The State and Perspectives of Restaurant Business in London - Essay Example

?Examine the Current Restaurant Business in London Table of Contents Introduction 3 Economic Development and London Business Environment 4 London Tourism Industry 5 Investment Potential 6 Sustainability of the Market 7 Social Environment 9 Eating Trends 10 Role of Design and Construction 11 Cultural Factors and Ethnic Cuisine 11 Marketing, Media and Consumer Influences 12 Conclusion 14 References 15 Bibliography 19 Introduction London is known as one of the big food capitals around the globe. Restaurants of London have significantly contributed towards the economic development in the UK. As observed by Arifa Akbar in The Independent, the customers of London in recent years have been getting a feel of a “golden age” as many restaurants have opened over the last few years (Akbar, 2007). London restaurant industry is part of the hospitality industry. Thus, keeping in view the primary function of the hospitality industry which is to establish a new relationship as well as to promote a previously established relationship, this industry plays a significant role in making London one the most preferred destinations for people across the world (Lashley & Morrison, 2001). According to Harden, due to growing competitors in the market, the London restaurant industry has grown up to be more competitive. The UK market growth report of restaurant shows that the restaurant industry will increase to ?5449 million in coming years. During the year 2007, total number of 158 restaurants were opened which was 13% higher than the same period of previous year i.e. 2006. Simultaneously many restaurants were closed down due to rising competition in restaurant business. The growth in restaurant business was going up due to increase in disposal income in the economy (Eat Out, 2009). The London restaurant business is experiencing a significant amount of growth in recent years. As the restaurant sector was facing increasing competition and economic uncertainty, there was 3% fall in the year 2008 amounting to ?5373 million. At the same moment, there was problem in generating capital for operation of the business (Eat Out, 2009). According to the study conducted in March 2011, the hotel and restaurant sector in the UK is growing at the rate of 6.2 per cent. In spite of problems in the economy, companies such as “First Restaurant Group” in London have been still growing as compared to other companies. This shows that the customers are interested in enjoying nice meal even with lower budget (Warle, 2011). The restaurant business has contributed a lot for development of the economy. Every year it is creating a number of employment opportunities for the people of London. In London, traditional British food is more accepted, as it is one of the favourite foods of the citizens. Generally, the menu of the London Restaurant contains traditional British food items. The demand for food quality is increasing because of the changing culture as well as eating habits of the Londoners (Akbar, 2007). Economic Development and London Business Environment The hospitality sector is the fifth major industry which as per the data of the year 2010 provides employment to over 2.4 million populations in the UK. It also contributes more than ?34 billion in gross tax revenue. Creation of jobs are one of the most important aspects for development of the economy, thus it has created employment opportunities for people from Highlands of Scotland to the South West of England along with other main cities such as London or Edinburg (British Hospitality Association, 2010). The hospitality industry is the fifth leading industry in Britain which contributes 8% of total employment. The hospitality industry is leading in creating jobs in comparison to transport, financial services and communication sector. It requires support from the government in area such as taxation, infrastructure and planning of education and health policy to maximise the economic and social contribution. As observed by Oxford Economic study, the hospitality industry has opportunity to generate 236, 000 additional jobs in the UK by 2015 (British Hospitality Association, 2010). The hospitality industry includes hotels (consisting of camping grounds along with other accommodation), restaurants (consisting of pubs, licensed club, motorway services, takeaway food shops), catering services (consisting of contract catering to private and public sector customers and in-house catering in non hospitality direct segment such as health and education), and event management groups (consisting of conference and exhibition managers) (British Hospitality Association, 2010). London Tourism Industry Restaurants play a significant role in tourism as eating has forever been a necessity for the society (Corigliano & Baggio 2003). There is a connection between restaurant and tourism industry because food is an essential element for any tourist to experience. The restaurant business is affected as the consumers’ taste and liking are changing day by day. The demand of consumer is changing, they not only want good food items to eat but also need a good service with it. The research has confirmed that food has become an essential part of travel for serving a large number of traveller (Gretzel & Et. Al., 2010). As a result, restaurant business is flourishing by offering multiple food items–from sophisticated or exotic food to ‘cook yourself-eat yourself’ offer. Restaurant industry is raising the essence of food for the tourism industry. There is a distinction between food trail tour and restaurant. The restaurant business offers food to the local customers with or without their actual interest in food but in food trail tour offers food to the customers who are only interested in food. Hence there is a distinction between food and food tourism. Food tourism is a form of travel and its main motive is food along with the interest in the local product. The group with a high level of interest travels different places with a purpose to visit a specific restaurant and to eat a specific food (Gretzel & Et. Al., 2010). Investment Potential The restaurant industry was in terrible condition because of economic crash but in recent times it has experienced considerable growth hence the investment opportunity in restaurant industry is rising as compared to previous year i.e. 2010. The forecasted trend of restaurant industry has proved that there are a large number of opportunities in restaurant business. In the 2010, popular restaurants were growing and at the same time, large numbers of new restaurant were emerging. During the year 2010, mobile food has gained popularity in restaurant business. The renowned restaurants have expanded in this area of business with various cuisines and specialised brand food trucks and in 2011 there is an expectation of increase in government regulations which will have an effect on the profit margin. However, it is expected to be an excellent venture for investment in restaurants. Restaurant that are situated in farm area or using farm sources are moreover gaining popularity in this field of business (Johnson, 2011). The customer preferences are moving from chemical processed foods to healthy and organic foods hence the investor can invest in organic food restaurant. As the economy has turned back and growing slowly, the desire of customers are also changing. The customers prefer to have their favourite food to recollect the childhood memories, so it can be profitable to invest in this type of restaurant. There are a few comfort restaurants which are in heavy losses and have huge debts due to which they have to cut all expenses hence they are not able to maintain a sustainable profit. The investors are required to do accurate analysis by considering all the trends of the business prior to investing in a restaurant business (Johnson, 2011). Sustainability of the Market According to Dalmeny & Et. Al. (2007), the restaurants in London are increasing their focus and interest towards the crucial aspect of sustainability. The several popular restaurants in London are purchasing food from the local suppliers. The interest of restaurant business is shifting to organic food. They have adopted sustainable method by means of certified fish and ‘fair-trade’ product in their menus. The restaurant business is exploring to make their business natural by using product such as recyclable as well as reusable packages (Dalmeny & Et. Al., 2007). The following are a few of the practices of restaurants for sustainability: Pod Foods Restaurant is specialised in providing lunch to the customers. It buys fresh, organic and seasonal food ingredients from their suppliers. Pod Foods had identified the customer’s interest moving towards healthy food and started the restaurant business in the year 2005. It provides organic coffee which is certified by Rainforest Alliance. The suppliers have been cooperative and are working since the beginning of the restaurant. It uses ‘free-range’ eggs and the restaurant is certified by fair trade. Conversely, it also avoids using additives and their products also contain low fat. As the local council was not interested in environmental issues, so it was a challenge for Pod Foods to obtain suppliers who provides recycle packages, wooden forks instead of plastics. However, it had many customers as a result it was easy for the company to employ a staff and there were various choices for distribution of food (Dalmeny & Et. Al, 2007). An Indian restaurant in London named Cafe Spice Namaste in recent times has received sustainability award from the ‘Corporation of London’. The restaurant was awarded ‘London Chamber of Commerce Leadership in Sustainability Award’ for the consistent efforts as well as dedication of the restaurant towards the environment along with sustainability (The Magazine for Entrepreneurs, 2010). Social Environment One of the significant aspects that affect the business is the society. The purchasing pattern of consumers can be determined by changing trends of the society. For example, demand for food products can be determined by consumption pattern and demand of trendy cloths can be determined by fashion. The consumption pattern of the consumer is changing every day. The demand for a product changes with change in the social attitude. The restaurant business is required to identify the total number of target customer as well as their consumption model. They should analyse the trend of the target customer as there may be fluctuation in buying habit of the customers. The purchasing decision is affected by psychological factors e.g. image of a product and the feeling of the consumer after buying the product. The psychological factor is more vital than the physical benefits of the product. For example, McDonald’s has segmented the market into different divisions to provide different services to different types of customers. The following are the different profiles of customer: 1. Parents having two children 2. Children 3. Business customer 4. Teenagers The above profile helps McDonald’s to understand the behaviour pattern of the customers and to meet their expectations (Marketing at McDonald’s, 2008). Eating Trends The traditional eating pattern is changing dramatically during the last 30 years because people are becoming more conscious about their health and they are living a busy life. The Government of the UK has started an assessment regarding eating behaviour of people in the year 2008. This review contains various figures which show that a small quantity of people is committed to pay a premium for the organic and free range foods. Thus, it proves that the popularity in free-range food and organic food has gone down. The consumers are ready to pay for food which are produced and grown in the local area. The government has decided to support the producer of local area to offer public sector contracts for the promotion of British food within the country. The report also shows that people spend ?30.5bn in Thai food which has gained popularity in the restaurants and food-serving pubs (excluding alcoholic drinks) (Alden, 2008). In 2008, the people of Britain had spent ?7.6bn quarterly for eating in fast food and restaurant which includes Thai, Indian and Chinese takeaways. The sale of Thai food in a restaurant had increased to 36% in the previous five years period since 2008 (Alden, 2008). The fast food business is growing as it is adding extra ingredients in their food items, for example promoting fish finger by means of omega oils. The restaurants are advertising snacks and crisps as ‘one of your daily wholegrain servings’. The trend of “adding ingredient” in the food item is a way to appeal the customer to increase the sales. Nowadays, people are willing to have more healthy food and the restaurants are providing tasty food with healthy food ingredients. Due to huge competition, the fast food restaurant KFC has made promotion of their products by presenting a trainee ‘chef’ making the KFC chicken. It shows that KFC is advertising the fact that their food is superior to others. KFC has become health conscious as they are using less amount of salt in their food item. The fast food restaurants are moving towards more environment friendly items of food. For example in the UK, Eat as well as Pret a Manger prepares coffee by using organic and Fairtrade milk. The restaurants are selling hand made sandwich and cooking porridge in breakfast (Clark, 2010). Role of Design and Construction In a restaurant, an important factor to attract customer is the ambiance and environment of the restaurant. The restaurant should be warm, comfortable and clean. Water House is one of the eco-friendly restaurants in East London. The company utilises its 48% of profit for the development of the area. Water House uses environmental friendly techniques such as the canal water is used for heating and cooling system, solar energy is used for renewable electricity and hot water. They have used hydro-carbon fridges and a system to convert cooking oil into a compostable material (Sims, 2008). Cultural Factors and Ethnic Cuisine The restaurants are offering large variety of food to the customers. The most famous cuisine in the UK is Mexican and Thai food. The ethnic food market in the UK is growing. In the year 2006, the market for ethnic cuisine had grown to 3.5 per cent which was around ?1.38bn. The market of ethnic food is divided into two parts food and rice. The food sector is again divided into six sub sectors such as: Indian, Chinese, Caribbean, Mexican, Thai and others. The largest among them is Indian food which is followed by Chinese food. The market of London is dominated by Indian and Chinese cuisine and the others are in growing stage. The Indonesian, Malaysian and Japanese are the other types of ethnic food cuisines. The newly launched Polish food is also one of the fast rising ethnic foods in London. The new and innovative foods such as foods with low level of salt, fat and carbohydrate have to be launched to attract more health conscious customers (PR. Com, 2007). Marketing, Media and Consumer Influences The marketing strategy is required to communicate with the customers. It is not only about entertainment but also involves innovation along with creativity to influence the buying habit of the customers. Advertising approach comes under marketing strategy which is used as a medium to convey message to the target customers (Hackley, 2009). Advertising is a way to communicate with the customers about the food product. The fast food consuming culture has become popular in today’s world. The special types of logo are used in advertisement to attract the customer’s attentions. There are three type of advertisement social, affective and cognitive (Spotts & Et. Al., 1997). The efficiency of advertisement is measured on the basis of attitude towards brand, advertisement, product and buying intentions of the people. Advertising is driven by technology. Development of technology is essential for entertainment media (Hackley, 2009). In early 1990s, restaurants used price-promotion related strategies to create a centre of attention for the customers and to increase profit margins; also many fast-food businesses depend on price discounts to attract the customers. Research has suggested that fast-food advertisements influence the behaviour of children towards food consumption which makes them request their parents repeatedly to purchase certain food items for them (Hackley, 2009). Conclusion This paper contains the assessment of the restaurant business in London. As per the study, future growth of the restaurant industry is increasing and it has also involved in development of economy as it is one of the largest contributors in providing jobs to the nation which helps to generate tax revenues for the country. The eating habits of the consumer are changing, thus the restaurant business is required to keep on conducting research regarding the changing preferences of the customers for the development of inventive food products to sustain in the market. Conversely, the restaurant industry has adopted different approaches for sustainable development. References Alden, J., 2008. Food Trends Report On UK Eating Habits. Food Marketing network. [Online] Available at: http://www.foodmarketingnetwork.com/Food-trends-report-on-UK-eating-habits/ [Accessed May 13, 2011]. Akbar, A., 2007. Record Number Of New Restaurants Was Launched In London Last Year. The Independent. 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