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Reinventing the business of street food

A glut of new traders, smart sites and big money: street food’s moving up and out. 

15 Feb 2017

Five years ago, friends Nud Dudhia and Chris Whitney quit their jobs to sell tacos from a shack in an east London carpark. The city guys-turned-street food makers encapsulated everything about the budding industry that seemed most exciting; bold, brave, a little brash, they were part of the wave of people ditching more conventional jobs to do the thing they loved – make great food – regardless of whether they’d trained at a Michelin-starred restaurant or in their grandmother’s kitchen.

Soon everyone was a winner. Lunchtimers swapped limp meal deal sandwiches for sourdough cheese toasties and gourmet burgers, city workers exchanged suits for aprons, and rumours flew around that some traders were making £3,000 a day.

Six years on, street food has grown up. Those ramshackle, chaotic assemblies have been replaced by curated and co-ordinated line ups (whether they look it on the surface or not). Consortia of operators have ballooned with the sector’s success. Festivals have doubled their pitch fees. Private landlords are wising up to street food’s cultural appeal, as are the investors that are increasingly helping traders transition from pitch to restaurant. Stalls are even shipped out from London to Dubai. Newbies are put through rigorous trials to secure a spot at a market, discouraging those without a full piggy bank to even give it a go. Brexit-induced currency changes have pushed up produce prices, customer excitement has waned, margins have shrunk, quality has dropped, taxes and pitch rents have increased, and the winters are as cold as ever.

But for many of the most successful traders, all that is becoming irrelevant. They’re into street food 2.0: the restaurant dream. The rockstars of yesteryear’s food markets – Meat Liquor, Pizza Pilgrims, Bao, Smokestak, Breddos Tacos, Bleecker St – have moved into bricks and mortar, and there are plenty more clamouring to join them.

On the one hand, this has all the signs of a new economy in the making; a slew of businesses serving top-notch, taste-changing food at seriously competitive prices, ready to roll out across London and beyond, and a troupe of investors keen to fund them. But how long can these brands, popular in part for their rough-and-ready personality, survive on the high street? And what state does this exodus leave the markets – and their increasingly corporate operators – in?

Smooth operators 

Springing up to help hapless culinary whizzes find a pitch, whip up a social media frenzy, and manage cash flow and staff in the early days were market operators Kerb and Street Feast, joining long-standing non-profits such as Borough and Broadway markets. Kerb, founded by food trader Petra Barran, focused on pop-up lunchtime markets, while Street Feast, started by club promoter Dominic Cools-Lartigue, took on nighttime entertainment. Selectively sourcing traders like a tech incubator, they enabled people to try out their ideas, hone their concepts, make connections and raise funding. Doing deals with private landlords who wanted to increase footfall on their sites or make a bit of money on an unused space, the markets they launched (Dalston Yard Street Feast in July 2012; Kerb King’s Cross in October 2012) offered something more polished than even the best council markets – Leather Lane, Whitecross Street – and a stall in their markets soon came with kudos.

‘Street Feast and Kerb really promote you,’ says Nisha Patel, co-founder of Leather Lane regular Grill My Cheese. ‘You become a name, get featured in the Time Out Top 50.’

‘It’s like street food Disneyland,’ says Thom Elliot, co-founder of Pizza Pilgrims, part of Kerb’s original line-up.

The deal was simple. Come here, pay us a pitch fee of 15% or so of your turnover, work damn hard, get a massive following, and make loads of money.

‘The exposure you get is phenomenal,’ agrees Dudhia, co-founder of Street Feast veteran Breddos. ‘It’s a brilliant platform to show your product to the world.’

Other, equally bustling, markets have become big fixtures in the capital: Borough market breakaway Maltby Street set up in Bermondsey in 2010; Netil market began piggybacking on Broadway market’s popularity in the same year; the Southbank Centre market launched in 2010; Boxpark Shoreditch opened in 2011.

Bossing it

None of the one-off wonders, however, have quite the clout or commercial drive of Kerb and Street Feast. Both are themselves remarkable success stories; Kerb claims its five markets have grown 30% year-on-year, while the three sites Street Feast had in summer 2015 generated a revenue of £3.5m.

In 2015, Cools-Lartigue sold Street Feast to a newly-formed company, London Union, headed up by bar owner Jonathan Downey and food writer and Leon founder Henry Dimbleby. The new owner had ambitious plans; it promptly raised £2.5m on Seedrs to create 12 local markets with 200 trader pitches across the city by 2020. It also announced it would soon build a new, permanent market that would give Borough a run for its money, and then take the Dinerama model to Europe, the US and beyond.

It’s not proved so simple. For a year London Union went silent, and opened no new markets. Finally, in November 2016, the company announced it had secured a spot for its flagship venue. Not the Victorian Smithfield market, as once touted, but a brand new space in Canary Wharf. (See ‘Street food traders and property developers’.)

As for Kerb, markets are now only half of what it does: 50% of its business now comes from organising corporate events, securing extra gigs for its cohort of traders to feed the suited masses; it also runs a permanent seven-day-a-week market in Camden; and has recently announced plans to run a workspace near Brixton, where it will hold workshops, events and a cookery school, and food startups can also rent kitchens and desks.

If that sounds a little like an incubator for food businesses, that’s exactly Kerb’s aim. ‘The idea is to give the next generation of food startups all the necessary support to shine,’ says Kerb’s head of markets, Ian Dodds.

At the markets too, both operators are fairly involved in an advisory capacity; they keep tabs on how much traders sell, how fast they serve, and how long their queues are.

Rather than breathing down cooks’ necks, Dodds says this operating system is ‘very systematised and grown-up’. It allows Kerb to monitor performance across its sites, rotate traders around (based on past performance) and give useful feedback.

For a few traders though, the growing up has gone too far. ‘If you don’t get a meal out in three minutes, you get a slap on the wrist,’ one ex-Street Feast trader told Courier.

Peak street food

For all their PR machines’ clamour, trade isn’t what it used to be. ‘Dalston Yard died a death this year,’ said one trader, who didn’t want to be named. It closed its doors for the last time in September 2016. Custom is slow at Kerb’s new Camden market too; Londoners are still hesitant to make the trip, and the location doesn’t attract anywhere near as many office workers as the sites in Shoreditch and Canary Wharf, leaving it mainly a tourist haunt.

‘Many of the best traders aren’t in Kerb or Street Feast,’ says Mathew Carver, The Cheese Truck founder. He points out that when the operator is itself a brand that needs to be pandered to, ‘it can become a bit cliquey, and less about the quality of the food’. Some traders, especially those who are more passionate about being their own boss and escaping life behind a desk than the potential for nationwide expansion, instead make a healthy income rotating between less high-profile markets, festivals and corporate events, buoyed by a loyal fanbase.

Other operators jumping on the street food bandwagon take far less interest in their traders. One of Shoreditch’s many markets reportedly fines traders who run out of food £150 per day (meaning they must overproduce, and waste money that way, or take the fine). ‘There are so many traders now, they can kind of take the piss,’ says Patel. ‘Because if someone says no, someone else will say yes.’

This proliferation of street food splits opinion. On the one hand, Kerb and Street Feast’s expansion across the city means there are more gigs available for traders. On the other, it means that instead of boasting 20 or so star traders, the operators now have 70 on their books which, some say, has led to a drop in quality.

Mega markets

Kerb and Street Feast are by no means the only operators interested in setting up permanent markets.

Boxpark soon discovered that food – originally an ‘incidental’ offering – was more popular than retail at its Shoreditch site, and has focused its entire Croydon market (opened October 2016) on street food fare, with a hefty dose of entertainment to keep customers coming back. ‘We’re selling an experience,’ says CEO Roger Wade, who had a hit list of key food businesses he wanted in the new market, including Meat Liquor and The Breakfast Club. He says he has plans to open 30 more Boxparks.

Modelled along the same lines, Pop Brixton’s shipping containers offer traders a happy medium between an outdoor stall and a full-on restaurant. Time Out is also muscling in, having announced it will convert a space opposite Spitalfields market into a permanent market that will ‘democratise fine dining’, while Italian company Mercato Metropolitano has set up a sustainable food, produce and events market in a disused warehouse in developer hotspot Elephant and Castle.

For traders, permanent markets mean less hassle lugging heavy cooking equipment around, guaranteed electricity and wifi, more space and an easy-to-find location. They’re viewed as a stepping stone on the journey from pop-up lunchtime market to high street joint. Operators, meanwhile, can make a healthy profit selling booze (although, Dodds warns, ‘it’s hard to deliver on experience’), and landlords and property developers can introduce a wedge of culture in an otherwise unexciting area.

It’s looking unlikely that one operator will come out on top. ‘There won’t be one winner – the Google of street food,’ reckons Brittney Bean, founder of Mother Clucker.

Scott Erwin, founder of staffing app Hire Hand, thinks there are only 20-40 more street market opportunities across the city – not enough to satisfy all the operators interested in running them. East London might have hit saturation point, but he says demand at Boxpark Croydon (which clocked 5,000 visitors in its opening weekend) suggests that those operators ‘willing to take the risk with a more diverse geographical footprint’ and engage with local communities will do well.

But while the operators grow their empires, street food is getting less attractive for traders, and many already in the game are struggling.

Fool’s gold?

Startup costs are still low – around £30,000 will get a van and equipment – but competition is intense for spots at even substandard markets, margins are getting squeezed, and the lifestyle of early mornings and long, physically demanding days is brutal. On top of that, no matter how much help an operator gives, the risks still sit squarely on the traders’ shoulders.

‘Kerb can be amazing on weekends, but on a weekday out of tourist season, you can take a pretty big loss,’ says Digby Vollrath, founder of street food trader booking platform Feast It. ‘A rainy day can really haemorrhage you.’

Lunchtime markets, though, are relatively low risk; festivals, where many traders hit the big bucks, are much riskier. Charging anything from £250 to £10,000 (Lovebox’s fees doubled to £4,000 last year), and often taking 20-30% of the till on top, if a festival’s a wash-out, traders can make a big loss.

Cheesed off 

While top line figures can be astounding (one truck is rumoured to have an annual turnover heading towards £1m, and vans can take several thousand pounds in a lunch hour), most successful traders will have a yearly turnover of closer to £300,000.

The so-called ‘pasty tax’ (requiring food traders to pay VAT on hot food once past the annual £89,500 threshold) is another cost to consider. ‘You can’t pass that price on to your customer on the street like you maybe could do in a restaurant,’ says Patel. ‘It eats into margins; it’s a real problem.’

Since the Brexit vote, some produce costs have also gone up. Grill My Cheese says its costs for cheese and bacon have gone up by 50%, while Mother Clucker estimates it’s paying 20% more for chicken. As for pitch fees, they can be as much as £165 per day.

Putting up prices is tricky, as everything is so directly comparable in the market, so traders are forced to cut corners or absorb the loss. Many are proud to use quality produce, because they’re trying to establish a brand. Patel continually compares suppliers to check she’s getting the best deal, while Bean is ordering Mother Clucker’s packaging in larger quantities to save costs. ‘It comes down to finding space to store 10,000 takeaway boxes from,’ she jokes. Other traders just cut portion sizes.

Patel says she’d seriously question starting a street food business at all in today’s climate: ‘It’s much more difficult to make any money.’

The restaurant dream

It’s no surprise then that nearly every trader wants to open a stand-alone restaurant. For some, it’s a pipe dream; for others, it’s always been the game plan.

‘I didn’t leave my job in the city to run a 20-seater that barely breaks even,’ says Rik Campbell, who started small plate Indian restaurant Kricket in Pop Brixton in 2015. In January, it opened a much bigger site in Soho.

‘There’s an exciting new restaurant scene exploding out of street food,’ says Vollrath. ‘People are ready to go to specialist restaurants now,’ adds Pizza Pilgrims’ Elliot.

Bean is another trader soon to open a restaurant, and says concern about where to pick up a last-minute gas canister has been replaced by advice on which solicitor and agent to use when securing a site. For street food traders serious about expanding their brand, pop-up markets have their limitations. ‘It’s hard to grow an actual business with no security,’ says Bean. ‘You only have a pitch because somebody else wants you there.’

Making the jump

Shifting from stall to shopfront has plenty of benefits: it means getting proper kitchen equipment, being able to cook to order and offer staff development, expand the menu and make a lot of money on alcohol sales.

But it’s not an easy transition. Premiums on restaurant properties can be up to £500,000, and a mid-market fit out can cost £80,000. Finding a suitable site is also tricky, and contracts with landlords often fall through, meaning many traders announce they’ll open something, but never succeed.

‘It’s really hard to find the site you want and lock it down,’ says Bean. ‘You have to spend time creating relationships with people so you get the first phone call about something coming onto the market that meets your requirements.’

‘I think lots of people go in quite naively,’ says Patel. ‘Some just don’t crunch the numbers.’

Street Feast’s Yum Bun is one trader that tried, and decided that bricks and mortar wasn’t right for the business. London Union’s Downey is hoping he can offer an alternative means for brands to grow. ‘I would like Yum Bun in all sites,’ he says, pointing out that the company is open to investing in its traders.

Keeping hold of great traders will be a problem for Street Feast. Last year, London Union looked to invest in Breddos and Smokestak (described by Downey as ‘irreplaceable’) to help both move into permanent sites. However, when negotiations broke down, both traders left for good, leaving some big boots to fill.

Smokestak’s first restaurant opened in Shoreditch last November. Its founder, David Carter, is one of the rare traders turned restaurateurs so successful he could bootstrap the venture, and rely on his experience in the hospitality industry to do it well. For others though, funding opportunities are growing.

Wooing the wonderkids

Increasingly, the most successful traders are being courted by investors and landlords, who do anonymous tastings at markets, check out a business’ social presence and the competition.

Less than six months after Pizza Pilgrims opened its first restaurant, West End property investor Shaftesbury offered it a second spot in its Kingly Court development. Breddos was also approached by Shaftesbury and property developer Derwent. ‘They basically want to make their properties cool,’ says Dudhia. ‘They don’t want to have Pizza Express and Pret.’

The onus is on bringing new concepts into its restaurant sites to keep people visiting an area, says Julia Wilkinson, who heads restaurant strategy at Shaftesbury. ‘Indy operators have such a level of creativity, and you don’t see that anywhere more so than in markets.’

Other investors are looking to grow brands. The Sethi restaurant group, investor in Kerb and Netil market alumni Bao, clearly knows what it takes to start a culinary frenzy; one of the Sethi family’s own restaurants, Hoppers, is renowned for its queues, as are the two outlets of Bao now open in Soho and Fitzrovia.

Kricket’s investor, White Rabbit Fund, is a new restaurant development pot scouting for small food businesses with ‘high growth potential’. Founder Chris Miller compares London’s food concepts to Silicon Valley’s tech firms, and says it’s a world of untapped investment opportunity.

Traditionally, private equity has only been an option for restaurant groups with around eight to 10 sites. However, Miller reckons he’s spotted a lucrative opportunity to turn street food businesses into valuable restaurant groups to be sold for seven or eight times their profit once they hit that 10 site mark.

Investors will be hoping to replicate sales like that of Franco Manca which, when sold for £27.5m in 2015, had 10 outlets. Pizza East and Dirty Burger sold the year before for £33m.

Proof in the pudding

Crucially, street food offers investors something they’ve never had before: proof of concept. Businesses already have big followings and tried and tested recipes. The founders, too, have showed their mettle.

According to Wilkinson, years of hard graft in markets tends to pay off. ‘By the time these operators are taking a site, they really know what they’re doing,’ she says. ‘They tend to have a far lower failure rate than premium concepts.’

Many of the notable restaurant successes of recent years have been investor-backed street food transitions – Pizza Pilgrims, Bao, Meat Liquor – something that would not have happened even five years ago. ‘Investors want to get behind the next Bao,’ says Feast It’s Vollrath. ‘That’s exciting; the industry’s in a better state than it’s ever been.’

The money guys

For a trader who self-financed a food van, taking on investment can be a strange but extremely useful experience. ‘It’s like growing up,’ says Dudhia. Breddos’ investor Ennismore (which owns the Hoxton Hotel) has helped with all the ‘back end stuff’; restaurant advisers, wholesaler relationships, PR, finance.

Elliot says he couldn’t have made Pizza Pilgrims a success without its investors (which own around a 30% stake): ‘You have to be very arrogant to think you, on your own, with no experience, will make a success of something.’

For traders who don’t have investors queueing at their trucks, finding cash to start up is a problem. The Cheese Truck’s Carver is one who couldn’t find an investor. Instead, he raised £130,000 on Crowdcube to open his Cheese Bar in Camden. ‘Crowdfunding goes hand in hand with street food,’ he says. ‘It’s so driven by social media that the transition’s quite easy.’

His new landlord, Market Tech (see boxout, p15), is working with several food startups, including Dalston pizza favourite Voodoo Rays. In a bid to incentivise young businesses, Market Tech offered The Cheese Truck a site with no premium, and a reasonable rent-free period, with a standard 10-year lease. ‘It’s the only way a street food business without a lot of money behind them can find their feet,’ says Carver.

Without the expert advice and contacts of an investor or hospitality insider, Carver could still find it tough going, but he’s positive. ‘The risk we’ve taken is calculated,’ he says. ‘This landlord needs businesses like ours to survive in Camden; they need success stories so others will join.’

Growing pains

Facing all street food businesses that make the transition to restaurant chain is the same question: how do you keep the ethos and personality that set you apart to begin with?

Meat Liquor, founded five years ago and now a chain of 10 restaurants across the country, is still run by its founders (although former Pizza Express CEO David Page has a large stake). So too is Honest Burger, which took on £7m investment in 2015 in exchange for 50% of the company, and is about to open its 19th restaurant.

Pizza Pilgrims plans to open several more sites (one confirmed location is West India Quay), and Elliot insists that he has no immediate plans to sell. ‘It’s not the aim. But at the point where we’re not capable of running it anymore, say we grow it to over 10, or stop enjoying it, then we’d have to think long and hard [about selling].’

Bao is taking a different tack. Having opened two central London restaurants, and been awarded a Michelin Bib Gourmand, the team have announced their next restaurant, set to open this spring, will be high-end. Julia Wilkinson at Shaftesbury, the new site’s landlord, says diversifying is a smart move: ‘The successful operators are those who do something different in each site, or bring in new ideas.’

Kricket investor Miller reckons there are two ways for a street food business to grow successfully. Some, with a core brand offering – like the pizza and burger chains – are very scalable concepts that could fit into high streets or office blocks across the country. Others, like Kricket and Bao, which are much more dependent on the creativity of the chef at their helm, need to make each new site unique and focus on training great chefs in-house.

Maintaining the buzz

Founders and investors’ interests aside, it’s hard to gauge how excited customers will still be about these businesses in five years’ time. If the state of street food is anything to go by, novel concepts have a limited life span. ‘The public has accepted street food as a quotidian outfit,’ says Dudhia. ‘Gone are the days of the cult.’

‘Everyone’s eaten a burger that’s going to change their life,’ agrees Carver. ‘I think there’s going to be a return to people wanting a dining experience, instead of eating out of takeaway packaging on a bench.’

The best street food traders and market operators already have brilliant food and flair. The very best will continue to keep it fresh and exciting as they move indoors.

This story is taken from Courier Feb/Mar 2017.