Category Archives: Hospitality

Roaring trade: a history of J Lyons (1894 – 1949)

J Lyons was the largest catering business in the world.

Barnett Salmon (1829 – 1897) and Isidore Gluckstein (1851 – 1920) established a tobacconist chain which undercut rivals by passing on bulk discounts to customers. With 140 shops, it was the largest tobacconist chain in Britain when it was acquired by Imperial Tobacco for £400,000 in 1902.

In the 1880s Montagu Gluckstein, a travelling partner in the firm, lamented the poor state of catering at trade exhibitions. Gluckstein suggested that Salmon & Gluckstein enter into the business of non-alcoholic refreshment. A trial was established whereby the business catered for the Newcastle Exhibition of 1887. Contracts for other exhibitions soon followed.

In order to pursue catering further, J Lyons & Co was established as a public company with capital of £120,000 in 1894. The original stakeholders were Montagu Gluckstein, his brother Isidore, brother-in-law Barnett Salmon (maternal grandfather to Nigella Lawson) and distant relative Joseph Lyons. The Lyons name was adopted to distinguish the company from the Salmon & Gluckstein business.

The first Lyons tea shop opened in September 1894 at 213 Piccadilly. It had 200 seats and a £30,000 lease. After a year the shop had made a profit of £11,400, and the company was able to pay a dividend of ten percent.

The first Lyons Tea Room was sited at 213 Piccadilly
The first Lyons Tea Room was sited at 213 Piccadilly

The early tea room exteriors were enticing and extrovert, and the interiors were often glamorous, and intended to evoke the great Victorian exhibitions and Parisian cafes.

The Lyons tea shop girls went on strike in protest against low wages in 1895.

Cadby Hall was opened in Hammersmith to centrally produce baked goods for the company’s 17 tea shops from 1896. There were 37 tea shops in London by 1900, and expansion had begun in the provinces, with six branches in Manchester, four in Liverpool, and two in both Leeds and Sheffield.

Quality was good and prices were reasonable. The tea rooms were particularly popular throughout the daytime with lower middle class office workers. Cinema and theatre-goers patronised the chain on evenings.

The first Lyons Corner House was opened on Coventry Street in 1909. The Corner Houses were much larger than the tea rooms, with a greater appeal to the middle classes. Live bands and an informal atmosphere helped to cement their popularity. The Coventry Street outlet became the Lyons flagship outlet, and seated 2,000 diners on multiple floors. It was the largest restaurant in the world. A second Corner House at the Strand opened in 1915, capable of seating 1,200 diners.

J Lyons was one of the largest caterers in the world by 1911. Half a million meals were served every day through 200 shops and restaurants. The company employed over 12,000 people, including 2,000 people at Cadby Hall. The Cadby Hall works covered ten acres and included sixteen bakehouses, five cold storage rooms and three butchers’ shops.

20,000 people were employed by 1913. J Lyons was the largest baker in London, the largest tea merchant in the world and the largest restaurant operator in the world.

J Lyons also expanded into hotels, building the Regent Palace Hotel in London at a cost of £600,000. Opened in 1915, it was the largest hotel in Europe, with 1,028 bedrooms.

Lyons tea was far and away the market leader by 1915: five million packets were sold every week by 160,000 shopkeepers. The company accounted for one in four cups of tea sold in London.

Lyons had a capital of over £2 million by 1917.

Tea, coffee, bread, cakes, ice cream and groceries which had originally been produced for the tea rooms began to be sold directly to the customer, all manufactured at the company’s Hammersmith site.

In 1918 Lyons acquired two leading packet tea companies, positioned second and fourth place in the market respectively: Horniman of London and Black & Green of Manchester. The acquisitions were intended to increase Lyons’s market share in the North of England: Horniman was strong in Yorkshire and G&B strong in the North West.

The company had a share capital of £3.5 million by 1919. By this time Lyons was likely the largest catering company in the British Empire. There were 182 tea shops by 1919, making it easily the largest chain of its kind in the country.

Cadby Hall was struggling to meet demand by 1919, so Lyons acquired a 30-acre freehold manufacturing site at Greenford, on the outskirts of London. Lyons opened the largest tea packing plant in the world there in 1920. Coffee, cocoa and confectionery production were also transferred to Greenford. It was the sixth largest manufacturing site in Britain.

J Lyons was the largest catering business in the world by 1921. Cadby Hall boasted the largest bakery in the world.

There were over 22,000 employees by 1922. There were 160 Lyons tea shops in London, and a further 50 throughout Britain.

It was calculated that seven million people drank Lyons tea each week in 1922.

The Trocadero Restaurant was acquired in 1921.

Lyons opened the Cumberland Hotel at Marble Arch, which was the largest hotel in Europe, in 1922. The Coventry Street Corner House was extended in 1923 to create what was likely the largest restaurant in the world, with seats for 4,500 diners.

Ice cream manufacture at Cadby Hall had reached the mass production scale by 1923.

In 1930 Lyons was the 20th largest company in Britain, with a market value of £12.1 million and 30,000 employees. Over ten million meals were sold each week. Lyons held 14 percent of the packet tea market, with over 1.25 million packets sold every day.

The teashop chain continued to grow strongly until the onset of the Great Depression. Teashop losses between 1934 and 1938 totalled £374,000. Despite this, due to its manufacturing and hotel concerns, the company remained the largest catering company in the world in the latter half of the 1930s.

By 1937 there were over 42,000 employees.

In 1939 Lyons produced 3.5 million gallons of ice cream.

By 1939 Lyons had 253 tea rooms. Due to wartime labour shortages, self service was introduced at the tea rooms from 1941, and rolled out across the chain from 1945.

Lyons led the world in sales of packaged tea by 1948.

From the late 1940s the company’s catering arm supplied the Wimbledon Lawn Tennis tournament.

Part II of this post can be found here.

A history of Burger King in the UK

Burger King entered the UK in 1976 with a Haymarket, London location. The chain claimed to aim at a higher quality market than McDonald’s, who had arrived in the UK two years earlier.

There were nine outlets in the UK by 1983, although the chain was suffering heavy losses. At this point, the European operations headquarters were relocated from Zurich to London.

Expansion continued at a slow but steady rate: by 1987 there were 14 outlets, including three drive-through locations. Like many of the American fast food chains, it struggled to succeed in the UK until it found a British partner.

In 1988 Burger King acquired eight Quick hamburger chain sites from Whitbread for around £7 million.

BK’s big expansion in the UK occurred in 1989. That year the American parent company had been acquired by the London-based hospitality giant Grand Metropolitan. GM also owned the British-based Wimpy Hamburger chain, and converted 150 counter service Wimpy outlets into Burger Kings, to take the chain’s UK total to 180 outlets.

Another large expansion came in 1996, when roadside hospitality giant Granada began to convert some Little Chef outlets into Burger Kings. Conversion of Little Chefs to Burger Kings had been found to increase turnover by as much as 100%. By 1997, there were 465 BK outlets in the UK.

There were over 500 Burger King outlets in the UK by 2018, with the vast majority operated by franchisees.

How should KFC move forward?

It was recently announced by the research company Technomic that KFC is no longer the leading chicken based fast food company in the US. KFC, the leader since the 1950s, has been overtaken by Chick-fil-A, which had sales in 2013 of $5 billion versus KFC’s $4.22 billion.

Further humiliation for KFC comes from the fact that Chick-fil-A is not even present in some US states and is under-represented outside the South East of the country (New York has only one outlet). Its stores don’t open on Sundays. However its outlets make more than three times the average KFC outlet.

KFC is in decline in the US, down to 4,491 outlets from a 2004 peak of 5,500. I think it has struggled, in part, because it has moved away from its core offering of fried chicken, instead heavily promoting the likes of grilled and roasted chicken for years. It even jettisoned the “Fried” component from its name in 1991, as if it were embarrassed about itself.

kfc wrap, salad and grilled chicken burger
KFC have introduced healthier menu items in recent years

For KFC to succeed, I think it needs to market itself as an indisputable “treat”. Don’t deny that fried food is unhealthy, but imply that everyone can/should have some every once in a while. Krispy Kreme hardly markets itself as a healthy option, does it? Despite recent trends, there is a market for this kind of product.

To take advantage of the popularity of Chinese food, which has a heavy emphasis on fried chicken, introduce Asian influenced dips (sesame, soy, tomato, plum) and side dishes of rice. Market it as “KFC Global Flavour” or “KFC Heart of Asia”. Maybe introduce other fried chicken concepts from elsewhere in the world as part of an ongoing series of new products and variants. South Korea has a double fried version of fried chicken, for example.

How about Original Recipe Extra Spicy: the standard Original Recipe product, but with perhaps 50% more seasoning? Or try different seasoning mixes all together: ie, English seasoning, which would be sage and onion based, or Mediterranean seasoning, which would be lemon and thyme based.

Whatever KFC does, it needs to do something different than it is doing right now. And international growth is sluggish too, with a 3% growth rate largely explained by expansion into virgin territory. Obviously that can only mask stagnant sales for so long. Once they’ve expanded as far as they can, where then for growth? The only option will be to increase outlet sales.

What next for Wetherspoons?

An abandoned pub
An abandoned pub

Wetherspoons now have 900 outlets, and plan to open a further 50 throughout 2014. The key areas for expansion are suburban locations, smaller market towns which hitherto lack an outlet, and the Republic of Ireland.

A sound case for expansion. However, Wetherspoons are known for operating pubs that have two to three times the area of an average pub. That limits the opportunities for expansion in small market towns and the suburbs. New build outlets are unlikely, with the large number of vacant pub premises littering the suburbs. Large outlets allow Wetherspoon to cut prices for the customer, as they maintain lower overheads.

Expect to hear the latest wheeze from Tim Martin then, stating the business case for smaller neighbourhood pubs. The words “convenience” and “community” will be bandied about. I maintain that half the empty suburban pubs in the land could be made viable if Wetherspoons began to operate from them. A lot of them are quite large anyway. All day food, family friendly atmosphere and cheap beer. Furthermore, suburban pubs with a largely local customer base eliminates the need for a designated driver. Remind me again why people would bother to go into the town/city centre when they access the same facilities in their own neighbourhood?

Why can’t you get Black Sheep Best Bitter at Wetherspoons?

Black Sheep Best Bitter logo
The “flagsheep” beer. Sorry.

Black Sheep Best Bitter is the the flagship product of the Black Sheep Brewery of Masham, North Yorkshire. I live in the brewery’s heartland, and the product is sold in pretty much every pub here. Provenance is nothing new: many regions have a local beer that they love: Newcastle Brown Ale, Sharp’s Doom Bar in the South West, Deuchars IPA in Scotland, Bass and Pedigree in Staffordshire and Derbyshire. Black Sheep Best Bitter is ours.

How did Black Sheep become so ubiquitous? For one thing, it’s local, which always helps. It’s independent from a major corporation and is family owned: people like that aspect.

The product is really good: it’s deliciously hoppy, with a hint of demerara sugar and a crisp, dry finish that leaves you wanting another.

It has strong marketing that is quirky and ideosyncratic. It emphasises the rural nature of the product because sheep feature prominently in its advertising and through the brewery tour. It is respectful of tradition, yet modern and unfusty. Outside its home county, it has the “brand Yorkshire” behind it, which has connotations of quality, value, craft and tradition.

Black Sheep products such as Ale, Riggwelter and seasonal beers are available in bottles in your local supermarket. The Ale is also available in cans. But the flagship Best Bitter is never found in supermarkets. This is deliberate, to ensure that you can only find Best Bitter in the pub. That the product has not been subjected to commodification in this way makes it seem special and premium. Best Bitter has to be sought out, which raises its value in the eyes of the consumer. It makes business sense as well, as I’m sure there are higher profit margins from selling to pubs than to supermarkets. It means that pubs are able to compete against the might of the supermarket: they can offer an exclusive product. In that sense, it’s also a moral standpoint.

For the same reason, Black Sheep refuse to sell Best Bitter to the J D Wetherspoon value pub chain. In my local market town of Richmond, almost every pub sells Best Bitter, for around £3.10 a pint. If the local Wetherspoons stocked it they would be selling it for £2.29. Why would anyone pay more at one of the other pubs if Wetherspoons were selling it cheaper? This works in the pubs favour as they don’t have to compete with Wetherspoon prices directly. It also helps Black Sheep as they surely sell a lot more beer at higher margins if 8 pubs in town stock their beer, rather than one.

The only other major cask ale brewer in the county who don’t bottle or can their flagship beer is Theakston (if you class their higher selling Best Bitter as their flagship product, rather than the better known Old Peculier). Theakston are also located in Masham. It makes business sense to me. I wonder why other brewers don’t follow their lead.

The history of Dunkin’ Donuts in the UK

As Dunkin’ Donuts makes its third attempt on the UK market, I explore its previous attempts.

The broadsheets such as the Daily Telegraph report that this is the chain’s second attempt at the UK market, but this is incorrect.

The first outlet opened in the UK at Ludgate Circus, London on October 1965. The UK operation entered liquidation in 1968. At the time, the Economist described the attempt as a “flop”.

The second attempt began in 1988. Rather frivolously, its UK head office was at 48 Carnaby Street, London. Four outlets were opened in the Birmingham area, with a bakery at Leamington Spa. 6 DDs (including a 24 hour outlet in Glasgow) and a bakery in Livingston were opened in Scotland. As with now, the plan was to open 100 outlets, with a focus on the London area. The outlets and bakeries were all closed down in 1999, after continuously losing money.

When it failed the (second) time around, DD was actually owned by a British company, Allied Domecq, which has substantial knowledge of the UK property and catering markets, as the owner of J Lyons (including the Wimpy burger chain) and 3,500 pubs.

Clearly the present owner feels that the success of Krispy Kreme in the UK since has cleared the way for another doughnut retailer to enter the fray. The chairman and chief executive in America is also a Brit. But Krispy Kreme clearly presents itself as a premium priced “treat”, whereas the Dunkin’ Donuts model is more of a value proposition akin to Greggs. It’s foolhardy to take on an established competitor such as Greggs in its home market.

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.

Pete Shotton (1941 – 2017) and Bill Turner (died 1993), two friends from Liverpool, opened the first Fatty Arbuckle’s outlet in Plymouth in 1983. Shotton had been a member of the Quarrymen alongside John Lennon, later of Beatles fame.

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

A second Fatty Arbuckle’s restaurant was opened in Bournemouth in 1985. Adrian Lee and his wife were appointed managers of the Bournemouth restaurant.

Adrian Lee was promoted to managing director of Fatty Arbuckle’s in 1988.

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 lacked managerial skill.

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.