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[wasbenson] 07/5/2007 14:45

May 6, 2007

Fast food goes posh
Now giants such as McDonald's are jumping on the bandwagon, writes Matthew Goodman
THE restaurateur Paul Campbell took a seat a few weeks ago by the window of the newly opened branch of Gourmet Burger Kitchen (GBK) in the Festival Square shopping mall in Basingstoke.

The site, one of 24 branches of the chain owned by the company that Campbell heads, was the first to open directly opposite a Burger King outlet and the boss wanted to see how shoppers reacted.

He was pleasantly surprised. "I watched people as they wandered through the mall and were looking at both," he said. "A fair percentage came into GBK. The site is performing better than we expected."

GBK, part of Clapham House Group, which Campbell co-founded, is the market leader in a wave of upmarket burger bars that have sprung up, mainly in southeast England, in recent years.

Since opening in March 2001, it has been joined by Hamburger Union and Fine Burger Company, both of which were launched in 2003, and by Ultimate Burger and Natural Burger Co.

All of them serve better-quality food in a smarter environment than a traditional fast-food outlet. They are a far cry from the sort of restaurants featured in Fast Food Nation, the film version of Eric Schlosser's best-selling critique of the industry, which is released this weekend.

Collectively, these new eateries amount to about 50 outlets, insignificant next to the 1,800 or so operated by the sector's giants, McDonald's and Burger King, and have made barely a dent in the £11 billion UK market. But the upstarts are about to get a lot bigger – GBK hopes to get to 100 sites within three years – and the big boys are waking up to the fact that unless they respond, they could start to lose customers.

It is not just hamburger joints where staple fast-food fare is being reinvented. Basilico is a five-strong chain of gourmet pizza take-aways in London. Fish and chips has lent itself particularly well to being taken upmarket. Mini-chains such as Sea Cow are springing up while chefs such as Rick Stein and Tony Allan have launched fish-and-chip outlets, in Cornwall and Kingston, Surrey, respectively.

Business is booming, said Allan, now that customers have got their heads round the extra cost. "People don't mind paying £8 for a pizza that cost 30p to put in a box," he said. "Initially, it was a bit of a problem getting them to pay £7 for [fish and chips] that cost £3.50 to put in a box. But these days, people don't mind paying for a bit of quality."

Even the lowly kebab has been transformed, thanks to chains such as The Real Greek (another Clapham House brand) and the As Greek As It Gets diner in west London.

These upmarket versions of mainstream foods have been gaining in popularity over the past two or three years. Some cite the success of chains such as Pret a Manger and Pizza Express as paving the way. But the rise of the posh burger bar is the most notable.

In part it is a symptom of the so-called "flight to quality" prevalent in much of Britain's food culture. "It's been happening in supermarkets with the success of labels such as Taste the Difference at Sainsbury and Finest at Tesco, and with Marks & Spencer and Waitrose doing well," said Jeffrey Young at Allegra, a consultancy.

Consumers have become increasingly concerned about eating more healthily and are more interested in the provenance of the food. While they still want to enjoy the odd burger or fish and chips, they want to be confident the food is good quality. "People are undoubtedly more discerning about what they put into their bodies," said Robert Tame, founder of Fine Burger Company. "But it's not just about the product, it's also the environment you are presenting the burgers in."

There is also a move away from complicated cuisine, said Campbell. "Ten years ago, everyone was interested in Michelin stars. That's less of a thing these days. Chefs like Gordon Ramsay talk about doing great food simply." The traditional burger chains have certainly sensed the change. David Kisilevsky, marketing director for Burger King northwest Europe, said: "People are now looking for products that stand up to scrutiny on their authenticity, provenance and so on."

McDonald's, for example, has been striving to improve its image by using free-range eggs and organic milk. This week, it will move into upmarket burger territory with the launch, for a limited time, of its Deluxe Burger, which will come in a ciabatta bun with batavia lettuce and have a different taste from any of its other sandwiches.

Burger King launched a premium burger last November, the Aberdeen Angus Burger, and promises at least two variations this year, such as a blue-cheese version.

Steve Easterbrook, chief executive of McDonald's UK, plays down suggestions that the company is responding to the rise of the new wave of burger bars, arguing that the Deluxe is just the latest in a series of new products. He also rebuts the notion that the sector's traditional players feel threatened. He said: "[Like some of the new burger restaurants] we also have ambitious growth plans. Given our scale, if we meet our plans, we don't have any great degree of concern about whether others meet theirs.

"Our burgers contain 100% pure beef; you can't get any more beef in a burger than that. We believe we can offer premium quality but at affordable prices."

But some of the new upstarts think it is only a matter of time before the big chains take stakes in their firms or buy them out. Hugh Fowler, the founder of Hamburger Union who was responsible for opening the first Wendy's outlet in Britain in the early 1980s, said it was "inevitable" that McDonald's or Burger King would acquire one of the new chains. Others suggest that this may be wishful thinking.

To date, the new wave of fast-food outlets has been a London phenomenon, but that is beginning to change. Fine Burger Company, for example, has opened an outlet in Swin-don, which Tame says is going "very well". The chain has recently retained Shelley Sandzer, a property agent, to find sites around Britain. GBK also has outlets in Bristol and Brighton.

Some question whether people in many parts of Britain will be prepared to pay £8 for a burger, but Young believes upmarket fast-food will prove as sustainable as coffee shops, which were once written off as a fad. "This is going to be a permanent shift," he said.

[gucci] 06/5/2007 15:13

excellent article today

[leytonorient] 06/5/2007 11:11

Sunday times article





Get in quick on Tuesday I say, the train is about to leave the station

[holgerl] 05/5/2007 14:10

well done ab, onwards and upwards to 600p

[ablack] 04/5/2007 19:10

To johnrxx99 re Richard and Judy.
The offending piece has gone from the Board.
Hopefully the originator too.
Thanks again

[razorlite] 04/5/2007 15:52

Would wait for weakness, probably due at results. We've had a pre close update 5 weeks ago, that caused the stock to run up. Results are unlikely to offer any new surprises. Great for the long term, but at present too much is in the price.

[mitzis] 04/5/2007 15:36

gucci:

cph looks quality and will buy more in the next month.

[holgerl] 04/5/2007 13:50

High rollers wading in, nice 27.5k buy at 416p

[holgerl] 04/5/2007 13:20

CPH - level2 firming again, 4 vs 2, looks ready to go up in a moment

[gucci] 04/5/2007 12:47

sadly sold inspace mit,
will hang onto cph and add add add

[ablack] 04/5/2007 09:52

Thanks - johnrxx99 - 4 May'07 - 08:37 - 141 of 143 - I'd thought of that but failed to act so thanks for the trigger.
I'll get on with it pronto.

[mitzis] 04/5/2007 09:10

Off topic take a look at Inspace gucci has doubled in recent months and still half price compared to Mears and Connaught..

[gucci] 04/5/2007 08:39

give up johnny,
lets sing another song now

[johnrxx99] 04/5/2007 08:37

ablack - there is something you can do - report to TMI and try and get subscription terminated with no refund. Up to advfn to pass the identity though to TMI.

[holgerl] 04/5/2007 08:26

going bluer on L2

[holgerl] 04/5/2007 08:20

Forgot to ask, anyone have a date for the results, was 6 June last year

[holgerl] 04/5/2007 07:52

Hi
Opened a bit higher, results are next month and i think we will hear some grand opening plans

[mitzis] 03/5/2007 18:45

I have to agree 600p is a possible price target in 12 months time ..

I still regret not buying Dominos Pizza 6 years ago when they were 20p each and they would have been a 20 bagger.

[holgerl] 03/5/2007 18:30

20p consensus forecast for next year, Id say if we go a year and work on a prospective PE of 30, that implies 600p, but the openings are much faster than many are expecting so id probably look for closer to 800p in 12-18months time.

[gucci] 03/5/2007 16:12

that sounds good to me

[holgerl] 03/5/2007 13:04

In a telephone interview this morning, executive chairman David Page told AFX News, "We see the second half being more of the same, with the first half of next year being even busier."
Page said Clapham House, which has opened 6 new locations in the past 6 months, is targeting 72 sites by March 2007 and 85-90 sites by March 2008. He added the company is looking in Manchester, Leeds, Birmingham and Nottingham, has exchanged on a site in Cambridge and is acquiring a site in Oxford, as the company plans further expansion of the GBK chain outside of London.
Page said the group has seen "more than doubled" trade at a Tootsies restaurant in Ealing converted to the GBK format. Clapham House has two further conversions slated for the second half of the year, with the company considering further switches.
However, Page played down the possibility of further restaurant brand acquisitions.
"We haven't seen anything that interests us," he said, stressing the company was founded with a "venture capitalist" view of building up 3 or 4 brands over a 5-6-year period.
Page said the company "would look at the options" when it reached 30 units of each of its four brands - GBK, The Bombay Bicycle Club, The Real Greek and Tootsies.

Numis has upgraded Clapham House Group to buy from add with a 435p target price.

[razorlite] 03/5/2007 09:49

Looking at consensus shows huge growth is already forecasted. Shares have also re rated and directors have been selling. I like this story long term but don't think today its worth this price. Roll outs never go that smoothly.