The food service industry is undergoing a cyclical surge, with sector sales predicted to hit £90bn by 2017/18. Much of this growth is being driven by expansionary capital being directed at new openings and aggressive brand roll-outs. Not a day passes without a firm in the sector boldly declaring that it is targeting X amount of new sites, either for genuine (scalability) or tactical (“exit”) purposes. The size of the food service market is being driven both by “pull” (consumer eating-out trends) and “push” (increased capital investment) factors.

But the longevity of all concepts/brands rests on one major driver: organic growth. That is to say, after site start-ups/major conversions and initial trading, the litmus test for all businesses rests on total same-outlet performance, year-on-year (so-called like-for-like performance), otherwise termed “static estate underlying performance”. Its importance as a true reflection of concept resilience is acknowledged by outstanding growth concepts like Loungers. As Nick Collins, Loungers’ chief operating officer, reflected in Propel in June this year: “[our] like-for-like sales growth of 5.1% demonstrates that the core business continues to perform strongly, and while we are opening more sites, we are not taking our eye off the ball and are achieving healthy conversion and an increased average site Ebitda.”

So how do firms/brands in the food service sector drive organic growth? Are there commonalities between the firms that consistently deliver above-average like-for-likes? Ignoring organisations that “gorge” (price-driven sales spikes at the expense of margin) or cheat (comparing apples with pears), certain patterns emerge. Over the past four years I have had access, through the authorship of four books on multi-site retail firms, to many food service firms that have achieved “organic nirvana” – consistent underlying sales growth. My colleague Stephen Willson is currently assembling chief executive podcasts on the same subject, and uncovering some interesting observations. So what does it all boil down to?

The first thing to say that all firms that have stellar organic growth records do one thing supremely well. They organise, motivate and engage front-line service providers far more effectively than their peers. Notwithstanding this important observation (which is reflected upon further below) these firms seem to have six interconnected features:

• Execution – organic growth firms are great at executing the basics day-in-day out. This is partially because they have (in American parlance) “elevator pitch” business models, ones that are simple to understand, well-documented and easily grasped by all internal stakeholders. A by-product of this simplicity is the (relative) ease by which these operators can implement and “land” things quickly in a diffuse multi-site context, in order to counter competitive threats and/or create competitive advantage. Look at McDonald’s organic sales growth in the UK over the past five years in comparison to its “value” burger rivals – 15% versus flat. Relentless execution has been a major component of its success. 

• Engagement – in parallel with the first point, execution is aided through authentic, rather than rhetoric-based, HRM systems: talent development, recognition, two-way communication and remuneration. Great HRM leads to higher engagement, better satisfaction, lower turnover/absenteeism, higher stability, more discretionary effort and so on. TGI Friday’s, which is one of the few UK food service firms that can claim 100% five-star “Scores on the Doors” for its hygiene, has also been nationally recognised as one of the UK’s best employers, based on employee engagement measures. This linkage between execution and engagement is both poignant and significant.

• Entrepreneurism – another feature of firms that enjoy sustained organic growth is their company-wide obsession with invention and continuous improvement with regards to product and service delivery. By adopting a “small company” mind-set within a large company frame, these firms constantly ask themselves: “What should we stop, start or continue doing” to improve the customer offer during all trading day parts. Importing entrepreneurial new concepts has also assisted organic growth in businesses such as Greene King, Young & Co and Fuller Smith & Turner, as new ideas flow across their core businesses. 

• Efficiency – however, the two prior features do not negate the imperative of cost efficiency. All the strong like-for-like companies I came across during my research were vigilant/diligent with regards to cost control measurement/monitoring, across cost of goods, labour, wastage, shrinkage and operations and maintenance costs. In short, they had a grip on the business but not at the expense of destroying engagement or entrepreneurial behaviours. In recent times (as reported in Propel) Vanessa Hall has driven gearing improvements at YO! Sushi, without damaging its vibrant culture. 

• Expertise – in addition to the above, food service companies with high levels of organic growth are e-savvy; that is to say, they are adopters of new front of house/back of house technologies that create value within their businesses. Using new technologies to drive customer awareness, traffic and throughputs is taken as a given by these organisations. Domino’s swift adoption of digital transaction technology to bypass traditional telephone ordering/payment methods, for example, has, in addition to increasing same-store revenues, become an industry standard to which others aspire.

• Expertise – finally, these inter-linked features are topped off by the fact that the senior leadership cadres at these companies are knowledgeable and operationally focussed. Understanding the nuts and bolts of the business enables them to take well-informed decisions that accelerate the growth trajectory of the business, an exemplar being Tim Martin of JD Wetherspoon, whose frequent presence “in” the business means that he is on top of it when it comes to the major calls.

What stands out for me when I reflect on these six features is, first, the absence of any statement regarding differentiation or uniqueness and, second, a focus on internally facing processes rather than external market-facing factors. In the case of the former – a lack of emphasis on differentiation – it becomes clear that being unique is not in itself a qualifier for organic growth. This is unsurprising. Companies might have first-mover advantage but they are often caught up by imitators. It is the act of doing it better than anyone else, especially in food service, that is a principal qualifier for sustained success. As to the latter – a focus on internal processes – again, overturning one of the major tenets of business school cant, organic growth stems from organisations putting proper processes in place first, in order to attack the market. 

It all sounds so simple, really. But in fact, few companies ever achieve real sustained organic growth, resorting instead to aggressive roll-out, M&A or pricing/promotion strategies to prop up the figures. When the tide goes out, however, they become exposed. The six features of organic growth companies above might provide some food for thought for those companies currently experiencing “organic anaemia”.

I hate to keep banging on about it, but they do you see; I’m referring to minimum unit pricing (MUP). Two new reports from “experts” have appeared extolling the virtues of MUP and castigating the government for a “lamentable failure to take action.” The main report was conducted by the University of Southampton, and its lead author is anti-alcohol zealot and arch-minimum price campaigner, Professor Nick Sheron, whose quote appears above. Their press release describes MUP as a policy that is “an almost perfect alcohol policy because it targets cheap booze bought by very heavy drinkers and leaves moderate drinkers completely unaffected.”

The report studied the amount and type of alcohol drunk by 404 liver patients and it also asked them how much they paid for their booze. They found that these patients, who all suffered from alcohol-related liver cirrhosis, were drinking on average the equivalent of four one litre bottles of vodka each week and were buying the cheapest alcohol they could find, paying around 33p per unit, irrespective of their income. By contrast, low risk moderate drinkers were paying on average £1.10 per unit (obviously pub drinkers). Dr Sheron said: “Our research shows that a MUP set at 50p would affect the liver patients killing themselves with cheap alcohol 200 times more than low risk drinkers.”

So, what is meant by an MUP of 50p affecting liver patients 200 times more than low risk drinkers, and how does the report define “low risk drinker”? It turns out that “affect” means that heavy drinkers would have to pay an extra £1,500 per year for their drink, or 13% of their income, whereas low risk drinkers would only end up paying an extra £4 a week, or 0.03% of their income. A ‘low risk drinker’ is defined a person who consumes no more than six units of alcohol per week – just over two pints of lager. So, what is being compared here is two extremes: the cost of alcohol to people who are drinking four one litre bottles of vodka (160 units) a week with those who are drinking just over two pints of lager (six units) a week. Let’s do the math: For the heavy boozers that’s 160 x 33p = £52.80 per week. And if a MUP of 50p was introduced: 160 x 50p = £80 per week, an increased cost of £27.20 per week. By contrast the low risk drinkers who are drinking six units a week at £1.10 per unit spend just £6.60 per week and a 50p MUP would only impact on the very small amount of cheap booze they buy to the tune of about £4 a year.

And that’s it! That’s their argument! Who would have guessed it – if you drink large amounts of cheap booze MUP will raise your bar bill much more than if you drink tiny amounts of expensive booze – apparently you have to be a professor to work that one out! The report makes no attempt to predict how much this increased cost would reduce the amount these liver cirrhosis patients would drink, merely that it would increase the cost of their drinking. Neither do we know whether the budgets of these research subjects would be constrained by having to find an extra £27 a week, and if they were whether they would drink less booze, as opposed to eating less food or buying less petrol to run their cars on the odd occasion that they were sober enough to drive. The real point of this research was to answer the government’s point that moderate drinkers would be unfairly affected by MUP, and they do this by using a definition of moderate drinker that is utterly ludicrous. This report is yet another example of policy based evidence where you manipulate the statistics to get the result you want. Let’s hope the government won’t be fooled by this nonsense.

The other report was by the Advisory Panel on Substance Misuse which backs the Welsh Assembly’s plans to introduce MUP in Wales. The chair of the Advisory Panel’s committee of experts, Kyrie James, said MUP would: “exquisitely target the most vulnerable groups in our communities and ameliorate the negative impacts of alcohol misuse.” Interesting use of superlatives from both men: “almost perfect alcohol policy”, and “exquisitely target”. Boy are they miffed that the government hasn’t been fooled by their so-called evidence. And with regard to the intention of the Welsh Assembly to introduce this measure, hasn’t anyone explained to them yet that unlike in Scotland, this is not a devolved matter – they don’t have the power to introduce it.

What’s interesting is how the argument about MUP has shifted. Its advocates used to say that this is a whole population measure that will shift everyone’s drinking in a downwards direction. When that failed to persuade government they changed tack and they now say it’s a targeted measure aimed at heavy drinkers. When your opposition to alcohol is ideological any argument of convenience will do. They have nothing new to say; they just try to find new ways of saying it.

If you point out to the chaps at Meantime Brewing Company that theirs is now the second-oldest independent brewery operation in the whole of London, they won’t be thanking you. Venerability is not something that appeals to Meantime’s core demographic of 25 to 40-year-olds. But it’s a fact that of the ten or so other breweries in the capital when the company’s founder, Alastair Hook first fired up his brewing kettle in Greenwich in 2000, only the positively antiquarian Fuller, Smith and Turner further up the Thames at Chiswick is still going.

Of course, in the past four or five years, London has seen an explosion in new small breweries, fuelled by the enthusiasm among just those 25 to 40-year-olds that Meantime attracts for beers of a type rather different than those an older generation seeks out: brewery conditioned, not cask conditioned, and not “boring brown” bitters, but crisp lagers and aromatic American-style pale ales, cloudy wheat beers and chocolate-flavoured porters.

It’s not just the second-oldest, but the second-biggest, too, with production this year likely to top 70,000 hectolitres: a long way behind the 342,000 hectolitres Fuller’s produced in the previous 12 months, but still probably more than the next eight or ten small London brewers put together, and certainly as much or more as a number of long-established family brewers.

And yet, strangely, the man in charge of this young giant among the minnows comes from a background where even Fuller’s output would be thought of as not very much at all. In 2011, Meantime appointed Nick Miller, then managing director at SAB Miller UK’s operating company, Miller Brands, as its new chief executive. Miller was the first sales and marketing heavyweight ever to join a UK craft brewer. He had 20 years of experience in sales, strategic projects and marketing with Coors UK (formerly Bass), where he was director of sales, before he joined Miller Brands as sales director in 2005. His new employer boasted then that Miller had “a history of consistently delivering improved customer relations, sales and profit”, and he rose to be MD at Miller Brands in 2008. Under Miller, sales of Peroni, SAB’s Italian lager, rose in the UK from 160,000 hectolitres a year to 850,000 hectolitres (today, for what it’s worth, the brand is probably selling more than a million hectolitres in the UK). In other words, Miller boosted yearly sales of Peroni in the UK by as much as Meantime would currently produce in a decade.

Sitting in the garden of Meantime’s one “proper” pub, the Greenwich Union, on a sunny summer evening with a pint of the brewery’s own lager in front of me, I put it to Miller that had he stayed with SAB, he would most likely have continued on the sort of stratosphere-soaring corporate career currently being enjoyed by a former colleague, Mark Hunter, who started with Bass in the 1980s, just like Miller did, rose to be head of Molson Coors UK and then chief executive of Molson Coors Europe, and who was named at the end of July as the new chief executive and president of Molson Coors Brewing Company in the United States. So, having already risen high, and with that sort of potential career ladder in front of him, what persuaded him to make the swing away from the mega-brewery world to be in charge of an operation that makes less beer in a year than SAB Miller probably spills down the drain by accident?

“It’s a long and convoluted story how Meantime came about,” Miller replies after a sip at his own pint, “but it was one of those, ‘well, do I go abroad and do the big plc thing or do I take my chances and take a share in the business, see if we can grab hold of the craft beer revolution, shake it up, and change the way people think about beer, take a small business and turn it around?’ It’s been a great experience. I’ve always been in love with beer and the beer industry, and Meantime was one of those opportunities you would not want to miss. It took a lot of thinking about, because obviously it was a very lucrative job where I was – pensions, share schemes – it was a massive gamble. But it’s one, hopefully, that’s paying off, and I’m thoroughly enjoying it. It’s great grabbing hold of a business and working with someone like Alastair to create something different, and something exciting for beer drinkers.”

Miller actually began his working career as a shoe shop manager, before moving into the beer business. “I was born and brought up seven miles north of Burton on Trent, and weaned on things like Bass and Pedigree, and I had an interest in beer. But there was no real planning in terms of a career. I ended up, via a contact, being afforded an opportunity to work for Charrington’s in London in 1986, at the former Anchor brewery. The beer industry in 1986 was completely different to the way it is now, the Big Six brewers controlled the market place, it was still vertically integrated, the orders would come in from the pubs, which is where they made all their money, and brewing was, essentially, the poor man of the enterprises that were operating at that time.”

“I started at the bottom in sales and worked up to become a sales manager, then did the tactical, vertically integrated brewer route – retailing, ops, marketing. I did 16 years with Bass, which was bought by Coors, I was sales director for Bass looking after the on-trade, then in 2005 I had the opportunity to go and be sales and marketing director at SAB Miller, when we set up Miller Brands, and then two and a half years after that I became the MD of Miller Brands.”

The effects of the Beer Orders in 1989 “sharpened people up to making big brands bigger, to get efficiencies and overhead recovery out of having big brands, through long runs in breweries, but they probably then somewhat neglected consumer choice, variety, style: I don’t think it did the beer industry, the beer genre much good,” Miller says. “And it had a lot more competition coming in for disposable income – mobile phones, and the rest.”

“When I started in the industry the off-trade was about 20% of the market place, and the market place was well over the 70 million hectolitre mark. We’ve seen an accelerated decline down to around, what, 45 million hectolitres, roughly. Why is that? The industry hasn’t engaged consumers, hasn’t engaged drinkers, hasn’t talked about the possibilities in matching with food, drinking on different occasions, styles of beer relative to different times of the day. I think that’s what Meantime tries to do – it tries to celebrate all styles of beer.”

At Meantime, Miller says, “My job is to try to keep things contained, in a commercial sense. But the day you stamp on innovation is the day you start ringing the death-bell. Yes, there’s a hierarchy, but we rarely have to use hierarchical tactics in Meantime because the culture’s right with the people within it. Blending good financial systems and standards, backed by great creativity and not being frightened to fail, is absolutely crucial if you want to be a pioneering company. We will screw things up, but hopefully we get eight or nine decisions out of ten right. You have to accept that sometimes a test brew isn’t that good. Fair play. I run this company, but the one thing I will never attempt to run is the quality of the beer. I’ve got someone who’s a million times at judging the quality of the beer than me. Therefore you trust him to do that. I’m a marketeer. I can do the strategic framework and what I want to see delivered, but I let Alastair loose to do the work.”

The company’s board consists of two executive directors, Miller and Hook, and three non-execs, including the chairman, the South African former brewery industry exec Gary Whitlie, who was recommended to the post by Miller – “he was my first boss at Miller Brands, so if you’ve had a half-decent boss, you might as well pick him again,” Miller jokes, since Whitlie has just joined us in the Greenwich Union garden. “Best boss he ever had,” Whitlie retorts.

Miller’s contacts mean he knows where to go to get advice: hence the arrival at Meantime in July of Martin Harlow as a consultant. “We are in an absolute growth spurt, and we need to become a bit more processed and efficient in how we run our supply chain,” Miller says. “Martin was our supply chain director at Miller Brands, I needed someone, so why not go to someone you’ve worked with for five years.”

His experience outside the UK while working for Miller Brands also means he can suggest ideas that others might not think of. Brewery Fresh, which delivers unpasteurised, unfiltered London Lager from special five-hectolitre tanks in the pub cellar, was Miller’s initiative, inspired by the similar “tankova” system he had seen in Prague while working for SAB. “The outlet will pay for the installation, and we’ll pay for the tanks,” Miller says. “We then sign an agreement that they must hold those tanks for a certain period of time. The cost differential between tank and keg is reflected in the price, though there’s not a lot of difference. But the beer’s been kept at a constant temperature, with no air and no light – it’s probably the purest, freshest beer you’ll ever drink in a bar. It’s had less chance to be affected because it stays at a constant 2C from the brewery to the tank. It sells about twice as much as you would do through a keg – at a price premium. So the retailer enjoys better cash margins. We’re here to provide styles, variety, choice for the drinker, but at the same time you mustn’t forget the middle man, the guy that’s actually putting it in front of the drinker. They’re investing heavily in providing an experience for the drinker, we have to supply something that’s relevant for them.”

Meantime brewed 43 different beers last year, and had brewed 14 new beers by the end of July this year, and 19 in all. The biggest is the pale ale, followed by London Lager, pilsner and Yakima Red, a “one-off” two years ago that proved so popular it became one of the brewery’s standard lines. “We’re always doing lots of NPD down at the Old Brewery [the microbrewery/bar/restaurant at the Old Naval College in Greenwich],” Miller says. “We’ll play with lots of different things. But we are firmly keg. There’s too many others playing in the cask arena. Let them get on with it. We’ll do things with modern keg beer, which is unpasteurised, unfiltered on some occasions, such as Brewery Fresh. We celebrate all styles and genres – but we are a commercial enterprise, you brew what the drinker wants to drink.”

UK restaurant operators are looking to expand their reach and serve new audiences by debuting concepts a step above or a step below their original brands’ service style. Paul, which came in at No. 75 on Technomic’s 2014 list of the Top 100 UK Chain Restaurants (based on 2013 UK systemwide sales), is among this group. The fast-casual patisserie chain last month debuted a brasserie-style casual-dining concept, Le Restaurant de Paul, in the back of its Covent Garden bakery. Paul, founded in France in 1889, has long prided itself on its commitment to ingredient integrity (flour for Paul’s signature breads, for example, is milled exclusively for the chain by French farmers) and to traditional, time-intensive preparations (bread dough is allowed a longer fermentation time to enhance flavour). Adding a casual-dining concept lets Paul cultivate after-work, pre-theatre and evening business among Londoners and London visitors who know the brand’s reputation for high-quality fare. Moving in the opposing direction and targeting on-the-go diners with a condensed menu of “greatest hits,” so to speak, is Ed’s Easy Diner, which recently introduced the limited-service Ed’s Dinerette. Ed’s Dinerette will borrow from the core menu of the 50s-American-diner-inspired brand.

Ed’s Easy Diner, No. 85 on the Top 100 list, enjoyed strong growth in 2013: UK systemwide sales were up 52% (to £25.7 million) over the previous year on unit growth of 15% (to 23 units at the end of 2013). Noting that Ed’s Dinerette will allow the Ed’s brand to have a presence in smaller-footprint sites, Ed’s Easy Diner chief executive Andrew Guy said that Ed’s Dinerette “will hopefully open up options for further growth across the UK”. Large chains aren’t the only ones looking for a brand boost from new concepts, either. Four-unit contemporary Japanese restaurant Roka is opening a more-casual lunch spot, Shochu Kanteen, in September in the basement of its unit in London’s media district.

As we noted earlier this summer, Asian/noodle restaurants were one of the UK’s fastest-growing full-service menu segments in 2013, with sales for leading full-service Asian/noodle chains rising 12.2% over 2012. And limited-service Asian/noodle concepts including Itsu and Wasabi Sushi & Bento posted robust growth for the year, too. This all points to further growth opportunities for Asian/noodle concepts like Roka and Shochu Kanteen that are attuned to the menu interests and service-style needs of consumers in their operating areas.

Building new concepts from a successful brand always presents risks, including a loss of operational focus and a harmful diversion of resources from the original brand. But in a highly competitive foodservice environment, identifying opportunities to meet the needs of untapped audiences and deliver new ways for loyal customers to access a brand can be a powerful weapon against stagnation and complacency. Indeed, development of new concepts can spark innovation that serves to propel legacy brands forward, too.