Speaking at last week’s Generation Next event, organised by Restaurant and MCA Insight, Harry Heartfield, senior partner at leisure investment group Edition Capital, identified the two market segments, along with “independently-minded chains” as the most attractive for investment in the current climate.
“With vertical drinking locations such as bars and cocktails bars, like-for-like sales have gone through the roof and a lot of that is because you grab extra days in the week,” he said. “It used to be you were dependent on your Thursday, Friday and Saturday nights but all of a sudden you’ve got Wednesdays as well. That space is a huge area of growth.”
He also said that a lack of quality in the F&B offer in the growing competitive socialising sector also presented an opportunity for investment.
“There are a lot of immersive experiences and they have under-thought their F&B offerings for years. There is a massive opportunity for one or two players to become the in-house operators for those spaces and offer something that is either tailored to the experience or a great quality offering that can fit into a small kitchen space.”
Changes to consumer behaviour as a result of the pandemic have also thrown up opportunities for some parts of the hospitality sector, but has impacted on others, Heartfield said.
“Pre Covid, a lot of what we saw was very fast casual dining or grab-and-go and a lot of that was being driven by people’s five days a week in the office, and that has shifted massively. Those growth sectors that you think are going to be there for a very long time can be impacted by black swan events like Covid.
“We are certainly seeing growth in independently-minded chains and something slightly higher end that can use smaller sites, so grab and go for workers being dragged into the office for three of four days a week is going to come back. A lot of economics work quite nicely for that.
In general, the current economic climate remains a challenging time for investors, according to Heartfield, who added that the longer-term outlook was “broadly positive”.
“Right now it’s very difficult for us to raise capital even as an institutional investor and it’s very challenging for restaurants as a whole to raise capital. A lot of that to do as a legacy of Covid and getting out Covid and into inflationary pressures and the long tail of Brexit, which is going to be an incredibly long tail.
“My general view is that if you take a longer-term views it’s still broadly positive. Consumers, particularly Millennials and Gen Z want to go out and have experiences, eating fantastic food, spending time with friends, and that’s not going to change even if you have nervous investors that want to put their money into something that feels safer. We can take a longer-term approach.”
He said that while London is again very competitive, there are better opportunities beyond the capital.
“Deals that we were getting at tail end of 2021 for new sites, fit outs, CapEx contribution are starting to get more competitive again in London faster than they are outside of London. You can still get great deals in places like Manchester, Leeds or Bristol, that have still got a lot of buzz around them, whereas in London it feels like those deals are compressing a bit again.”
Harry Heartfield was speaking at Restaurant's Generation Next, an event for fledgling and rising food and drinks operators. It is supported by headline partner is Iconic Project Management, and sponsors Frobishers and Zonal. For more information or to join for free click here.