All posts by Thomas Farrell

Will Facebook continue to dominate social media in 2014?

Facebook is a giant of social media. Entering 2014, its market capitalisation tops £80 billion. In October 2013, it demonstrated that it is able to be profitable. Its position as the Google or the Apple of social networking appears to be relatively secure.

MySpace was the original social media giant. Its position of market dominance seemed insurmountable. In 2005, Rupert Murdoch’s News Corporation acquired it for $580 million. And then Facebook came along and stole away much of its market share. In 2011, MySpace was sold off for just $35 million, a sign of just how much its star had fallen.

MySpace popularised social media. But it’s attitude was quite different to that of Facebook. As the name implies, MySpace was focused on “me” rather than other people. It offered a huge range of options for customising one’s homepage. Many of these options necessitated a basic familiarity with the HTML programming code. People spent so long working on their own “space” that they barely had time to look at other pages. It was a strangely inward-looking social network.

Facebook took notice of the success of Google versus Yahoo! as well as search engines such as Lycos, that no one has heard of anymore. Sometimes, simplicity is key, especially on the World Wide Web. People are rarely willing to learn to code with HTML when there are simpler options. The casual user is short on time. Apple provide a brilliant example: they have essentially created an entire brand which revolves around minimalism and simplicity of use, and Apple is the most highly capitalised publicly traded company in the world. The likes of Twitter, Snapchat and Instagram are very simplistic services that focus on just one aspect of social media: microblogs or photos.

Facebook’s position as the giant of social media seems secure. But with newcomers eating into market share, and the fates of former social network giant MySpace and other former WWW leaders in their category such as Yahoo!, Facebook knows that it cannot afford to become complacent.

A history of TGI Friday’s in the UK

TGI Friday’s was the world’s first international casual dining chain.

Whitbread was a large British brewer. The company had established the Beefeater restaurant chain in 1974. Eager to replicate this success, Whitbread experimented with a number of new restaurant concepts in the 1980s. A 50 percent stake in the British franchise for Pizza Hut from 1982 was to prove highly successful. The British franchise for Quick, a Belgian fast food chain, was acquired, but the concept quickly failed.

Whitbread opened the first TGI Friday’s in Britain in Birmingham in 1986. A former Wendy’s in Covent Garden, London was converted in 1987. The site enjoyed a £1 million makeover, and was an exact replica of the American model. Outlets were soon added in Fareham, Reading and Cardiff.292px-TGI_Fridays_logo.svg

TGI Friday’s was established as a singles bar on the east side of Manhattan by Alan Stillman, a young perfume salesman, in 1965. At the time, New York pubs and bars were aimed at men. Stillman redecorated the bar to make it brighter, cleaner and more domestic, in order to make it more attractive to women. Daniel R. Scoggin was a customer who recognised the franchising potential of the restaurant, and instigated the roll-out of the chain across the US.

TGI Friday’s was the first chain of themed casual dining restaurants. The flamboyant bartenders were the direct inspiration for the Tom Cruise movie Cocktail (1988), which was filmed in the original Friday’s. The restaurant claims to have invented loaded potato skins in 1974, and helped to popularise nachos. After a few years, the chain began to attract families, particularly during the daytime.

The chain was an instant success in Britain. Whitbread had insight into the mindset of the British public, and knew the local property market. The Covent Garden site was the busiest TGI Friday’s in the world by 1992, and reputedly the busiest restaurant in Europe. In one week, its 260 seats yielded a turnover of £180,000.

There were 12 sites in Britain by 1993, and the average annual turnover was £2.5 million. According to Sally Dibb and Lyndon Simkin, Friday’s altered the UK dining scene “beyond recognition” due to its vitality, enthusiasm and tight quality control standards. The company hired staff with extrovert personalities, and the restaurants provided a theatrical experience. From the beginning, TGI Friday’s was an early example of a company that tried to be “nice”, to treat its employees fairly and to be a good corporate citizen.

The chain grew to 41 outlets by 2004. At this time, Whitbread indicated that it would divest the chain if profits failed to improve. Sales remained disappointing throughout 2005. Whitbread sold the chain to the American parent company, Carlson, for £70.4 million in 2007. Whitbread felt that it had grown the chain as much as it could.

Wendy’s Hamburgers in the UK

Wendy’s is the third largest burger chain in the world, although the majority of its restaurants are in the US. It positions itself upmarket from McDonald’s and Burger King.

The first British outlet opened in London in 1980. For trademark reasons it was called Wendy, not Wendy’s. The operation was a joint venture between Wendy’s International and Grand Metropolitan, a large British hotels and brewing concern. An experienced local operator, Grand Met had already enjoyed great success with the Berni Inn casual dining chain in Britain. A flagship Wendy outlet was opened on Oxford Street. The idea was to target the over-25s market.

Grand Met exited the joint venture just a year after it entered it,  and Wendy’s International assumed full control of the British operations.

Wendy expanded to 16 restaurants. However, soaring rents at its central London sites left the company struggling to make a profit. The sites, all of which were located in London and the South East, were sold to Whitbread for £6.8 million in 1986. The majority of Wendy sites were converted to Quick, the Belgian fast food retailer.

Wendy’s returned for a second attempt at the UK market in 1992, with outlets at Shaftesbury Avenue and Oxford Street. Outlets were now known as “Wendy’s”, and featured salad bars. The company announced plans to expand to 70 sites across Britain. The initial expansion concentrated on London and West Yorkshire.

There were twelve restaurants by 1996, including eight company owned and four franchised. Wendy’s retreated from the British market for the second time in 2000. Some of its most prominent sites were taken over by McDonald’s, including Oxford Street, Shaftesbury Avenue, York Way near King’s Cross and Briggate in Leeds. Wendy’s blamed high property and operating costs for its failure in the British market.

A lot on their plate: Fatty Arbuckle’s

Fatty Arbuckle’s was one of the largest casual dining chains in Britain during the 1990s.

The first Fatty Arbuckle’s outlet was opened in Plymouth in 1983. The restaurant was co-owned by Liverpool-born friends Pete Shotton (1941 – 2017) and Bill Turner (died 1993). Shotton had been a member of the Quarrymen alongside John Lennon (1940 – 1980).

The restaurant was modelled on American diners, and had a retro Hollywood theme. It was named after Roscoe “Fatty” Arbuckle, one of America’s most successful silent film actors in the 1910s. There was a focus on large portions served on 13-inch plates.

A second restaurant was opened in Bournemouth in 1985. After Shotton and Turner met Adrian Lee and his wife, they offered them the job of running the Bournemouth outlet. Within three years, Lee was managing director of Arbuckle’s.

Bill Turner died in 1993, and Pete Shotton acquired his stake in the business.

Each new Arbuckle’s outlet proved an immediate success. Franchise outlets were opened from 1991, which allowed the chain to rapidly expand to 22 restaurants by 1995. Arbuckle’s was the largest American-style restaurant chain in the UK by 1997, with 42 outlets.

Arbuckle’s, with its focus on beefburgers and steaks, was hit hard when a BSE-epidemic struck Britain in 1996. 70 percent of its sales had been burgers. Pete Shotton sold his majority stake in the business to the turnaround experts, Alchemy Partners, for £5 million.

Alchemy was widely credited with reviving the fortunes of Arbuckle’s. More profitable leisure park sites were pursued over high street locations, and the chain peaked with 58 restaurants by 1999. “Fatty” was dropped from the name from 2000 in order to appeal to health-conscious diners.

However, after making heavy losses, the company entered into receivership with debts of £6.8 million in July 2000. The loss-making majority of outlets were immediately closed down.

The brand and ten outlets were acquired by the Noble House Group, headed by investor Robert Breare (1953 – 2013), for a rumoured £1 million. Breare was charismatic; a hyperactive, shambolic and disorganised man, who enjoyed living the good life. He was adept at acquiring companies, but not so skilled at managing them.

The ten remaining outlets were closed down in 2006. Two former managers acquired the rights to the name and opened a revamped Arbuckle’s at Downham Market in Norfolk from 2008.

The American-style restaurant is still represented in Britain by TGI Friday’s, Frankie & Benny’s and Chiquito (Tex-Mex), but other American-style restaurant chains such as Henry J Bean’s and Old Orleans have since closed down.

Central London rentals

Okay, so visited London for about a week. One thing really jumped out at me. In the provinces, Costa Coffee is by far the largest coffee shop chain, especially outside of the large cities. In London, I was astounded by the number of Starbucks in prime real estate locations. Costa takes smaller premises than Starbucks, on less prime real estate. And with the recent tax avoidance scandal that Starbucks UK was involved in, I can really believe that they don’t make any profit in the UK. I predicted that this was due to the high rentals that they were paying in central London. Turns out, I was right. I later found this from their website:

during our rapid expansion phase we positioned a high proportion of our efforts on prime, high street locations, and in particular in Central London where the cost of leasing is the highest in the UK. The result has been a group of stores that do not make money.

Yes, Starbucks are often full, but many of its customers seem to buy a £1.55 filter coffee and linger there half the day using the free WiFi to work. Costa avoided paying silly money for these sites because they are owned by Whitbread, masters of the UK property market. Whitbread’s knowledge of the market stems from decades of owning pubs, hotels and restaurants in the UK.

Recently, Starbucks has been closing down some of these unprofitable London sites, including three on Oxford Street. A recent report stated that the company was looking to close down 16 central London sites.

A company that avoided paying silly prices for central London sites was bakery chain Greggs. They have a mere handful of sites in the area. And it’s not as if they’re under-represented in outer London. Upmarket Wimbledon high street has two Greggs for example.

I find the Starbucks unprofitability case interesting, because I think people assume that when a brand is brash, bold, highly visible and obviously splashing the cash around, that it is successful. Another instance of this is the many incarnations of the Virgin brand: yes, there are some successful Virgin brands, but look at the high profile failures like Virgin Cola, Brides and Vodka.

The rise of J D Wetherspoon

JD Wetherspoon logo

J D Wetherspoon is a company that has been consistently innovative throughout its history. It has demonstrated a tendency to follow its own path, and has been willing to take innovative risks.

Tim Martin (born 1955), was born in Norwich, the son of an executive for Guinness.

Martin was a qualified barrister with no desire to practise. He had wanted to be a squash professional but that didn’t work out either.

Martin enjoyed a drink at Marler’s Bar in Muswell Hill, London. It was one of relatively few free houses in London at the time.

The proprietor, Andrew Marler (born 1953), had acquired the lease when it was a betting shop, and converted it into a bar. Martin entered into the lease with Marler from 1979.

The pub was renamed Wetherspoon’s from 1980, after a teacher of Martin’s who struggled to control his class. Sales were brisk, largely due to the fact the the pub was free to sell beers of its own choosing. Martin realised there was untapped demand for free houses.

Martin expanded his business by taking on debt. He opened his second pub in a converted car showroom at Crouch End in 1981.

J D Wetherspoon was incorporated in 1983. Martin was keen to expand the company, but was hampered by the lack of pubs on the property market at the time. As a result, he instead converted unconventional premises such as former banks, supermarkets, churches and cinemas. The company quickly gained expertise in securing drinks licenses for new premises and gaining planning permission.

The company grew with its standard offering of low prices, cask ale, and no music. Comparisons began to be made between the chain’s values and the ideal English pub as described by George Orwell. Whilst the similarities were initially coincidental, Martin consequently adopted Orwell’s template, and a number of outlets are named after Orwell’s essay title, The Moon Under Water.

J D Wetherspoon was floated on the stock exchange in 1992. By this time there were 44 pubs, all situated in London.

In 1993 the chain introduced its all day food menu, and dedicated one third of its pubs as smoke-free areas. Its new pubs were double the normal pub size, and had almost double the average turnover, although margins were lower.

In 1994, the Financial Times reported that the chain was selling Guinness stout at lower prices than the two major supermarkets, Tesco and Sainsbury’s.

The chain had grown to 300 outlets by 1999. An advantage of converting former banks and supermarkets was that the company was able to significantly reduce its tax bill due to benefits from capital allowances. Its rate of corporation tax was three percent in 1998, and five percent in 1999. Therefore, Wetherspoon had a significant reason to expand its number of outlets, and it helps explain how and why the company expanded so quickly. The loophole was closed in 2001.

The company experienced its first major misstep in 2000, when it entered the Northern Ireland market for the first time. It was a serious instance of misjudgement of a local market. As Wetherspoon sells its beer so cheaply, it normally requests a discount from breweries. However, Guinness refused to discount their beer in the country, claiming that the Northern Ireland market had increased marketing, staff training and quality control costs. Therefore Wetherspoon did not stock Guinness, and as a result, nobody came to their pubs. The company then had to accept Guinness’ terms, or else risk utter failure in Northern Ireland.

By 2001, outlet sales were four times that of the average pub. That year, Wetherspoons began to wholeheartedly push its food offering, taking on the likes of Starbucks and McDonald’s with its own range of coffees and burgers. Breakfasts were introduced, and the company became noted for its notably clean toilets.

In 2002, the company rolled out a second brand that it had acquired from Wolverhampton & Dudley. Called Lloyds No 1, it functioned as a Wetherspoons by day, but as a nightclub in the evening.

In 2005, the company banned smoking in all of its pubs, ahead of the smoking ban. In 2006, 9am openings and TVs (on silent) were rolled out across the chain. The company claimed that its coffee sales matched those of Caffe Nero, the coffee shop chain. By 2007, 50 percent of all sales were food related, influenced in part by the smoking ban.

In January 2009, in a notorious move, Wetherspoons introduced the recession-busting 99p pint. The beer offered was Greene King IPA. The brewer baulked at their main product being sold so cheaply, and the offer was switched to their lower profile Ruddles Best brand.

From April 2010, all pubs opened at 7am for the breakfast market.This was not altogether successful, and opening times have since largely been scaled back to 8am. Nevertheless, the company was second only to McDonald’s in the breakfast market.

In 2013, the company entered the Republic of Ireland. In the future, Martin remains keen to open outlets in France, having explored potential sites in Paris, Calais and Lille.

The rise of Jack Daniel’s

JackDanielsLogo

Jack Daniel’s was a small American regional brand through the 1950s and much of the 1960s. But it landed on the radar of Hollywood stars, including Humphrey Bogart’s Rat Pack. The famous, simple monochrome adverts were first introduced in 1954.

By 1980, 3 million cases were shipped. “Jack” has always been marketed as a premium product. Marketers remind us that the product is not bourbon, but “Tennessee whisky” that is filtered through maple charcoal.

Originally, there were two main Jack Daniel labels: black (the famous one) and green. Although both whiskies were aged for at least four years, Black Label had a higher ABV content of 45% versus Green Label’s 40%. Black Label was reduced to 43% in 1988. Green Label was later delisted, and Black Label was further reduced to 40% ABV. So Black Label essentially became Green Label, but with no corresponding price reduction!

The origins of the full English breakfast

The origins of the full English are more recent than you might expect.

Historically, the classic English breakfast pairing was bacon and eggs. Bacon was the staple meat for the agricultural class for hundreds of years, and eggs were available in most homes each morning. As late as the 1950s, an “English breakfast” was shorthand for bacon and eggs.

Seemingly beginning around 1915, as wartime economy and rationing began to bite, the cold remains of the previous evening meal began to be added to bacon and eggs. As bacon and eggs became scarcer (and more expensive), the additions of these items bulked out the meal and prevented waste. Fried bread and potatoes were popular starchy additions. Sausages were not subject to rationing, and began to be introduced as a bacon substitute.

The earliest reference I can find to the phrase “full English breakfast” is in a 1930 edition of the Daily Mail.

A 1978 edition of The Globe and Mail of Canada lists the meal as comprising “eggs and bacon, tomatoes, sausages, kippers and heaven knows what else”. It may be possible that the phrase is a foreign coinage: why would the English refer to their own breakfast as “English”? Similarly to how the Scottish never refer to their whisky as “Scotch”. The need to differentiate your native product only occurs in different countries from your own.

The phrase was first shortened to “full English” (minus breakfast) in the mid-1990s.

Today, a full English comprises of, more or less, sausage, bacon, eggs, some starch such as fried bread, toast, hash browns or sauté potatoes, and some vegetables such as tomatoes, mushrooms and baked beans. Black pudding is popular. Regional variations include white pudding and oatcakes.

A history of Slug and Lettuce

Slug and Lettuce is a British chain of bar restaurants with 70 outlets.

Originally a pub chain, Slug was founded by entrepreneur Hugh Corbett, who had a background in the hotel industry. Corbett brought a degree of trendiness and relative luxury to his pubs, with an increased focus on wine and food. His pubs were all given nonsensical names, which differentiated them from their competitors (eventually Slug and Lettuce became the standard name).

Corbett stripped out the carpets to leave stripped pine boards, removed the curtains and installed large glass windows. This meant that people could look into the pub from the street, and the new light and airy open plan design made the pubs more attractive to women.

Corbett cannily located the first Slug in Islington, which was beginning to undergo gentrification due to its proximity to the newly liberalised City of London.

There were nine outlets by 1989. The chain was considered by some commentators, such as Roger Protz, as an imitation of the popular Firkin pub chain.

The chain was sold to David Bruce for £2.25 million in 1992. Bruce began to pursue the relatively untapped female market in earnest, imitating elements of the upmarket Pitcher & Piano chain and increasing the emphasis on food.

In 1995 the chain underwent another rebranding, aimed at creating an English pub/Continental bar hybrid.

The rise and fall of the Little Chef empire

Little Chef was the largest restaurant chain in Britain. At its peak it boasted 433 outlets, but this has since been reduced to around 70.

The first Little Chef restaurant was opened in 1958. Sam Alper (1924 – 2002) and Peter Merchant had been inspired by diner caravans they had seen in America, and introduced the concept to Britain.

Alper had a background in caravan manufacturing, and the first outlets were portable prefabricated roadside snack bars. Outlets could be built, assembled and opened within a matter of hours.

Little Chef was acquired by Trust Houses, a hotel operator, in 1961.

By 1964 Shell-Mex and BP had discovered that opening Little Chef outlets next to its petrol forecourts helped to boost fuel sales.

Outlets began to be built from brick from 1965. The familiar Little Chef brand guaranteed consistency for weary travellers. There were twelve outlets in 1965, and 28 by the end of 1968.

In 1970 Trust Houses was acquired by Forte to form Trust House Forte, a large catering and hotels company. The new owner had the necessary funds necessary to roll out a rapid expansion of Little Chef.

As it was difficult to acquire roadside planning permission, Trust House Forte acquired a large number of existing transport cafes, and converted them to the Little Chef format.

A typical Little Chef meal cost 35p in 1972. It was around this time that the “Fat Charlie” logo was introduced.

Due to rapid expansion there were 174 outlets by 1976. Ten years later there were 250 outlets. Little Chef was the largest restaurant chain in Britain by 1986, with more outlets than Berni Inn.

In 1986 the Competition Commission found that a significant proportion of customers were locals, not commuting drivers. Little Chef was innovative and forward-thinking, providing high chairs and baby food when most British restaurateurs regarded children as irritants rather than potential customers. Meanwhile, strict roadside planning laws preventing new buildings effectively worked to maintain the company’s monopoly.

Trust House Forte acquired Happy Eater, Little Chef’s only major rival with 90 outlets, in 1986.

Little Chef was acquired by Granada, an operator of motorway service stations, in 1996. Granada hiked prices, charging £7.95 for a full English breakfast in 1996! The high prices did not guarantee quality: even the omelettes were frozen and then reheated.

Granada described Little Chef in 1996 as “tired and neglected”. Management Today described the chain in 1997 as “perhaps the most neglected part of the old Forte empire”.

Under Granada the total number of restaurants expanded to 433 (68 of which were Happy Eater outlets) by 1999.  Granada also began to franchise Burger King in some of their existing outlets. Upon conversion, Burger King outlets would see double the turnover of former Little Chefs.

In 2002 Little Chef was serving 30 million people a year.

Little Chef was the first branded roadside restaurant chain in Britain, and had few competitors until the motorway service stations began to improve exponentially in the mid 2000s. They now offer a range of desirable high street brands such as Burger King, W H Smith and M&S Simply Food. Meanwhile McDonald’s have vastly extended their drive-thru presence and offer faster service and lower prices.

In 2013, a Kuwaiti private equity conglomerate acquired the company. In 2014 there were only 72 outlets.