The July heatwave saw the opening of two of the most hotly anticipated US burger chains in London. Danny Meyer’s Manhattan-born Shake Shack and Obama’s favourite Five Guys from the co-founder of Carphone Warehouse have now gone head-to-head just 300m apart in Covent Garden. They are the latest entrants in a sky-rocketing sector now worth £2.79bn in the UK.
Both chains insist there is no animosity and have played down talk of a burger war. But stepping back reveals that the sheer volume of home-grown products plus the US imports could see the London market hitting saturation point sooner rather than later. Especially as most outlets have their sights set on expansion.
Tracey Mills, director at leisure and property consultancy Davis Coffer Lyons, explains: “We deal with a number of London estate landlords like Shaftesbury, the Crown Estate and Howard de Walden and it is becoming good estate management policy for them to say no to any more burger outlets because there are so many now. I think it will be a case of those who pick the right locations in London – and regionally – will have the best chance of survival.”
Estates Gazette investigates the rise of “slider culture”, the burger space race and considers the likely winners and losers in an increasingly crowded market.
Order up
From George Osborne munching on a pre-spending review Byron Burger to waiting in line for an hour to pay £25 for a cheeseburger at Burger & Lobster in Mayfair; it is clear that the UK obsession with a premium product is on the rise. And premium is the operative word.
“This is one of the key market shifts,” explains Deborah Parker, a retail and consumer adviser at PwC. “The new outlets are very focused on a brand and product that matches the new demand for better quality. McDonald’s and Burger King are still doing well offering a fast, value brand. But there was a real gap in the market for premium burgers as a result of these two burger chains dominating the market for so long. It could be a generational thing as customers now want to know more than ever what is in their food.
“Plus a premium version of a casual dining experience is extremely popular. As people scale back their spending they are eating out more. They are allowing themselves treats like dinner out in lieu of more expensive leisure activities. The new burger outlets are carefully branded to create that sense of occasion and style without breaking the bank.”
That might go some way to explaining the focus on a premium product, but why burgers? What sparked the craze?
Mills thinks it could be a reaction to the lifting of the ban on British beef in 2006 following the BSE crisis: “The red meat market had the stuffing knocked out of it in the 1990s with BSE,” she says. “Now there is a love affair with this food again.”
US v UK
In terms of the impact of US burger chain moves across the pond – on top of Shake Shack and Five Guys, California-based Fatburger and Smashburger, originally from Denver, have plans to expand into the UK over the next two years – PwC’s Parker says that UK brands are unlikely to have too much to worry about as a result of this trend alone. Shake Shack’s Meyer insists he has no immediate plans to open another UK outlet, and the arrivals of Fatburger and Smashburger are 18 months and two years away, respectively.
But Parker’s reassurances are despite an ambitious expansion plan from Five Guys, which intends to open five outlets in the UK – four of them in London – by October and between five and 10 more every three months onwards.
“US firms do appear to be moving to the UK more regularly, but it comes in waves and quite a few never appear to quite understand the market once they get here,” she says. “We have very different property and employment laws and it is much easier to roll out aggressively across the States than here. There are savvy Americans who can make it work and they are aggressive. But I can’t see that happening to a damaging degree with the US burger chains. The ones that will thrive will be the bigger chains with big US backing, which should leave a gap in the market for the smaller British pop-ups.”
Burger battle
So is that where the battle ground really lies? Between the UK homegrowns? Following on from trailblazers such as the Kiwi GBK (Gourmet Burger Kitchen) and Byron, everyone from the street-food inspired outlets like Bleeker Street Burger to the entrepreneur-backed Dirty Burger, which is part of Nick Jones’s Soho House Group, are now fighting for their share of the market.
With expansion plans across the board (see box below) and London estates landlords already feeling that they may have reached their burger limit, unusual locations and a strong USP will be the key to survival.
Until now, premium burger outlets have been well positioned to find space. Mills explains the benefits of being a small, independent – often stemming from a food van or a street food site: “Lots of the new outlets don’t need big sites just 1,000-1,500 sq ft. Even 600 sq ft. MEATliquor, which opened just off Oxford Street in 2011, was a pop-up with the fag end of a lease with a two- to three-year development break. Then we put them into Covent Garden nine months ago on another short-term lease. Because there are only a few people there making the big decisions it was a fast process and these groups are able to open in obscure sites and then use social media to attract customers.”
Indeed, Dirty Burger hasn’t suffered from opening in a pop-up corrugated-iron shed in a car park in Kentish Town. The group is now planning to expand in Tooting, Vauxhall and Mile End.
And that, says Mills, will be the trick in tackling a much tougher market now the competition has reached fever pitch. Clever expansion in well-thought-out locations will separate the winning brands from the losers. She describes Dirty Burger’s strategy to move into lesser-known parts of London as “a pioneering calculated risk” she is confident will come off.
Movement into the regions will also be a trick to staying ahead. Thomas Rose of Cushman & Wakefield explains: “The true test will be when all of these brands try to take on more price-sensitive regions. The major cities will be a good expansion move, ?but small towns will be the challenge.”
Ultimately for now, while there are fears over saturation, the experts are confident that the best of the burger bunch will thrive as the trend for the patty looks set to stay: “It’s not a question of the market bursting,” says Mills. “It’s a question of there being enough space for the best to survive.”
