Have we lost our appetite for dining out? The UK Restaurant sector continues to struggle in uncertain times
Earlier this year we reported on the struggling restaurant industry following the closure of some of Jamie Oliver’s restaurants. Unfortunately it seems that our prediction for hard times ahead is coming to fruition with more big name restaurants adding to the list including Ed’s Easy Diner and Frankie and Benny’s closing poorly performing sites from their chains. White Maund has also seen an increase in restaurant inquiries over recent months.
Business advisors, Moore Stephens also recently reported that they believe over 5000 restaurant businesses have at least 30% chance of insolvency in the next three years.
The factors driving these closures include changes in lifestyle, rising costs and increased competition.
Changes in lifestyle affecting the restaurant Industry.
Entertaining at home has become increasingly popular; due to the difference in cost people are buying more alcohol to consume at home than in pubs and restaurants for the first time. A marked increase in demand for healthy options has also led to more complicated menu creations adding further strain to restaurant operators.
Technology has helped the boom in takeaways with companies such as Deliveroo and Uber making dining in even easier. While many restaurants have got involved with these delivery companies in an effort to increase their customer numbers, it takes the temptation away from ordering starters and deserts which would arise when dining in a restaurant, reducing overall customer spend.
Disposable income in the UK has also stagnated or declined in many cases which is further fuelling the decision for families to eat at home.
Rising Costs
Recent political events and continuing uncertainty haven’t helped confidence for consumers or for the restaurant owners themselves. Restauranteurs’ budgets are getting squeezed tighter as the revaluation of business rates takes effect with increases in excess of 20% in some parts of the country. The higher national living wage and new pension provisions have also taken their toll. Catering staff are often only paid the minimum wage meaning businesses will now have to absorb the increased staff costs. As Brexit takes hold the availability of foreign workers may also be restricted, overseas workers having bolstered the catering labour force in the UK in recent years. Much of the raw ingredients and alcohol for UK restaurants is imported. Following the fall in sterling after the decision to leave the EU, these commodities are now even more expensive.
Increased Restaurant Competition
In addition to competition from home dining the restaurant market is suffering from increased completion from within. In the last year over 200 new restaurants have opened in London, while 76 have closed. The net effect means a higher range of dining choices to compete against. People are no longer loyal to a favourite restaurant and diners get bored of menus quickly. Pop-up restaurants are keen to cash in providing the next ‘hot’ thing in dining before moving on before the appeal fades.
Getting Advice Early
On a positive note getting advice early on and making the necessary changes at the onset of trouble could save the business or at the least provide damage limitation. The Frankie and Benny chain implemented turnaround strategies including simplifying its offering and closing some of its less profitable outlets which has led to a more positive outlook. The company saw a big jump in share prices at the beginning of June but whether their turnaround activity will be enough to help them weather the storm of uncertainty only time will tell.
If you would like to talk to us about how White Maund can help your business please get in touch. We offer a free consultation to help you explore and consider the alternatives for your business so please call us on 01273 731144 or e-mail at info@whitemaund.co.uk if you require independent and professional advice.