• Strategy
  • CFO Europe Magazine

Food Fighters

American restaurant chains have reigned, but some European innovators are gaining ground.

Flo’s objective is to increase scale across the brand portfolio. But to put this in context consider McDonald’s numbers. Not only does it dwarf Flo globally, with 2006 system-wide sales of $57 billion (€40 billion), but it also does so regionally with €12 billion European sales, and nationally in France with €3 billion sales. Despite the culture-war perception suggested by incidents such as the 1999 attack on a French McDonald’s by anti-globalisation agitator José Bové, France has long been one of McDonald’s largest and fastest growing markets. That kind of scale — sales in France alone last year of 60,000 tonnes of fries, 32,000 tonnes of beef patties, 12,000 tonnes of chicken and 600m buns — brings enormous economies of scale and is difficult for competitors to match.

The Stomach’s the Market

It’s not for want of trying, but Europeans have mostly failed to get their chain concepts established beyond their national, or regional, base. Why? “Because Europe has had a different attitude to food generally, and food service is mostly done only on a national basis,” says Peter Backman, managing director of Horizons, a London-based food industry consultancy. “US companies, on the other hand, say ‘They might be different countries but if you’ve got the right model, you can steamroller it everywhere.’”

However, not all American efforts have panned out. Arby’s, an American chain specialising in gigantic hot beef sandwiches, and Wendy’s, a burger rival to McDonald’s on its home turf, have been among the serial failures in Europe. But the fact that European chains have only challenged American operators in their home countries is, Backman reckons, “a failure of will on the part of European companies and their management.”

The contrast in management attitudes was neatly demonstrated to Pierre-Antoine Raberin, international managing director of Groupe Holder, a Lille-based chain retailing high-end baked goods, including the Paul and Ladurée brands, at a meeting he had recently with McDonald’s France CEO, Jean-Pierre Petit. Raberin, who has expanded the chain to the UK, Florida in the US, and elsewhere, recounts that when he told Petit that he didn’t see the two companies as competitors, Petit countered that McDonald’s “sees the market as a person’s stomach” — if someone fills up by 20% on a Paul croissant, Petit said, then McDonald’s has lost a fifth of its potential sales to that customer.

C’est la Vie Française

Aggressive expansion through both franchised and fully owned outlets certainly has been a major weapon for McDonald’s, opening outlets in France, for example, at a rate of about 40 a year.

That’s not the kind of pace that high-end concepts aim for. Groupe Holder began its American expansion two years ago with a licence to open 100 outlets over ten years, putting Lebanese-born Vladimir Alfa, who has a family connection to Groupe Holder’s owners, in charge. Starting in the swankier neighbourhoods in and around Miami, it has so far opened three Paul shops, with another two on the way. When the aim is “to embody the art of living in the French manner,” as Alfa has described the Paul concept, the speedy and highly adaptable approach of some of the bigger chains may not be feasible.

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