Article

How restaurant chains are nurturing their international ambitions

Around the world, foodservice brands are eyeing new overseas markets to drive growth.

February 19, 2020

Whether it’s a UK sushi chain looking to make its mark in the UAE or the latest U.S. burger joint trying to win over Australian consumers, growing numbers of today’s fast-casual restaurant brands are making the leap into new markets.

Expansion has accelerated in recent years, led mainly by U.S. and UK foodservice brands looking to grow their global footprint and feed the growing consumer appetite for new food trends and cuisines across global cities.

“Today’s foodservice brands are keener than ever to expand their horizons well beyond their home markets, from America’s Fatburgers entering Pakistan to Turkey’s Nusr-Et steakhouses entering the UK,” explains Ken Higman, Foodservice Consulting director at JLL.

“While motivations vary, it’s often the need to beat the local copycats or the search for growth from a brand’s private equity owners that define these moves.”

Making an entrance

In a rapidly globalizing, social media-driven world, foodservice brands face an increasingly competitive race to be in the market before similar concepts emerge.

“Burritos and more recently, poké bowls, are both good examples of how a leader in one particular food offer and geography can be trumped elsewhere if they’re not quick enough to expand,” Higman says. “Trends travel fast and get replicated swiftly - often the alternative approach is then to consider consolidation.”

Getting it right first time is therefore even more crucial with brands facing the choice between going it alone or setting up a franchise arrangement.

“Some of the more successful expansions have been carried out by franchising the concept to a local operator who know the ins and outs of the market and can fine-tune things accordingly to optimise its appeal,” Higman explains.

“But for those bold enough to venture into new markets alone, they’re very much in, allowing greater flexibility if decisions need to be made spontaneously.”

Understanding cultural tastes

While some markets are dramatically different, others, especially in Europe, share many traits. Off the back of improved sales, noodle chain Wagamama has its sights set on Germany, having opened in neighboring Austria in 2018.

The beauty of Europe’s density and diversity, Higman says, it that it allows brands to test the market close to country borders.

“Brands know that if a concept works well in Budapest or Vienna, it’s as much thanks to visiting clientele from nearby Slovakia as it is to local Hungarian or Austrian diners,” he explains. “Being aware of both the similarities as well as the contrasting cultural preferences of customers is vital when plotting the map.”

Indeed, when Duck & Waffle prepared for its opening last year in Hong Kong, it shunned the round-the-clock service it offers back in London for a midnight closing.

At the same time, ever-increasing levels of international travel – not to mention social media – help to build brand awareness long before a local restaurant branch opens its doors in a new city.

“Many travelers are keen to try out new foods and popular local chains when they go abroad, and in doing so, many will post photos of where they’ve been and what they’ve eaten on social media so, in many cases, the brand recognition is already there,” explains Higman. “It means that in some markets, the door is already half open.”

Ingredients for success

Even for those brands that break into new markets, staying true to their brand values is essential for long-term success especially at a time of hyper-localization and increased consumer awareness of where their food comes from.

“Seeing the likes of burger chain Five Guys post on their message boards that ‘today’s potatoes are from X or Y farm’ is a sign that no matter how big you become, there’s a need to link to local markets,” says Higman.

Take Burger & Lobster, which is sticking to its use of Nebraskan beef patties and Nova Scotia lobsters, whether its restaurants are in London or Singapore.

Location choices are equally make-or-break, especially when it comes to understanding the specific dynamics of local neighborhoods.

“Brands need to position themselves near their core clientele,” Higman says, highlighting California brunch chain Eggslut, which opened in London’s Notting Hill. “What works in west London may not be a given in Shoreditch or Soho – and equally vice-versa.”

With competition only increasing within the foodservice sector, it’s the brands that have a solid concept, quality products and the ability to adapt to local market conditions who will thrive.

“There are plenty of pitfalls to overseas expansion but the biggest of all is not understanding the local market,” says Higman. “Equally, today’s urban consumers are keen to try new brands so for those who not only break into new markets but can also build market share, the rewards are sizeable.”