Drive-thrus

The popularity with the consumer of the drive-thru format has seen an escalation in their requirements. In turn, this has fuelled a significant increase in rents, with the latest data from Savills open market lettings and regears showing that average annual headline rents on new F&B drive-thrus increased 25.9% in 2023 on the previous year.

2023 saw 44 new drive-thru openings across existing retail and shopping parks throughout the UK. McDonald’s, Burger King and KFC remain active in this market, having consistently sought drive-thru space in recent years. This made up 31% of all new F&B openings and is slightly above the average annual number of drive-thru openings over the last decade.

Nevertheless, this represents less than half the number of drive-thru openings seen in 2022, which is, in fact, a consequence of a lack of supply and difficulties and delays in delivering new drive-thru developments rather than a reduction in operator appetite. Vacancy is particularly low in the out-of-town market at 4.6%, and a number of other factors, such as delays in the planning system, financial viability challenges due to rising development costs and more stringent restrictions imposed by existing retail tenants preventing development in car parks, are reducing the pipeline of opportunities. Operators are therefore finding it increasingly difficult to find and secure appropriate space to expand on existing retail and leisure schemes.

As a result, the competition for drive-thru space has become increasingly fierce, with fast food operators innovating to develop smaller format drive-thrus to compete with other grab-and-go and coffee operators in the smaller format size range of 1,800–2,000 sq ft. This has resulted in headline rents for new drive-thrus for all brands in this smaller format climbing to just under £55 per sq ft on average for 2023 (Figure 5).

Starbucks and Costa have been the sector’s most acquisitive brands in recent years, opening 26 and 14 new drive-thru units, respectively, across existing out-of-town retail and leisure schemes in 2023, in addition to their other drive-thru openings in traditional locations on mixed-use and solus roadside developments. McDonald’s, Burger King, and KFC have also remained consistently active; however, there have also been a number of new entrants to the drive-thru sector in the last five years. Tim Hortons, Wendy’s, Greggs, Popeyes and Taco Bell, amongst others, are all competing for space and have appeared in the top 20 most acquisitive drive-thru brands over the last twelve months.

Despite the varying fortunes seen across the sector, there are reasons to be positive for hospitality as a whole. Falling foodservice price inflation is now a clear trend, having decreased for the fifth consecutive month, and energy costs are also beginning to fall. Many F&B businesses have spent the last couple of years driving efficiencies across supply, front-of-house and restructuring finances to give them a surer footing going forward. There have been plenty of exciting new openings across the sector, and challenger brands to watch. Overall, we remain positive about the prospects for 2024 and summarise the key openings in 2023 in Figure 6.

_{Read the articles within Spotlight: UK Leisure – 2024 below.}