere 18% (127) Close to work 17% (106) Recommendation 16% (172) Promotion 15% (153) Close to home 14% (104) Friendly service 14% (118) Food quality 39% (105) Been before 31% (98) Close to other* 27% (105) Good value 26% (94) Fast service 16% (95) Promotion 16% (167) Close to work 16% (102) Atmosphere 15% (109) Cheap/inexpensive 14% (82) Close to home 13% (94) Note: All data is from the year ending June 2016 combining lunch and dinner. *Close to other refers to a convenient location other than work or home. Food quality 37% (100) Been before 33% (105) Freshness 20% (199) Fast service 20% (114) Close to work 19% (124) Healthy options 19% (222) Cheap/inexpensive 18% (105) Close to other* 18% (70) Good value 18% (64) Close to home 12% (88) Food quality 37% (100) Been before 31% (98) Good value 24% (89) Atmosphere 22% (155) Close to other* 21% (83) Cheap/inexpensive 19% (109) Close to work 19% (120) Fast service 18% (104) Wide choice 14% (110) Recommendation 12% (122) 112

113 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Section summary Customer typology overview Customer profile types Bespoke consumer research Future outlook 113

114 Section summary CONSUMER TYPOLOGY ANALYSIS MCA divides eating out customers into nine segments based on age, social grades and if they have children in the household. The nine segments include three Millennial segments (the Explorers, the New Parents and the Home Builders), four Generation X segments (Established Families, Humble Householders, Aspiring Child Free and Functional Child Free) and two Grey Pound segments (Greying Generation and Golden Oldies). Millennials and Established Families are the most valuable customers. Three Millennial segments (18-34s) account for 29% of UK adult population but represent 46% of the total visits and 43% of the total expenditure in the restaurant market. Established Families (ABC , children at home) account for 10% of adult population but contribute 14 % of total visits and 14% of total expenditure. 55+ account for 36% of adult population however only contribute 18% of the total visits and 21% of the total expenditure. The Explorers have a big budget and appetite for specific cuisines. While all the other customer segments spend the most when have special occasions or celebrations, the Explorers spend the most when on a mission to have a specific cuisine. Want a specific cuisine is the joint fourth most important mission (6%) for the Explorers, 1pp higher than the average. Developing and advertising authentic minority cuisines is a key opportunity to encourage the Explorers to visit more often and spend more per visit. The Explorers(18-24s) are the most adventurous customers. They have the greatest consideration set for each visit. Promoting through social media, contact lists and digital coupons are effective ways to target and persuade this tech-savvy generation to visit. The New Parents are the most foodie parents ever The parents (25-34s, with children at home) have the highest eating out frequency across all generations. On average, they visit the restaurant market 157 times per annual for breakfast, lunch, dinner and snacking. Being New Parents, family friendliness is now one of the most important needs. Developing family friendly service and facilities are important selling points. Contemporary brands are winning Millennials and Aspiring Child Free. The Millennials eating out repertoires strongly over-index for contemporary brands Turtle Bay, Nando s and YO! Sushi for the Explorers; BrewDog, Wasabi, Wahaca, Itsu, Five Guys and YO! Sushi for the Home Builders (25-34s, with no children at home) and Chimichanga and Wacky Warehouse for the New Parents. Aspiring Child Free (35-54 ABC1, with no children at home) are overrepresented for the more premium contemporary brands, including Côte, Wahaca, Itsu and GBK. Special occasions and celebrations drive the highest spend. Customers aged over 25, either ABC1 or C2DE, having children at home or not, all spend the highest when eating out for special occasions or celebrations. This indicates an opportunity to dig the customer pockets deeper with appropriate celebration offers. For all customers aged over 25, the mission for spending the second highest is to spend time with their partners. Nice environment and friendly service are important to enhance customers dining experiences and encourage repeat visits. Notes: age range for the three broad segments Millennials (18-34s), Generation Y (35-54s), Grey Pound (55+). 114

115 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Section summary Customer typology overview Customer profile types Bespoke consumer research Future outlook 115

116 Customer segmentation demographics and spend CONSUMER TYPOLOGY ANALYSIS Millennial segments and the ABC with kids are the most valuable restaurant customers*. These four segments account for 57% of total implied expenditure despite only a 39% share of the total adult population. DEMOGRAPHICS Age Social grade No limit No limit No limit ABC1 C2DE ABC1 C2DE No limit No limit Kids at home No limit Have kids No children Have kids Have kids No children No children No limit No limit % OF UK ADULT POPULATION** (50.9million) 12% (5.9m) 7% (3.6m) 10% (5.1m) 10% (4.9m) 8% (4.2m) 9% (4.6m) 8% (3.9m) 14% (7.4m) 22% (11.4m) IMPLIED ANNUAL RESTAURANT MARKET SPEND*** ( 45.3b) 16% ( 7.0b) 13% ( 6.1b) 14% ( 6.2b) 14% ( 6.4b) 7% ( 3.2b) 10% ( 4.4b) 6% ( 2.5b) 10% ( 4.5b) 11% ( 5.0b) Notes: *Restaurant customers: customers who have visit fast food, pubs, branded restaurants, local independent restaurants and fine dining for breakfast, lunch, dinner or snacking. **UK adult population: based on ONS most recently released data - population and age group (2014), social grade (2011) and children dependent in household(2011). ***Implied annual restaurant market spend is an estimated UK adult spend (inc. tax) at fast food, branded restaurants, independent restaurants and fine dining across all day-parts. N.B. have kids means having children (under 18) in the household; no children refers to customers who either have no children in the household or have children but over

117 Customer segmentation frequency and average spend CONSUMER TYPOLOGY ANALYSIS Millennial parents eat out most frequently. The new parents visit fast food, pubs, branded and independent restaurants 178 times for breakfast, lunch, dinner or snacking in a year. Golden oldies have the highest average spend per head per occasion, however they eat out least frequently at only 35 times a year. % OF UK ADULT POPULATION* (50.9million) 12% (5.9m) 7% (3.6m) 10% (5.1m) 10% (4.9m) 8% (4.2m) 9% (4.6m) 8% (3.9m) 14% (7.4m) 22% (11.4m) Visit frequency (Annual res mkt visits per person) Nat. avg = 83 (100) 132 (159) 178 (214) 117 (141) 121 (146) 82 (98) 82 (99) 68 (82) 54 (64) 35 (42) Average spend (p/h per visit) 9.05 Nat. avg = (100) (84) 9.38 (88) (98) (101) 9.45 (88) (109) 9.60 (90) (107) (118) IMPLIED ANNUAL RES MKT SPEND ** ( 45.3b) 16% ( 7.0b) 13% ( 6.1b) 14% ( 6.2b) 14% ( 6.4b) 7% ( 3.2b) 10% ( 4.4b) 6% ( 2.5b) 10% ( 4.5b) 11% ( 5.0b) Notes: *UK adult population: based on ONS most recently released data - population and age group (2014), social grade (2011) and children dependent in household(2011). **Implied annual restaurant market spend is an estimated UK adult spend (inc. tax) at fast food, branded restaurants, independent restaurants and fine dining across all day-parts. N.B. visit frequency is the average annual visits to fast food outlets, branded restaurants, independent restaurants and fine dining restaurants for breakfast, lunch, dinner and snacking (it excludes visits to cafés, supermarkets, workplaces, hotels, etc.); Average spend is the average spend per head per restaurant market visit, including breakfast, lunch, dinner and snacking. 117

118 Customer segmentation segment expenditure by channel CONSUMER TYPOLOGY ANALYSIS Strong branded restaurant skew for the M segments. UK adults spend 45.3 billion on restaurants in MAT June % of total expenditure goes to branded restaurants, with all three M segments strongly over-indexing. Fast food is broadly appealing to customers under 55 years old. Overall 30% of total expenditure goes to pub restaurants, with no kids and 55+ in particular, strongly over-indexing. IMPLIED ANNUAL RESTAURANT MARKET SPEND* BY SEGMENT Fine dining Branded restaurant Fast food Independent restaurant Pub restaurant 45.3b 7.0b 6.1b 6.2b 6.4b 3.2b 4.4b 2.5b 4.5b 5.0b 8% 9% 10% 9% 8% 5% 9% 5% 7% 9% 13% 11% 10% 14% 20% 16% 17% 14% 14% 10% 15% 8% 23% 22% 28% 31% 16% 25% 32% 30% 31% 29% 24% 28% 23% 26% 19% 23% 17% 19% 30% 24% 24% 26% 27% 32% 33% 36% 40% 44% Total customers Notes: *Implied annual restaurant market spend is a calculated total restaurant expenditure for UK adults in the restaurant market (including fast food outlets, chain restaurants, independent restaurants and fine dining restaurants) across all day-parts (breakfast, lunch, dinner and snacking). It excludes expenditure from specific segments that are excluded in the MCA Eating Out Panel consumer research, in particular children and tourists. 118

119 BY SEGMENT Customer segmentation the expenditure matrix The Explorers are the most important contributors for fast food and chain restaurants. The Explorers spend 2.1b at fast food, accounting for 20% of the fast food outlet revenue. The Explorers also spend 1.4b on chain restaurants, accounting for 22% of the total revenue at this channel. Golden Oldies spend the most at pub restaurants and local restaurants. IMPLIED ANNUAL RESTAURANT MARKET SPEND* 45.3b 7.0b (16%) 6.1b (13%) 6.2b (14%) 6.4b (14%) 3.2b (7%) 4.4b (10%) 2.5b (6%) CONSUMER TYPOLOGY ANALYSIS 4.5b (10%) 5.0b (11%) BY CHANNEL 13.8b (30%) 1.7 (3.7%) 1.5 (3.2%) 1.6 (3.6%) 1.7 (3.8%) 1.0 (2.3%) 1.4 (3.2%) 0.9 (2.0%) 1.8 (3.9%) 2.2 (4.8%) 10.7b (24%) 1.2 (2.6%) 1.2 (2.6%) 1.6 (3.5%) 1.5 (3.3%) 0.6 (1.3%) 1.2 (2.7%) 0.6 (1.3%) 1.3 (2.9%) 1.5 (3.3%) 10.6b (23%) 2.1 (4.7%) 1.9 (4.2%) 1.4 (3.1%) 1.8 (4.0%) 1.0 (2.2%) 0.7 (1.6%) 0.6 (1.4%) 0.7 (1.5%) 0.4 (0.8%) 6.5b (14%) 1.4 (3.0%) 0.9 (2.1%) 1.1 (2.4%) 0.9 (2.0%) 0.4 (0.9%) 0.6 (1.3%) 0.3 (0.6%) 0.5 (1.0%) 0.5 (1.1%) 3.7b (8%) 0.7 (1.4%) 0.6 (1.3%) 0.6 (1.2%) 0.5 (1.1%) 0.2 (0.4%) 0.4 (0.9%) 0.1 (0.3%) 0.3 (0.7%) 0.5 (1.0%) Notes: *Implied annual restaurant market spend is a calculated total restaurant expenditure for UK adults in the restaurant market across all day-parts, excluding expenditure from specific segments that are excluded in the MCA Eating Out Panel consumer research, in particular children and tourists. 119

120 Customer segmentation Top 10 restaurant brands CONSUMER TYPOLOGY ANALYSIS The M segments strongly over-index for leading fast food and casual dining brands, while the G segments are over-represented among pub brands. TOP 10 RESTAURANT BRANDS ACROSS ALL DAY-PARTS (Visit share and indices for each segment against the average) 14.8% 7.5% 4.7% % 1.6% 1.5% 1.2% 1.2% 1.0% % Notes: Bubble size relates to the absolute value of index. E.g. The Explorers strongly over-index on McDonald s against the sample average of 14.8%. Colour: green (index over 110), grey (index under 110); data source: MAT June 2016, MCA EOP 120

121 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Section summary Customer typology overview Customer profile types Bespoke consumer research Future outlook 121

122 Worked example and notes on calculations used CONSUMER TYPOLOGY ANALYSIS 7.0bn (Implied annual res. mkt expenditure) Population: 5.9 m The Explorers spent 7.0bn in the restaurant market in 2016 Strong day-part participation and visit frequency but low average spend Participation 65% (129) Visit frequency p/y 18 (154) Average spend p/h 5.03 (96) 65% of the Explorers have eaten out for breakfast in the past year, with an index of 129 against the average share for all adult customers The Explorers on average visit the res. mkt 18 times for breakfasts. With an index of 160 against the total customers The Explorers on average spend 5.03 per head per visit for breakfast, under-indexing compared to the total customers Early week v late week 48% 43% Fri-Sun 52% 57% Mon-Thu Average The Explorers 46% (127) 6 (98) Channel visit share and average spend 46% of the Explorers restaurant market visits end up in fast food outlets. Index of 127 against the average for all the res. mkt customers The Explorers on average spend 6 per visit at fast food outlets, with an index of 98 against the average for res. mkt customers Key messages TOP 10 OCCASIONS FOR THE EXPLORERS TO AVERAGE Top brands with the highest segment skew (355) Turtle Bay has the strongest customer visit skew towards the Explorers, based on last month visits; a min sample size of 50 applies; index against the total res. mkt customers AVERAGE SPEND P/H Consideration set and non-consideration level No. of restaurant brands considered for a visit: 1.9 (118) Key messages TOP 10 NEEDS FOR THE EXPLORERS % who only considered 1 brand for last restaurant visit 51% (76) Index against the average for restaurant market customers TO AVERAGE 15% of the Explorers eat out in the restaurant market for having a treat. (Single choice question) 1pp higher compared to the total restaurant market customers The average spend when eating out on this mission Index against the avg. for restaurant market customers who eat out on this mission 21% of the Explorers choose a venue based on food quality/taste; (multiple choice question) 1% higher compared to the avg. for restaurant market customers 122

123 M The Explorers (18-24s) CONSUMER TYPOLOGY ANALYSIS The Explorers are the younger Millennials, with key characteristics of strong day-part participation, frequent restaurant visits, wide eating out consideration set, but spending lower than the average compared to other generations. The opportunities to target the explorers include developing offers for authentic ethnic cuisines and promoting informal dining experiences. 7.0bn (Implied annual res. mkt expenditure) Population: 5.9 m Strong day-part participation and visit frequency but low average spend Participation 65% (129) 96% (105) 91% (106) 82% (131) Visit frequency p/y 18 (154) 40 (144) 42 (159) 31 (186) Average spend p/h 5.03 (96) 7.95 (82) (86) 4.66 (84) Early week v late week 48% 43% Fri-Sun 52% 57% Mon-Thu Average The Explorers Channel visit share and average spend 46% (127) 21% (70) 15% (72) 14% (137) 5% (130) 6 (98) 10 (86) 10 (78) 13 (92) 19 (74) Top brands with the highest segment skew (355) (297) (302) (296) (302) (295) Consideration set and non-consideration level No. of restaurant brands considered for a visit: 1.9 (118) % who only considered 1 brand for last restaurant visit 51% (76) Under-index for social occasions; highest average spend when want a specific cuisine TOP 10 OCCASIONS FOR THE EXPLORERS TO AVERAGE AVERAGE SPEND P/H Having a treat 15% 1% (85) Get together 15% -3% 9.57 (79) Too tired to cook 10% 1% (84) With my partner 6% -1% 8.18 (85) To wind down 6% 1% (90) Special occasion 6% 0% (84) Specific cuisine 6% 1% (77) Other shopping 5% -1% (98) Work/study break 4% 2% 7.89 (94) Regular routine 4% -1% 6.85 (94) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Strongly over-indexing for fast service TOP 10 NEEDS FOR THE EXPLORERS TO AVERAGE Food quality/ taste Wide menu choice Been there before Good value Close to home Inexpensive prices Fast service Nice environment Convenient - other* Recommendation 21% 16% 13% 11% 9% 9% 9% 7% 7% 7% -3% -2% -2% -1% 0% 1% 1% 2% 2% 3% 123

124 M The New Parents (25-34s, with children at home) CONSUMER TYPOLOGY ANALYSIS The New Parents strongly over-index for participation and visit frequency. Fast food outlets are the main destinations. With the constriction with younger kids, getting together with friends is less important for the new parents, and family friendliness is a key need for choosing an appropriate venue. Critical to attract new parents is to provide family friendly services and facilities. Celebration offers (birthday party, etc.) for young kids will also encourage the New Parents to spend more per visit. Strong day-part participation and visit frequency Early week v late week 6.1bn (Implied annual res. mkt expenditure) Population: 3.6 m Participation 76% (150) 96% (104) 93% (109) 82% (132) Visit frequency p/y 30 (252) 46 (164) 46 (171) 57 (335) Average spend p/h 5.31 (102) 8.84 (91) (100) 5.42 (98) 48% 44% Fri-Sun 52% 56% Mon-Thu Average The New Parents Channel visit share and average spend 44% (124) 21% (71) 18% (85) 12% (124) 5% (130) 7 (109) 11 (90) 10 (78) 12 (84) 20 (79) Top brands with the highest segment skew (402) (343) (377) (331) (361) (331) Consideration set and non-consideration level No. of restaurant brands customers are aware of: 2.1 (130) % who only considered 1 brand for last restaurant visit 50% (74) Over-index for treat occasions; highest average spend for special occasions TOP 10 OCCASIONS FOR THE NEW PARENTS TO AVERAGE AVERAGE SPEND P/H Having a treat 16% 2% (90) Get together 11% -6% (94) Too tired to cook 9% 0% 9.87 (102) With my partner 7% 0% (97) To wind down 6% 1% (104) Other shopping 5% 0% 7.79 (93) Special occasion 5% 0% (83) Regular routine 5% 0% 9.75 (94) Specific cuisine 4% 0% (98) Work/study break 4% 1% 8.90 (123) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Over-index for the need of family friendliness TOP 10 NEEDS FOR THE NEW PARENTS TO AVERAGE Food quality/ taste Wide menu choice Been there before Close to home Good value Fast service Family friendly Inexpensive prices Convenient - other* Friendly Service 15% 14% 10% 9% 8% 7% 7% 6% 5% 5% -6% -5% -3% -3% -3% -1% -1% 0% 1% 3% 124

125 CONSUMER TYPOLOGY ANALYSIS M The Home Builders (25-34s, with no children at home) The Home Builders are the older millennials but have no children at home. This segment strongly over-indexes for visit frequency and contemporary chain restaurants (especially for contemporary brands). Having a treat is the joint No.1 mission and food quality is the most important need. This indicates strengthening food quality perception is the key to attract this segment to visit and build their loyalty. 6.2bn (Implied annual res. mkt expenditure) Population: 5.1 m Strong day-part participation and visit frequency Participation 69% (136) 95% (104) 94% (110) 76% (122) Visit frequency p/y 17 (144) 38 (135) 40 (150) 23 (134) Average spend p/h 5.16 (99) 8.65 (89) (100) 5.23 (96) Early week v late week 48% 49% Fri-Sun 52% 51% Mon-Thu Average The Home Builders Channel visit share and average spend 38% (107) 24% (81) 21% (101) 12% (124) 4% (111) 6 (99) 11 (95) 13 (100) 15 (103) 24 (97) Top brands with the highest segment skew (374) (356) (362) (303) (359) (280) Consideration set and non-consideration level No. of restaurant brands customers are aware of: 1.7 (106) % who only considered 1 brand for last restaurant visit 62% (92) Under-index for getting together; highest average for special occasions TOP 10 OCCASIONS FOR THE HOME BUILDERS TO AVERAGE AVERAGE SPEND P/H Get together 14% -3% (104) Having a treat 14% 0% (96) Too tired to cook 10% 1% 9.17 (95) With my partner 9% 1% (105) To wind down 6% 1% (96) Specific cuisine 5% 1% (93) Special occasion 5% -1% (101) Other shopping 4% -1% 9.69 (116) At leisure activity 4% 0% 7.58 (104) Work/study break 4% 1% (94) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Food quality, inexpensive, fast and recommendation over-indexing TOP 10 NEEDS FOR THE HOME BUILDERS TO AVERAGE Food quality/ taste Wide menu choice Been there before Good value Close to home Inexpensive prices Convenient - other* Fast service Nice environment Recommendation 22% 14% 14% 11% 11% 9% 9% 9% 7% 7% -2% 0% -1% 0% 0% 0% 1% 2% 2% 2% 125

126 X The Established Families (35-54s, ABC1, children at home) The Established Families are more affluent and mature customers. This segment strongly over-indexes for participation, frequency and average spend across all day-parts, especially in the later week (Fri-Sun). Customers in this segment have broad eating out repertoires but are relatively loyal, with 62% only considering one brand for each of their most recent visits. Targeting the Established Families with children s menu, celebration offers and family friendly services/facilities are key business development opportunities. Over-index for participation, visit frequency and average spend for all day-parts CONSUMER TYPOLOGY ANALYSIS Early week v late week 6.4bn (Implied annual res. mkt expenditure) Population: 4.9 m Participation 67% (132) 96% (104) 92% (107) 71% (115) Visit frequency p/y 19 (158) 38 (137) 36 (134) 29 (171) Average spend p/h 5.26 (101) 9.67 (99) 18.89(108) 5.75 (104) 48% 51% Fri-Sun 52% 49% Mon-Thu Average The Established Families Channel visit share and average spend 45% (125) 23% (77) 7 (110) 12 (106) 18% (88) 11% (106) 14 (107) 14 (100) 3% (97) 25 (101) Top brands with the highest segment skew (347) (209) (254) (204) (225) (202) Consideration set and non-consideration level No. of restaurant brands customers are aware of: 1.7 (108) % who only considered 1 brand for last restaurant visit 62% (92) Highest average spend when want a specific cuisine and with my partner TOP 10 OCCASIONS FOR ESTABLISHED FAMILIES TO AVERAGE AVERAGE SPEND P/H Having a treat 16% 1% (106) Get together 14% -4% (107) Too tired to cook With my partner 9% 7% 0% -1% (109) (112) Special occasion To wind down 6% 6% 0% 1% (105) (114) Other shopping 5% 0% (121) Specific cuisine 4% 0% (104) Regular routine 4% -1% (103) Work/study break 4% 1% 6.92 (95) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Family friendliness is a key need TOP 10 NEEDS FOR ESTABLISHED FAMILIES TO AVERAGE Food quality/ taste Wide menu choice Been there before Close to home Good value Family friendly Convenient - other* Nice environment Inexpensive prices Fast service 20% 14% 14% 12% 10% 9% 8% 7% 7% 7% -2% -1% 0% 0% 0% 0% 1% 0% 1% 5% 126

127 CONSUMER TYPOLOGY ANALYSIS X The Humble Householders (35-54s, C2DE, children at home) The Humble Householders are less affluent parents, who under-index for average spend for the main day-parts. With children being the No.1 priority in the household, family friendliness is of substantial importance for choosing a specific venue to visit, though over half of visits end up in fast food outlets. Customers in this segment are most willing to spend more for special occasions, especially when celebrating with their partners. In line for visit frequency but under-index for average spend at lunch and dinner Early week v late week 3.2bn (Implied annual res. mkt expenditure) Population: 4.2 m Participation 56% (111) 92% (100) 86% (101) 67% (108) Visit frequency p/y 14 (121) 27 (95) 26 (97) 15 (91) Average spend p/h 5.07 (97) 8.29 (85) (86) 6.03 (109) 48% 51% Fri-Sun 52% 49% Mon-Thu Average Humble Householders Channel visit share and average spend 48% (135) 26% (88) 14% (70) 9% (88) 2% (60) 6 (99) 11 (97) 12 (95) 14 (99) 23 (91) Top brands with the highest segment skew (207) (162) (172) (160) (170) (154) Consideration set and non-consideration level No. of restaurant brands customers are aware of: 1.7 (106) % who only considered 1 brand for last restaurant visit 63% (93) Strongly over-index for having a treat; highest average spend for specific cuisines TOP 10 OCCASIONS FOR HUMBLE HOUSEHOLDERS TO AVERAGE AVERAGE SPEND P/H Having a treat 19% 5% (83) Get together 13% -4% (90) Too tired to cook 10% 1% 8.89 (92) Other shopping 7% 1% 6.73 (80) With my partner 7% -1% (85) To wind down 5% 0% (89) Special occasion Regular routine Specific cuisine 5% 5% 4% -1% 0% 0% (94) (81) (95) Shopping for groceries 4% 1% 6.06 (84) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Strongly over-index for the need of family friendliness TOP 10 NEEDS FOR HUMBLE HOUSEHOLDERS TO AVERAGE Food quality/ taste Been there before Wide menu choice Good value Close to home Family friendly Convenient - other* Inexpensive prices Fast service Nice environment 18% 14% 13% 12% 11% 8% 8% 7% 7% 5% -2% -2% -2% -1% -1% -1% 0% 0% 1% 4% 127

128 CONSUMER TYPOLOGY ANALYSIS X Aspiring Child Free (35-54s, ABC1, no children at home) Aspiring Child Free are the more affluent 35-54s and have no children at home. Customers in this segment are above average spends and like to visit restaurants where they have been there before and which have strong food quality credentials. The majority of their visits happen in the later week (Friday to Sunday) and have a strong skew towards independent restaurants and premium casual dining brands. 4.4bn (Implied annual res. mkt expenditure) Higher day-part participation and visit frequency but lower average spend p/h p/v Population: 4.6 m Participation 57% (114) 93% (101) 90% (105) 62% (99) Visit frequency p/y 12 (99) 29 (105) 29 (107) 13 (77) Average spend p/h 5.05 (97) (104) (108) 5.75 (104) Early week v late week 48% 54% Fri-Sun 52% 46% Mon-Thu Average Aspiring Empty Nester Channel visit share and average spend 32% (89) 31% (103) 24% (115) 10% (102) 3% (97) 6 (95) 12 (106) 14 (107) 16 (113) 31 (125) Top brands with the highest segment skew (212) (184) (205) (180) (187) (172) Consideration set and non-consideration level No. of restaurant brands customers are aware of: 1.6 (98) % who only considered 1 brand for last restaurant visit 72% (106) Over-index for social occasions; highest average spend for special occasions TOP 10 OCCASIONS FOR ASPIRING CHILD FREE TO AVERAGE AVERAGE SPEND P/H Get together 17% -1% (112) Having a treat 14% -1% (113) Too tired to cook 10% 1% (104) With my partner 8% 1% (118) To wind down 6% 1% (101) Special occasion 6% 0% (112) Regular routine 5% 0% (105) Specific cuisine 5% 0% (100) Other shopping 4% -2% 9.37 (112) Leisure-based journey 4% 0% (114) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Need strong food quality credentials TOP 10 NEEDS FOR ASPIRING CHILD FREE TO AVERAGE Food quality/ taste Been there before Close to home Wide menu choice Good value Convenient - other* Inexpensive prices Nice environment Recommendation Fast service 24% 19% 15% 13% 12% 11% 8% 8% 7% 7% -1% 1% 1% 1% 1% 2% 3% 3% 3% 4% 128

129 2.5bn (Implied annual res. mkt expenditure) 42% (117) 6 (92) X Functional Child Free (35-54s, C2DE, no children at home) Functional Child Free under-index for participation, frequency and spend for lunch and dinner. Fast food and pubs are the main destinations. More functional missions over-index for Functional Child Free, including too tired to cook and out for shopping. However all these functional missions are associated with low relative spends. Promoting budget special occasion meal deal offers for functional Child Free is a key opportunity. Participation 49% (98) 89% (96) 80% (93) 60% (97) Visit frequency p/y 11 (93) 22 (80) 23 (88) 12 (68) Average spend p/h 5.02 (96) 8.49 (87) (84) 5.86 (106) Channel visit share and average spend 30% (101) 11 (95) Population: 3.9 m 18% (87) 13 (96) Under index for participation, frequency and spend for lunch and dinner 7% (73) 15 (104) 3% (73) 20 (80) Top brands with the highest segment skew (149) (128) (125) (118) (111) (109) Early week v late week 48% 49% 52% 51% Average Fri-Sun Mon-Thu Functional Empty Nester Consideration set and non-consideration level No. of restaurant brands customers are aware of: 1.5 (93) CONSUMER TYPOLOGY ANALYSIS % who only considered 1 brand for last restaurant visit 71% (105) Getting together and special occasions under indexing TOP 10 OCCASIONS FOR FUNCTIONAL CHILD FREE TO AVERAGE AVERAGE SPEND P/H Good value is a key need TOP 10 NEEDS FOR FUNCTIONAL CHILD FREE TO AVERAGE Having a treat 16% 2% (86) Get together 15% -3% (89) Too tired to cook 12% 3% 8.81 (91) With my partner Other shopping To wind down Regular routine Specific cuisine 8% 6% 5% 5% 5% 1% 1% 0% 0% 0% (95) (81) (84) (76) (83) Special occasion 4% -2% (93) Shopping for groceries 4% 1% 5.93 (82) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Food quality/ taste Been there before Wide menu choice Good value Close to home Convenient - other* Inexpensive prices Fast service Friendly Service Nice environment 20% 17% 13% 13% 12% 9% 8% 7% 6% 5% -1% -2% 0% 0% 1% 0% 1% 1% 0% 1% 129

130 CONSUMER TYPOLOGY ANALYSIS G Greying Generation (55-65s) Greying Generation strongly over-indexes for social missions, including get-togethers, leisure activities and leisure journey. Customers in this segment over-index for the need of food quality/taste, but under-index for having a treat. This indicates a key opportunity especially for pubs, to promote treating occasions and strengthen food quality/taste. 4.5bn (Implied annual res. mkt expenditure) Population: 7.4 m Under index for visit participation and visit frequency across all day-parts Participation 42% (83) 90% (98) 82% (96) 56% (90) Visit frequency p/y 7 (57) 20 (72) 18 (66) 9 (53) Average spend p/h 5.44 (104) (107) (103) 5.39 (97) Early week v late week 48% 49% Fri-Sun 52% 51% Mon-Thu Average Greying Generation Channel visit share and average spend 29% (81) 38% (125) 24% (114) 6 (95) 12 (103) 14 (108) 7% (75) 16 (111) 3% (75) 30 (117) Top brands with the highest segment skew (193) (121) (135) (120) (122) (116) Consideration set and non-consideration level No. of restaurant brands customers are aware of: 1.5 (9.3) % who only considered 1 brand for last restaurant visit 72% (108) Over-index for social occasions; highest average spend for special occasions TOP 10 OCCASIONS FOR GREYING GENERATION TO AVERAGE AVERAGE SPEND P/H Get together 20% 2% (102) Having a treat Too tired to cook 13% 9% -1% 0% (111) (107) With my partner Other shopping Special occasion Leisure-based journey Regular routine 8% 6% 6% 5% 5% 1% 1% 0% 1% 0% (101) (100) (111) (110) (108) To wind down 4% -1% (109) At leisure activity 4% 1% (103) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Want food quality and trust TOP 10 NEEDS FOR THE GREYING GENERATION Food quality/ taste Been there before Wide menu choice Good value Close to home Convenient - other* Nice environment Inexpensive prices Friendly Service Recommendation 21% 19% 13% 12% 12% 10% 8% 7% 6% 4% -1% TO AVERAGE 0% 0% 0% 1% 1% 1% 1% 2% 3% 130

131 G Golden Oldies (65+) Golden Oldies under-index for participation and frequency across day-parts, but they are the most loyal customers. Pubs are the main destinations. Getting together with friends and families is the main mission to eat out, and they are risk adverse and choose a venue where they have been there before for reassurance. There is an opportunity for pubs to capture more spend, not least though developing multi-generational family offer and gathering special events. Under index for visit participation and visit frequency across all day-parts CONSUMER TYPOLOGY ANALYSIS Early week v late week 5.0bn (Implied annual res. mkt expenditure) Population: 11.4 m Participation 27% (53) 89% (97) 79% (92) 50% (81) Visit frequency p/y 3 (24) 15 (53) 12 (46) 5 (29) Average spend p/h 5.64 (108) (116) (104) 6.34 (114) 48% 44% Fri-Sun 52% 56% Mon-Thu Average Golden Oldies Channel visit share and average spend 16% (44) 45% (148) 27% (133) 6 (97) 12 (105) 14 (106) 8% (84) 14 (103) 4% (108) 31 (124) Top brands with the highest segment skew (153) (131) (135) (129) (134) (129) Consideration set and non-consideration level No. of restaurant brands customers are aware of: 1.4 (86) % who only considered 1 brand for last restaurant visit 78% (115) Over-index for getting together; highest average spend for special occasions TOP 10 OCCASIONS FOR GOLDREN OLDIES TO AVERAGE AVERAGE SPEND P/H Get together 28% 10% (101) Having a treat 10% -4% (119) With my partner 7% 0% (93) Regular routine Other shopping 7% 7% 2% 1% (115) (101) Too tired to cook 6% -3% (109) Special occasion Leisure-based journey At leisure activity Other (please specify) 6% 5% 4% 4% 1% 1% 1% 2% (100) (107) (110) (107) Convenient other*: close to a place other than home or workplace, e.g. shops, leisure facility, etc. Choosing a venue within on existing repertoires TOP 10 NEEDS FOR GOLDEN OLDIES TO AVERAGE Been there before Food quality/ taste Wide menu choice Close to home Good value Convenient - other* Nice environment Friendly Service Recommendation Inexpensive prices 19% 18% 14% 12% 12% 9% 8% 6% 5% 5% -2% 0% 0% 0% 0% 0% 1% 1% 1% 3% 131

132 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Section summary Spending drivers Cuisine preference Promotional influences Social media and contact Loyalty considerations Future outlook 132

133 Section summary Cuisine collection and peer influence make Millennials the King of growth. 35% of 18-34s spending more on eating out than one year ago, 8pp higher than the average, reflecting the growing foodie culture among younger customers. Partner and friends becoming more interested in eating out is the joint most important reason for spending more on eating out these days, with Millennials and 35-54s strongly over-indexing. Keenness to try more cuisine types is the second most important reason for Millennials to spend more, reflecting more adventurous mindsets. The growing cuisine collection habit is also evident that 60% of 18-34s agree that they are trying out a broader range of cuisines than before, 15pp higher than the average. Generation Y cutting down on alcoholic drinks to spend more on food. 26% of Generation Y (35-54s) are spending less on going out for a drink and increasing their spending on eating out in restaurants, compared to the average of 18% of all adults. Enhancing the food offers in pubs is key to retaining footfall and mitigating the expenditure lose. Promotions remain a popular way to drive traffic. More restaurant offers and promotional discounts is the third most important reason for spending more now than 12 months ago. This message comes together with more restaurants opened near where I live and eating out is more affordable these days. Discounts and promotions is the third most important aspect of a branded restaurant that encourage customers to regularly visit it, with younger customers (under 55) strongly over-indexing. BESPOKE CONSUMER SURVEY The most favoured cuisines are becoming more multi-national. Thai, Mexican, Mediterranean, Vegetarian, BBQ and Vietnamese feature in the Top 10 fastest growing cuisines, with Millennials strongly over-indexing for the growth contributions British remains the most favourite cuisine, however it is losing its appeal to Millennials and its popularity is down slightly compared to 2-3 years ago. Italian cuisine is the second most favoured and is growing. The popularity has risen 3pp to 16%, driven by younger customers (under 55) and supported by promotional activity. s, social media and discounts are key to target Millennials. 46% of Millennials are on the contact list of restaurants and pub companies. The majority agree that being on an contact list does encourage them to visit more often. 43% of Millennials confirm that they follow restaurants on Facebook and Twitter for information and deals. 33% of Millennials use discount vouchers most of the time when they eat out. Half of customers in this age group agree that they regularly choose a restaurant based on whether there is a voucher/promotional deal available. Millennials want faster and more interactive service in chain restaurants. Millennials vote friendlier and more engaging customer service (15%) and faster service (14%) as the most important aspects that would encourage them to visit more often, 6pp respectively higher than the survey averages. Millennials also strongly over-index for more customisable products, more social media engagement and improved atmosphere. In light of heightened cost consciousness among 55+ customers, getting the value for money equation right and skilfully communicating this are important to succeeding among this segment. 133

134 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Section summary Spending drivers Cuisine preference Promotional influences Social media and contact Loyalty considerations Future outlook 134

135 BESPOKE CONSUMER SURVEY Who are spending more these days compared to 12 months ago? Growth is driven by Millennials. Overall, 27% of customers spend more money on eating out compared to 12 months ago, 3pp higher than the proportion of people who spend less s strongly over-index for spending more these days, reflecting fewer dependents in the household and generally reduced financial pressure. Compared with 12 months ago, are you now spending more money on eating out? Single choice, % of respondents 24% 29% 27% 17% Spending less these days 49% 36% 53% 55% Spending about the same Spending more these days 27% 35% 21% 28% Average 18-34s 35-55s 55+ N.B. Net increase/decrease is the absolute value of the difference between spending more these days and spending less these days. Data source: MCA bespoke survey,

136 22% 20% 18% 16% 16% 25% 24% 22% 14% 20% 14% 26% 24% 31% 26% 19% 30% 24% 33% 27% 22% 28% 19% 23% 20% 32% 34% 27% 26% 43% Top ten reasons for spending more money on eating out BESPOKE CONSUMER SURVEY Increases in food and drink prices and partner / friends eating out more often are the main reasons for spending more money on eating out. 30% vote the increase of prices is the main reason, strongly driven by 55+. The changing behaviour of partner / friends is the joint No.1 reason, with the under 55s strongly over-represented. If spending more, what would you most attribute this to? Multiple choice, % of respondents who spend more these days Average Average, 30% Average, 30% Average, 28% Average, 25% Average, 24% Food & drink prices have increased in restaurants & pubs My partner/friends are more interested in eating out More retaurant offers and promotional discounts More restaurants have opened near to where I live Feel more comfortable about the outlook for my finances Average, 23% Average, 23% Average, 23% Average, 20% Average, 18% I am buying from better quality establishments than I used to My financial circumstances have improved Keener to try more cuisine types It is more affordable these days Spending less on going out for a drink Data source: MCA bespoke survey,

137 BESPOKE CONSUMER SURVEY Top ten reasons for Millennials spending more money on eating out Peer influence is the most important reason for Millennials spending more. 33% of Millennials who spend more on eating out compared to one year ago vote my partner/friends are more interested in eating out as one of the most important reason, 3pp higher than the average. This indicates Millennials are more likely to be influenced by the changing attitudes and behaviours of others. Keener to try more cuisine types is the second most important reason, reflecting millennials adventurous characters and lower risk aversion. If spending more, what would you most attribute this to? Multiple choice, % of 18-34s who spend more these days Average % 33% 31% 23% 25% 28% 28% 27% 23% 25% My partner / friends are more interested in eating out Keener to try more cuisine types More restaurants have opened near to where I live More retaurant offers and promotional discounts My financial circumstances have improved 24% 23% 23% 22% 30% 19% 20% 16% 18% 16% Feel more comfortable about the outlook for my finances I am buying from better quality establishments than I used to Food & drink prices have increased in restaurants & pubs It is more affordable these days Spending less on going out for a drink Data source: MCA bespoke survey,

138 Top ten reasons for 35-54s spending more money on eating out BESPOKE CONSUMER SURVEY The changing behaviour of partner/friends is the most important reason for 35-54s to spend more. 32% of 35-54s who spend more these days vote my partner/friends are more interested in eating out as the one of the most important reasons, 2pp higher than the average. Spending less on going out for a drink is the third most important reason for 35-54s, 8pp higher than the average. This reflects the middle-aged customers switching their spending from alcoholic beverages to food. If spending more, what would you most attribute this to? Multiple choice, % of 35-54s who spend more these days Average % 32% 30% 30% 18% 26% 23% 24% 24% 17% My partner/friends are more interested in eating out 23% Food & drink prices have increased in restaurants & pubs 28% Spending less on going out for a drink My financial circumstances have improved I am buying more expensive dishes on menus these days 22% 22% 24% 20% 23% 20% 20% 20% Keener to try more cuisine types More retaurant offers and promotional discounts Feel more comfortable about the outlook for my finances I am buying from better quality establishments than I used to It is more affordable these days Data source: MCA bespoke survey,

139 Top ten reasons for 55+ spending more money on eating out BESPOKE CONSUMER SURVEY Rising food and drink prices are the main reason why 55+ say they are spending more. 43% think food and drink prices have increased in restaurants and pubs is the key reason for them spending more money on eating out, 13pp higher than the average. In addition, promotional discounts are an important factor that encourages 55+ customers to visit and spend more. If spending more, what would you most attribute this to? Multiple choice, % of 55+ who spend more these days Average % 30% 28% 34% 25% 27% 24% 26% 23% 26% Food & drink prices have increased in restaurants & pubs More retaurant offers and promotional discounts More restaurants have opened near to where I live Feel more comfortable about the outlook for my finances I am buying from better quality establishments than I used to 30% 24% 24% 20% 23% 18% 17% 17% 12% 15% My partner/friends are more interested in eating out It is more affordable these days My financial circumstances have improved I am buying more expensive dishes on menus these days Belong to more loyalty schemes Data source: MCA bespoke survey,

140 Better choice of good quality restaurants and pubs BESPOKE CONSUMER SURVEY The majority of customers agree there is a much better choice of good quality restaurants and pubs these days. 55+ customers and those who eat out more often and spend more all strongly over-index. To what extent do you agree with following statement? % of respondents There is a much better choice of good quality restaurants and pubs these days 2% 3% 2% 2% 1% 5% 5% 6% 5% 4% 2% 4% 28% 29% 30% 25% 17% 17% Disagreee Strongly Disagree 57% 56% Neither 53% 50% 52% 56% Agree 12% 13% 10% 13% 21% 21% Agree Strongly Average 18-34s 35-55s 55+ Eat out more often Spend these more days these days Data source: MCA bespoke survey, 2016 Eat out more often these days Spend more these days 140

141 The rise of the lower-ticket restaurants BESPOKE CONSUMER SURVEY Millennials visit more lower-ticket restaurants. 47% of customers agree that they visit more restaurants that offer lower prices or value deals, with 18-34s and customers who eat out more often and spend more strongly over-indexing. To what extent do you agree with following statement? % of respondents I visit more restaurants that offer lower prices or value deals 5% 2% 6% 8% 13% 14% 13% 16% 31% 34% 36% 33% 3% 4% 15% 16% 29% 29% Disagreee Strongly Disagree Neither 39% 44% 39% 35% 45% 42% Agree Agree Strongly 8% 11% 7% 8% 9% 9% Average 18-34s 35-55s 55+ Data source: MCA bespoke survey, 2016 Eat out more often these days Spend more these days 141

142 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Section summary Spending drivers Cuisine preference Promotional influences Social media and contact Loyalty considerations Future outlook 142

143 The globalising popularity of the Top 20 favourite cuisine types BESPOKE CONSUMER SURVEY British cuisine is the most favoured. 18% of respondents vote British as their favourite cuisine, down 0.3 pp compared to 2-3 years ago. Italian is the second most favoured, up 3pp in the same amount of time. Ten out of the Top 20 favourite cuisine types have grown popularity, led by Italian, Thai, Mexican and Mediterranean, but also with signs of interesting enjoyment of Japanese, Indian and Spanish cuisines. Healthier influences are also coming through with rising popularity of vegetarian and seafood dishes. Top 20 favourite cuisine types 2016 v 2-3 years ago, % of respondents PP compared to 2-3 years ago % % % 8.2% % 4.5% 4.0% 3.9% % 2.8% 2.6% 2.4% 2.4% 2.4% 2.1% 1.9% 1.5% 1.5% 1.3% 0.8% Data source: MCA bespoke survey,

144 3.2% 5.0% 5.1% 4.2% 3.6% 4.2% 4.7% 1.1% 2.9% 2.2% 4.2% 4.2% 2.8% 1.7% 6.1% 10.3% 6.5% 6.8% 7.1% 17.6% 18.7% 15.6% 12.3% 9.3% 10.6% 7.0% 2.5% 5.3% 14.9% 25.8% Top 10 most popular cuisines, 2016 BESPOKE CONSUMER SURVEY British is the most favoured cuisine, particularly for 55+ customers. 18% vote British as the their favourite type of cuisine, strongly supported by 55+ customers. Italian is the second favourite cuisine, with broad appeal to all age groups. Indian and Chinese rank in the third and fourth places, with strongly over-indexing. Millennials are over-represented for Italian, chicken, Thai, burger and Mexican food. When you are eating out these days, what is your favourite type of cuisine? Single choice, % of respondents Average Average, 18.2% 2 Average, 16.3% 3 Average, 9.5% 4 Average, 8.2% 5 Average, 4.9% British Italian Indian Chinese Chicken Average, 4.5% Average, 4.0% Average, 3.9% Average, 3.1% Average, 2.8% Pub Food Thai Burger Vegetarian Mexican Data source: MCA bespoke survey,

145 The fast growing cuisines by age group BESPOKE CONSUMER SURVEY Millennials are the key drivers for the majority of the fast growing minority cuisines. Millennials over-index for the growth of Thai, Mediterranean, Mexican, BBQ and Vietnamese cuisines s over-index for Italian, Thai, regional Indian cuisines. 55+ are over-represented for the growth for Mediterranean, seafood and vegetarian cuisines. Fast growing cuisines, by age groups, 2016 v 2-3 years ago Single choice, % represents the increased respondents who choose this type of cuisine as their favourite, % of respondents Average % 2.9% 3.4% 1.7% 1.8% 1.9% 2.0% 1.4% 1.5% 3.2% 0.3% 1.1% 1.5% 1.9% 0.8% 1.7% 1.3% 1.3% 3.1% Italian Thai Mexican Mediterranean Vegetarian -0.6% 1.3% 0.0% 0.8% 2.8% 1.0% 0.3% 2.2% 0.3% 1.0% 2.6% 0.0% 0.6% 0.6% 0.3% 0.6% 0.6% 0.5% 1.0% 0.3% 0.3% Seafood/Shellfish Regional Indian BBQ Japanese Vietnamese Data source: MCA bespoke survey,

146 The declining cuisines by age group BESPOKE CONSUMER SURVEY Chinese and India cuisines losing their appeal to the older customers. A large promotion of customers have switched their favourite cuisine from Chinese and India to others, with 55+ strongly over-indexing for both. Millennials account for the biggest decreases for American, burger and pub food. Fast growing cuisines, by age groups, 2016 v 2-3 years ago Single choice, % represents the decreased respondents who choose this type of cuisine as their favourite, % of respondents Average Chinese 2 Indian 3 American (Excl. burgers) 4 Burger 5 Pub Food 0.3% 0.6% -3.6% -4.6% -4.5% -5.6% -2.9% -3.9% -4.8% -2.5% -4.2% -2.5% -1.1% -1.3% -2.9% -0.3% -0.8% -1.0% -2.3% -1.4% Data source: MCA bespoke survey,

147 Top ten favourite cuisines for 18-34s, now v 2-3 years ago BESPOKE CONSUMER SURVEY Italian, BBQ and Thai are growing popularity among Millennials (18-34s). Italian is the most favoured and fastest growing cuisine for Millennials and the popularity has grown 2.9pp in the past 2-3 years. The popularity of BBQ has grown 2.6pp to 6.1%, 3pp higher than the average. This indicates Millennials are the main driver for the rise of BBQ. 4.2% of Millennials also vote Mexican as a favourite cuisine type, again higher than the average. Top 20 favourite cuisine types 2016 v 2-3 years ago Single choice, % of respondents Average : PP compared to 2-3 years ago 16.3% % 18.2% % % % 7.1% 8.2% 6.8% 6.5% Italian British Chicken Chinese Indian 6.1% 6.1% 3.9% % 4.2% 4.0% 4.2% % 2.4% % Burger BBQ American (Excl. burgers) Mexican Thai Data source: MCA bespoke survey,

148 Top ten favourite cuisines for 35-54s, now v 2-3 years ago BESPOKE CONSUMER SURVEY British, Italian, pub food, Thai and regional Indian are growing in popularity among 35-54s. British is the most favoured cuisine for 35-54s, up 1pp from 2-3 years ago. Italian cuisine is the second favoured, up 3pp for customers aged Pub food, Thai and regional Indian have also grown in popularity among this age group. Top 20 favourite cuisine types 2016 v 2-3 years ago Single choice, % of respondents Average : PP compared to 2-3 years ago 18.2% 17.6% % 15.6% 9.5% 12.3% 8.2% 10.6% 4.5% 5.0% British Italian Indian Chinese Pub Food 4.7% 3.9% 4.0% % % % 2.8% 2.8% 3PP 2.5% 1.5% Burger Thai Mexican Regional Indian Chicken Data source: MCA bespoke survey,

149 Top ten favourite cuisines for 55+, now v 2-3 years ago BESPOKE CONSUMER SURVEY All cuisines except Indian, Chinese, chicken and pub food, are growing in popularity among the 55+. More than one in four 55+ customers vote British cuisine as their favourite, up 1pp from 2-3 years ago. This highlights heightened cost conscious among this more mature customer segment. Top 20 favourite cuisine types 2016 v 2-3 years ago Single choice, % of respondents 18.2% % % % 5.1% 5.1% 2.4% 14.9% 9.5% British Italian Indian Chinese Chicken 4.0% 4.2% 4.2% 3.1% Pub Food Seafood/Shellfish Thai Vegetarian Mediterranean 9.3% Average % % : PP compared to 2-3 years ago 4.9% 1PP 2.4% % 3.4% 1.7 Data source: MCA bespoke survey,

150 The changing attitudes towards cuisines BESPOKE CONSUMER SURVEY Millennials have the biggest changes towards wider variety, healthier and more vegetarian cuisines. 60% of customers agree that they are trying out a broader range of cuisines than before, 15pp higher than the average. This reflects Millennial customers being more adventurous and lower risk averse than other age groups. Millennials also strongly over-index for ordering more healthier dishes now and eating more vegetarian food in restaurants and pubs these days, indicating that vegetarianism is becoming more established among younger customers. To what extent do you agree with following statements? % of agreement* I am trying out A BROADER RANGE OF CUISINES than before I order more 'HEALTHIER' DISHES now I am eating MORE VEGETARIAN food in restaurants and pubs these days Overall, 45% 60% Overall, 38% 43% 49% 35% 35% 33% 33% Overall, 22% 18% 17% 18-34s 35-55s s 35-55s s 35-55s 55+ % of agreement*: strongly agree % + agree slightly%, % of total respondents Data source: MCA bespoke survey,

151 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Section summary Spending drivers Cuisine preference Promotional influences Social media and contact Loyalty considerations Future outlook 151

152 The frequency of using discount vouchers BESPOKE CONSUMER SURVEY Millennials and customers who eat out more often or spend more these day are frequent discount voucher users. One in five customers use discount vouchers most or all of the time, with 18-34s and customers who eat out more often or spend more strongly over-indexing. How regularly do you use discount vouchers when eating out? % of respondents 18% 28% 34% 8% 25% 35% 20% 27% 36% 26% 22% 20% 17% 15% 12% 3% 6% 3% 8% 1% 6% Average 18-34s 35-55s 55+ Eat out more often Spend these more days these days 25% 30% 31% 12% 15% 27% 32% 28% 32% Never Occasionally Sometimes Most of the time Every time Data source: MCA bespoke survey, 2016 Eat out more often these days Spend more these days 152

153 The impact of vouchers/ promotional deal BESPOKE CONSUMER SURVEY Vouchers and promotional deals have a strong impact Millennials decision-making. 50% of 18-34s regularly choose a restaurant based on whether there is a promotional deal available, 10pp higher than the average. This indicates sending promotional codes / deals by contact list and social media are important and effective ways to boost Millennial customers visits. To what extent do you agree with following statements? I regularly choose a restaurant based on whether there is a voucher/promotion or deal available % of respondents Agree strongly Agree Neither Disagree Disagree strongly Total 8% 32% 28% 20% 12% 18-34s 12% 38% 29% 15% 6% 35-55s 8% 33% 29% 20% 11% 55+ 5% 27% 26% 24% 17% Data source: MCA bespoke survey,

154 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Section summary Spending drivers Cuisine preference Promotional influences Social media and contact Loyalty considerations Future outlook 154

155 The impact of social media BESPOKE CONSUMER SURVEY Social media has a strong impact on the Millennials but also customers who eat out more often or spend more. On average, 22% of customers agree they follow restaurants on Facebook and Twitter for information and deals, with Millennials and customers who have increased visit frequency and spending on eating out strongly over-indexing. To what extent do you agree with following statements? % of respondents I follow restaurants on Facebook and Twitter for information and deals 42% 21% 21% 16% 20% 39% 24% 63% 14% 15% Agree strongly 34% 24% 30% 24% 18% 17% 7% 4% 9% 11% 5% 6% 9% 0% Average 18-34s 35-55s 55+ Eat out more often Spend these more days these days 26% 19% 13% 34% 19% 14% Disagree strongly Disagree Neither Agree Data source: MCA bespoke survey, 2016 Eat out more often these days Spend more these days 155

156 The impact of on contact list BESPOKE CONSUMER SURVEY Millennials and customers who have increased eating out frequency and spending strongly over-index among those who have joined an contact list. The majority of those who sign up for contact list agree that being on a contact list does encourage them to visit more often. To what extent do you agree with following statements? % of agreement* I am on the contact list of 3-5 restaurant/pub companies I am on the contact list of more than 5 restaurant/pub companies Being on a restaurant/pub brand contact list does encourage me to visit more often Overall, 29% Overall, 19% Overall, 30% 38% 44% 39% 39% 45% 41% 27% 24% 30% 19% 32% 29% 29% 23% 10% 18-34s 35-55s 55+ More Spending frequently more 18-34s 35-55s 55+ More Spending frequently more 18-34s 35-55s 55+ More Spending frequently more % of agreement*: strongly agree % + agree slightly%, % of total respondents Data source: MCA bespoke survey,

157 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Section summary Spending drivers Cuisine preference Promotional influences Social media and contact Loyalty considerations Future outlook 157

158 Branded restaurants are higher quality than five years ago The majority of customers have recognised that branded restaurants are of a higher quality than five years ago. BESPOKE CONSUMER SURVEY To what extent do you agree with following statements? Branded restaurants are now of much higher quality than 5 years ago % of respondents Net agreement* 33% Net agreement 40% Net agreement 27% Net agreement 32% Net agreement 48% Net agreement 41% 2% 1% 3% 2% 1% 2% 10% 9% 13% 9% 9% 10% 43% 41% 42% 46% 32% 35% Disagreee Strongly Disagree Neither 38% 40% 37% 38% 46% 44% Agree Agree Strongly 7% 10% 6% 5% 12% 9% Average 18-34s 35-55s 55+ Eat out more often Spend these more days these days Net agreement* = (% of agree strongly + % of agree ) (% of disagree strongly + % of disagree) Data source: MCA bespoke survey, 2016 Eat out more often these days Spend more these days 158

159 Reasons for regular visits to chain restaurants Convenient location is the most important aspect why a branded restaurant retains customer loyalty. However, this is closely followed by a consistent and reliable food offer. What are the aspects of a branded restaurant that encourage you to regularly visit it? Multiple choice, % of respondents Rank Aspects of branded restaurants would encourage customers to regular visit it % of respondents (multiple choice) 1 Convenient location 49.6% 2 Consistent and reliable 44.6% 3 Discounts and promotions 39.0% 4 Great quality / tasty food 31.6% 5 Friendly and engaging Service 18.2% 6 Value for money 15.8% 7 Low prices 14.4% 8 Familiarity 13.6% 9 Favourite cuisine 13.5% 10 Customisable products 13.2% 11 Fast service 10.8% 12 Family friendliness 9.1% 13 Good atmosphere 7.9% 14 Good restaurant environment 6.9% 15 Events e.g. exclusive tastings, new opening parties 2.8% 16 Long opening hours 2.8% 17 Reward card 2.6% 18 Strong customer reviews 1.9% 19 Staff recognise me 1.2% 20 Social media engagement 0.5% Data source: MCA bespoke survey, 2016 BESPOKE CONSUMER SURVEY 159

160 BESPOKE CONSUMER SURVEY Top 10 branded restaurant aspects to retain the loyalty of 18-34s Consistency and discounts are the joint most important aspects that retain Millennials loyalty. 47% of Millennials vote consistent and reliable dining experiences and discounts & promotions as the most important aspects, with both strongly over-indexing against the total customers. Millennials also strongly over-index for customisable products and fast service. What are the aspects of a branded restaurant that encourage you to regularly visit it? Multiple choice, % of respondents Top 10 aspects for 18-34s 47% 47% 45% Average % 23% 18% 15% 13% 13% 11% Consistent and reliable Discounts and promotions Convenient location Where 18-34s over-index Customisable products Great quality / tasty food Friendly and engaging Service Familiarity Fast service Low prices Favourite cuisine +10pp +8pp +2pp +2pp +1pp +1pp +1pp +1pp +1pp 39% 47% 45% 47% 23% 13% 11% 13% 14% 15% 3% 4% 3% 4% 1% 2% 0% 1% Customisable products Discounts and promotions Data source: MCA bespoke survey, 2016 Consistent and reliable Fast service Familiarity Reward card Events e.g. exclusive tastings, new opening parties Staff recognise me Social media engagement 160

161 BESPOKE CONSUMER SURVEY Top 10 branded restaurant aspects to retain the loyalty of 35-54s Convenient location is the most important aspect that encourages 35-54s to regularly visit a branded restaurant. Convenient location is voted by 52% of 35-54s, 2pp higher than the average. Discounts and promotions is the third most important aspect, with 35-54s over-indexing s are also overrepresented for great quality / tasty food and family friendliness. What are the aspects of a branded restaurant that encourage you to regularly visit it? Multiple choice, % of respondents Average % Top 10 aspects for 35-54s 42% 42% 34% 18% 15% 14% 13% 13% 12% Convenient location Consistent and reliable Discounts and promotions Great quality / tasty food Friendly and engaging Service Low prices Favourite cuisine Familiarity Value for money Customisable products Where 35-54s over-index +3pp +3pp +2pp +2pp +1pp +1pp +1pp +1pp 32% 34% 39% 42% 50% 52% 9% 11% 8% 9% 13% 14% 14% 15% 0% 1% Great quality / tasty food Discounts and promotions Convenient location Family friendliness Good atmosphere Favourite cuisine Low prices Social media engagement Data source: MCA bespoke survey,

162 Top 10 branded restaurant aspects to retain the loyalty of 55+ BESPOKE CONSUMER SURVEY 55+ strongly over-index for value for money, great quality / tasty food and environment. 23% of 55+ vote value for money as one of the most important aspects that encourage them to regularly visit brand restaurant, 7pp higher than the total customers. 37% also vote great quality / tasty food as one of the most, 5pp higher than the average. Getting the value for money equation right and skilfully communicating this are important to succeeding among this segment. What are the aspects of a branded restaurant that encourage you to regularly visit it? Multiple choice, % of 55+ respondents Average 55+ Top 10 aspects for % 45% 37% 29% 23% 19% 15% 15% 12% 10% Convenient location Consistent and reliable Great quality / tasty food Discounts and promotions Value for money Friendly and engaging Service Favourite cuisine Low prices Familiarity Fast service Where 55+ over-index +7pp +5pp +3pp +2pp +1pp +1pp +1pp +1pp 16% 23% 32% 37% 7% 10% 13% 15% 50% 51% 3% 4% 14% 15% 18% 19% Value for money Great quality / tasty food Good restaurant environment Favourite cuisine Convenient location Long opening hours Low prices Friendly and engaging Service Data source: MCA bespoke survey,

163 BESPOKE CONSUMER SURVEY Top 10 branded restaurant aspects to retain the loyalty of parents Family friendliness is key for retaining the loyalty of parents. 22% of parents who have under 18 children at home vote family friendliness as one of the most important aspect of a brand restaurant that encourages them to regularly visit it, 7pp higher than the average. Discounts and promotions is the second most important aspect for parents, and 7pp higher than the average, highlighting some appreciation of the enhanced affordability of eating out that is facilitated by promotional offers. What are the aspects of a branded restaurant that encourage you to regularly visit it? Multiple choice, % of respondents who have under 18 children at home Top 10 aspects for parents 48% 46% 42% Average Parents 27% 22% 18% 17% 14% 12% 12% Convenient location Discounts and promotions Consistent and reliable Where parents over-index Great quality / tasty food Friendly and engaging Service Customisable products Family friendliness Familiarity Value for money Low prices 9% +7pp +7pp +5pp +4pp +1pp +1pp 46% 17% 39% 13% 18% 18% 22% 3% 4% 0% 1% Family friendliness Discounts and promotions Customisable products Friendly and engaging Service Events e.g. exclusive tastings, new opening parties Social media engagement Data source: MCA bespoke survey,

164 The aspects that would encourage more often visits BESPOKE CONSUMER SURVEY Better quality / tastier food is the most important aspect of branded restaurant that would encourage customers to visit more. What are the aspects of branded restaurants that would encourage you to visit them more often? Multiple choice, % of respondents Rank Aspects of branded restaurants would encourage more visits % of respondents (multiple choice) 1 Better quality / tastier food 39% 2 Lower prices 34% 3 Improved value for money 31% 4 More discounts and promotions 26% 5 Wider menu choice 23% 6 Reward card/loyalty scheme 17% 7 Favourite cuisine 15% 8 More convenient location 15% 9 Good restaurant environment 14% 10 More frequent updating of menu assortments 14% 11 More consistent and reliable menu offer 13% 12 More family friendliness 9% 13 Friendlier and more engaging Service 9% 14 Nicer environments 8% 15 Faster service 8% 16 Improved atmosphere 7% 17 More customisable products 6% 18 Staff recognise me 5% 19 More frequent 'club-type' events, e.g. exclusive tastings, new opening/menu parties 4% 20 More social media engagement 3% Data source: MCA bespoke survey,

165 Top 10 improvements for branded restaurants to target 18-34s BESPOKE CONSUMER SURVEY 18-34s are keener to see fast, friendlier and more engaging service in branded restaurants. For the Top 10 improvement aspects, 18-34s strongly overindex for fast service, friendlier and more engaging service and more customisable products. These attributes are consistent with a high regard for more informal and personalised dining experiences. What are the aspects of branded restaurants that would encourage you to visit them more often? Multiple choice, % of respondents Average Top 10 aspects for 18-34s 32% 31% 27% 25% 20% 15% 15% 14% 14% 13% Better quality / tastier food Lower prices Where 18-34s over-index More discounts Improved value and for money promotions Wider menu choice Reward card/ loyalty scheme Friendlier and more engaging Service Favourite cuisine Faster service More frequent updating of menu assortments +6pp +6pp +4pp +3pp +3pp +2pp +1pp +1pp +1pp 26% 27% 14% 15% 8% 9% 6% 10% 7% 10% 3% 5% 4% 6% 5% 6% 9% 10% Faster service Friendlier and more engaging Service More customisable products Improved atmosphere More social media engagement More frequent 'club-type' events More discounts and promotions Staff recognise me More family friendliness Data source: MCA bespoke survey,

166 Top 10 improvements for branded restaurants to target 35-54s BESPOKE CONSUMER SURVEY Better quality / tastier food and lower prices are the most important aspects that would encourage 35-54s to visit more often. 42% of 35-54s vote better quality / tastier food as the most important aspect, 4 pp higher than the average. Lower prices is the second most important aspect, but is 6pp higher than the average s also over-index for more family friendliness, reflecting the greater number of households with children in this age group. What are the aspects of branded restaurants that would encourage you to visit them more often? Multiple choice, % of respondents Average Top 10 aspects for 35-54s 42% 40% 31% 27% 22% 16% 16% 15% 14% 11% Better quality / tastier food Lower prices Where 35-54s over-index Improved value More discounts for money and promotions Wider menu choice Reward card/loyalty scheme Favourite cuisine More convenient location Good restaurant environment More frequent updating of menu assortments +6pp +4pp +2pp +1pp +1pp +1pp +1pp 34% 40% 39% 42% 26% 27% 9% 11% 15% 16% 5% 6% 4% 5% Lower prices Better quality / tastier food More family friendliness More discounts and promotions Staff recognise me More frequent 'clubtype' events Favourite cuisine Data source: MCA bespoke survey,

167 Top 10 improvements for branded restaurants to target 55+ BESPOKE CONSUMER SURVEY Improved value for money and more consistent and reliable menu offer have a stronger impact on the 55+. Better quality / tastier food is the most important for 55+, but slightly under-indexes compared to the total customers. Improved value for money and lower prices are the second and third most important aspects, with both over-indexing against the average. What are the aspects of branded restaurants that would encourage you to visit them more often? Multiple choice, % of 55+ respondents Average 55+ Top 10 aspects for % 35% 30% 25% 24% 19% 18% 17% 17% 16% Better quality / Improved value tastier food for money Lower prices Where 55+ over-index Wider menu choice More discounts and promotions Reward card/loyalty scheme More convenient location More consistent and reliable menu offer Good restaurant environment Favourite cuisine +4pp +4pp +3pp +2pp +2pp +2pp +2pp +2pp +1pp +1pp 31% 35% 13% 17% 15% 18% 23% 25% 39% 41% 14% 16% 14% 17% 17% 19% 8% 9% 15% 16% Improved value for money More consistent and reliable menu offer More convenient location Wider menu choice Better quality / More frequent tastier food updating of menu assortments Good restaurant environment Reward card/loyalty scheme Nicer environments Favourite cuisine Data source: MCA bespoke survey,

168 Contents Introduction and background Executive summary Market Competitive landscape Consumer insight Consumer typology analysis Bespoke consumer research Future outlook 168

169 Forecast UK Restaurant market growth by outlets FUTURE OUTLOOK Net closures to continue in Restaurant market. The net decline in outlets will be driven primarily by tenanted & leased pubs and independent restaurants. A slowdown is also expected for the Branded service-led restaurant and Branded delivery-focused fast food segments. Forecast growth in the UK Restaurant market by outlet numbers by segment, 2013, 2016E & 2019F 121, ,491 4, , , , ,987 28,273 26,600 1,475 2,770 1,776 3,031 3,308 2,057 25,475 25,834 26, , , ,960 22,370 17,510 13,000 17,345 17,900 18,800 8,688 9,318 10,250 2,901 2,730 2, E 2019F Branded service-led restaurants Fine dining Total Restaurant market Independent restaurants Branded traditional fast food Branded delivery-focused fast food Independent fast food/takeaway Branded contemporary fast food Street food & Mobile vans Tenanted & leased pubs Independent & Free of tie pubs Managed, branded & franchised pubs Social clubs CAGR E CAGR 2016E-2019F -0.6% -0.5% 3.6% 2.1% 5.6% 3.7% -1.9% -2.0% 3.1% 3.0% 6.4% 5.0% 0.5% 0.4% 17.0% 13.7% 8.7% 6.2% -7.8% -9.5% 1.1% 1.3% 2.4% 3.2% -2.6% -2.2% 169

170 Forecast UK Restaurant market growth by turnover FUTURE OUTLOOK Value growth to accelerate slightly over next three years. The total Restaurant market is forecast to reach a turnover CAGR of 1.2% between 2016E- 2019F, up from 1.0% between E. Turnover growth is expected to accelerate at Managed, branded & franchised pubs, Independent & Free of tie pubs and Branded traditional fast food. In contrast, a marked slowdown is expected in Branded service-led restaurants. Forecast growth in the UK Restaurant market by outlet numbers by segment, 2013, 2016E & 2019F 53,853 52,182 5,150 4, ,292 4,548 4,035 3,652 1, ,275 4,973 4,857 4,942 1, , ,611 5,145 4,177 3,159 7,059 14,410 7,196 8,992 9,932 11, E 2019F 55,946 5, ,397 7,545 Total Restaurant market Branded service-led restaurants Fine dining Independent restaurants Branded traditional fast food Branded delivery-focused fast food Independent fast food/takeaway Branded contemporary fast food Street food & Mobile vans Tenanted & leased pubs Independent & Free of tie pubs Managed, branded & franchised pubs Social clubs CAGR E CAGR 2016E-2019F 1.1% 1.3% 6.1% 4.4% 6.2% 4.2% -2.0% -2.4% 3.4% 4.1% 10.8% 7.7% 0.6% 0.2% 21.3% 16.0% 14.8% 13.8% -6.7% -8.9% 0.6% 1.6% 3.4% 3.8% -2.0% -2.6% 170

171 Share of Restaurant market turnover ad outlets FUTURE OUTLOOK Managed, branded & franchised pubs making biggest gains in share of turnover. The pub segment is set to increase its share by 2.6pp between F. Branded service-led restaurants and street food are also on track to claim a significantly higher share of the market. Outlets 0.2% 3.5% 4.0% 0.3% 4.3% 0.3% 24.6% 23.7% 22.6% Branded service-led restaurants Fine dining Independent restaurants Turnover 8.3% 9.6% 10.5% 1.2% 1.4% 1.6% 1.2% 2.3% 1.5% 2.5% 2.8% 1.7% 20.9% 21.6% 22.2% 0.3% 4.8% 0.5% 0.7% 6.3% 7.6% 18.4% 14.7% 11.0% 14.2% 15.0% 15.8% 7.1% 7.8% 8.7% 2.4% 2.3% 2.1% E 2019F Branded traditional fast food Branded delivery-focused fast food Independent fast food/takeaway Branded contemporary fast food Street food & Mobile vans 29.3% 26.8% 24.0% 7.0% 7.5% 8.2% 1.8% 2.4% 2.9% 9.3% 9.2% 8.9% 1.4% 0.6% 2.0% 1.1% 1.7% 2.9% 9.9% 7.8% 5.7% Tenanted & leased pubs Independent & Free of tie pubs Managed, branded & franchised pubs 13.5% 17.3% 13.4% 18.5% 13.5% 19.9% Social clubs 0.3% 0.3% 0.3% E 2019F 171

172 Restaurant market value growth drivers, 2016E-2019F FUTURE OUTLOOK Managed, branded & franchised pubs the largest contributor to Restaurant market growth over next three years. This is followed by branded serviceled restaurants, street food & mobile vans and branded traditional fast food. In contrast, social clubs, independent restaurants and tenanted & leased pubs are the main channels constraining growth in the market. Contribution to Restaurant market growth, 2016E-2019F, by segment, ranked from high to low, mn 1, ,013-1,

173 Forecast sales and outlet growth service-led restaurants FUTURE OUTLOOK Branded restaurants to continue outperforming independents, but segment not expected to reach previous highs in growth. The forecast sales CAGR for Branded restaurants for 2016E-2019F is 4.4%, down from 6.1%. Expansion rates are not expected to reach the levels seen in even with macroeconomic factors improving, as the property market and tightening competition will continue to be barriers to high aggregate growth in the segment. Younger brands with lower outlet counts are expected to see the strongest growth. Driving like-for-like sales improvements will be key for more established brands. Forecast sales and outlet growth, Service-led restaurant segments, F Market segment % CAGR 13-16E Sales Growth % CAGR 16E-19F % CAGR 13-16E Outlet Growth % CAGR 16E-19F Independent restaurants -2.0% -2.4% -1.9% -2.0% Fine dining 6.2% 4.2% 5.7% 3.7% Branded service-led restaurants 6.1% 4.4% 3.6% 2.1% Total Service-led restaurants 0.1% -0.3% -1.2% -1.3% 173

174 Forecast sales and outlet growth fast food FUTURE OUTLOOK Branded contemporary fast food to continue enjoying strong growth. MCA forecasts a turnover CAGR of 16.0% for Branded contemporary fast food between 2016E-2019F. While this is down from the previous growth rate of 21.9%, that rate was affected by a low base and average annual growth of 16% is still the fastest in the whole Eating Out market. Rapidly expanding brands, including Five Guys and Leon, are successfully tapping into key consumer trends around convenient yet high quality food. Forecast sales and outlet growth, Fast food segments, F Market segment % CAGR 13-16E Sales Growth % CAGR 16E-19F % CAGR 13-16E Outlet Growth % CAGR 16E-19F Independent fast food/take-away 0.6% 0.2% 0.5% 0.4% Street food & Mobile vans 14.8% 13.8% 8.7% 6.2% Branded traditional fast food 3.4% 4.1% 3.1% 3.0% Branded delivery-focused fast food 10.8% 7.7% 6.4% 5.0% Branded contemporary fast food 21.3% 16.0% 18.1% 13.7% Total Fast food 4.4% 4.6% 2.5% 2.2% Note: Branded delivery-focused fast food defined as branded fast food operators with no or very limited seating in outlets, e.g. Domino s, Papa John s and Pizza Hut Delivery. 174

175 Forecast sales and outlet growth pubs FUTURE OUTLOOK Managed and independent pubs in a strong position to grow. This growth comes on the back of accelerating conversions of tenanted pubs. Yet likefor-likes for several leading, national pub brands are under pressure, and this is expected to continue to be the case over the next few years. Forecast sales and outlet growth, Pub segments, F Market segment % CAGR 13-16E Sales Growth % CAGR 16E-19F % CAGR 13-16E Outlet Growth % CAGR 16E-19F Managed, branded & franchised 3.4% 3.8% 2.4% 3.2% Tenanted & leased -6.7% -8.9% -7.8% -9.5% Independent & Free of tie 0.6% 1.6% 1.1% 1.3% Social clubs -2.0% -2.6% -2.0% -3.2% Total Pubs 0.2% 0.8% -2.6% -2.2% 175

176 Market growth matrix, 2016E-2019F FUTURE OUTLOOK MCA believes the key sources of growth will move in the following directions in terms of importance over the next three years. New trading formats, the pace of NPD, premiumisation and hybridisation will all become more important to drive sales as the importance of physical expansion wanes. HIGH IMPORTANCE PHYSICAL EXPANSION INFLATION INTERNAL LONGER TRADING HOURS MARKETING INITIATIVES DISCOUNTS & PROMOTIONS EXPERIENTIAL SHARE OF SPEND FOODIE CULTURE EXTERNAL NEW TRADING FORMATS PREMIUMISATION HYBRIDISATION DELIVERY TRADING-UP TOURISM & STAYCATIONS PACE OF NPD SOCIAL MEDIA LOW IMPORTANCE ALTERNATIVE FUNDING SOURCES POPULATION GROWTH EARLY CAPTURE OF DIGITAL NATIVES 176

177 EXTERNAL INTERNAL Market growth drivers summary table FUTURE OUTLOOK Importance ranking Growth driver vs movement in importance Description 1 Physical expansion Physical expansion rates are believed to have reached a high water market in Longer trading hours The past three years have seen an explosion of breakfast offers 2 Marketing initiatives Marketing will remain a crucial component of driving sales growth 2 Discounts & promotions Discounts & promotions will be less prominent as business confidence improves 3 New trading formats Large groups are eyeing new markets, i.e. Whitbread s investment in Pure 3 Premiumisation Will grow in importance as operators need to justify higher prices to offset rising costs 3 Hybridisation Pubs doing coffee and coffee/sandwich shops doing alcohol, e.g. Pret Evening 4 Pace of NPD Faster fashion in food will push operators to speed up NPD 4 Social media Social media can be key to capturing the hearts and minds of millennials 1 Inflation Price inflation will continue to have a major impact on growth in the market 2 Experiential share of spend The trend towards a higher experiential share of spends is only increasing 2 Foodie culture The growing foodie culture in the UK is going from strength to strength 3 Delivery Delivery will only grow in popularity but care must be taken with margin management 3 Trading-up Average spend per visit is expected to keep increasing after Tourism & Staycations The UK will continue to be an attractive tourist destination on the back of a weaker sterling 4 Alternative funding sources Modest growth will come from increased usage of alternative investment sources 4 Population growth Net immigration rates are likely to begin stabilising after early Early capture of digital natives Today s teenagers will be a key customer segment in 2019 with their own missions & needs 177

178 Growth in Total & Branded Restaurant market, F FUTURE OUTLOOK Branded restaurant market growth rates expected to continue to slow down slightly. MCA expects the Branded restaurant market to see fairly strong growth over the next years, but at a slowing rate. The challenges facing the industry in 2016 the property market, tightening competition and arguable saturation in certain segments are unlikely to disappear over the next few years. The total Restaurant market will benefit from the improving performance of independent & free of tie pubs, pushing it to retain a stable 1.3% growth rate in 2018 and Comparative analysis of growth in the Total & Branded Restaurant market, F 5.5% 3.9% 2.6% 4.5% 3.2% 3.8% 4.7% 3.3% 4.3% 3.1% 4.7% 4.6% 3.4% 3.3% Branded Restaurant market turnover growth Branded Restaurant market outlet growth 0.2% 0.6% 1.4% 1.1% 1.0% 1.3% 1.3% Total Restaurnat market turnover growth E 2017F 2018F 2019F -0.2% -0.4% -0.8% -0.7% -0.8% -0.7% -0.6% Total Restaurant market outlet growth 178

179 Customer segmentation future outlook FUTURE OUTLOOK The rise of the Greying Generation and Golden Oldies. The latest projections are 4.5 million more 55+ in ten years time. Assuming no change in visit frequency and average spend only rising by 1% per annual, the implied restaurant expenditure for the G segments will rise by 3.5b or 4pp to a 25% share. In reality and importantly, this rise is likely to be greater with more youthful and more frequent eating out behaviours being maintained for longer as consumers age. % OF UK ADULT POPULATION* 2016 (Total: 50.9m) 12% (5.9m) 7% (3.6m) 10% (5.1m) 10% (4.9m) 8% (4.2m) 9% (4.6m) 8% (3.9m) 14% (7.4m) 22% (11.4m) 2026 (Total: 55.0m) 10% (5.6m) 7% (3.7m) 9% (5.2m) 9% (4.8m) 7% (4.1m) 8% (4.5m) 7% (3.8m) 18% (9.8m) 25% (13.5m) IMPLIED ANNUAL RESTAURANT MARKET SPEND** 2016 (Total: 45.3b) 7.0b (16%) 6.1b (13%) 6.2b (14%) 6.4b (14%) 3.2b (7%) 4.4b (10%) 2.5b (6%) 4.5b (10%) 5.0b (11%) 2026 (Total: 52.2b) 7.4b (14% ) 6.8b (13% ) 7.0b (13% ) 7.0b (13% ) 3.5b (7% ) 4.8b (9% ) 2.7b (5% ) 6.6b (13% ) 6.5b (12% ) Notes: *UK adult population: 2016 population is based on ONS most recently released data - population and age group (2014), social grade (2011) and children dependent in household(2011) population is based on ONS 2014-based national population projections. **Implied annual restaurant market spend: 2016 spend is an estimated UK adult spend (inc. tax) at fast food, branded restaurants, independent restaurants and fine dining across all dayparts; 2026 spend is based on consumer visit frequency remaining the same but the average spend rising by an inflation 1% per annum. 179

180 FUTURE OUTLOOK Future outlook visit frequency and spend Higher spend and wider repertoires but lower eating out frequencies. Over the next 12 months, 12% of customers will increase eating out frequency in contrast to 18% who will reduce frequency. 30% will increase the total spending on eating out, 12pp higher than proportion who will reduce the spending. 31% will increase the number / variety of restaurants, 18pp higher than those who will reduce. Over the next 12 months % of respondents My eating out frequency will be My total spending on eating out will be The number / variety of restaurants I visit will 5% 18% 7% 7% 11% Don't know 6% 3% 10% Don't know Fallen significantly Fallen significantly Don't know Less often 46% Fallen slightly 50% Fallen slightly 65% The same More often Remained unchanged Remained unchanged Increased slightly Increased slightly 26% Increased significantly 27% Increased significantly 12% 4% 4% Data source: MCA bespoke survey,

181 Future outlook customer confidence indicators FUTURE OUTLOOK 55+ customers are more confident in the economy. 55+ strongly over-index for not having any concerns about job security and are broadly optimistic about the outlook for the UK economy over the next months. By contrast, Millennials are over-represented for thinking their household finances are going to stretch further over the next 12 months. To what extend do you agree or disagree with the following statements? % of respondents I do not have any concerns about my job security I am broadly optimistic about the outlook for the UK economy over the next months I think my household finances are going to stretch further over the next 12 months Overall, 46% Overall, 42% 55% 51% Overall, 32% 43% 40% 40% 36% 42% 33% 22% 18-34s 35-55s s 35-55s s 35-55s 55+ % of agreement*: strongly agree % + agree slightly%, % of total respondents Data source: MCA bespoke survey,

182 Future outlook potential business development ideas FUTURE OUTLOOK The top customer wish list include reducing prices for larger groups and more sharing platters on the menu. 56% of customers agree that it would be a good idea if prices were reduced for large groups. 51% agree that if more sharing platters were on menus, against only 16% of disagreement. It would be a good idea if how much do you agree or disagree with the following statements? % of respondents Net agreement* 41% Net agreement 36% Net agreement 28% Net agreement 25% Net agreement 20% Net agreement 14% 4% 5% 4% 9% 5% 10% 11% 11% 14% 15% 14% 16% 29% 33% 37% 28% 40% 34% 42% 42% 33% 38% 31% 28% Disagree Strongly Disagree Neither Agree Agree Strongly 14% 9% 13% 11% 9% 11% Prices were reduced for larger groups More sharing platters were on menus Bills included showing how much the meal costs on a per person basis More seafood and fish is included on menus More restaurants offer breakfast More vegetarian lines are offered on menus Net agreement* = (% of agree strongly + % of agree ) (% of disagree strongly + % of disagree) Data source: MCA bespoke survey,

183 Catching up with friends more than before Eating out to catch up with friends is a key driver. Overall, 38% of respondents agree that they are going out to eat as a way to catch up with friends more than before, with 18-34s and customers who eat out more often these day or spend more these days strongly over-indexing. To what extent do you agree with following statement? % of respondents I'm going out to eat as a way to catch up with friends more than before 12% 18% 33% 6% 12% 29% 13% 15% 17% 23% 34% 7% 7% 14% 15% 17% 26% Disagreee Strongly Disagree 42% 35% 47% 42% Neither Agree 31% 30% 23% Agree Strongly 7% 11% 6% 4% 15% 11% Average 18-34s 35-55s 55+ Eat out more often Spend these more days these days Data source: MCA bespoke survey, 2016 Eat out more often these days Spend more these days 183

184 MCA Key contacts: Sophie Barber, Sales & Marketing Manager Peter Linden, Market Analysis Manger