Tue, Mar 06, 2018 - Page 10 News List

Top UK restaurant groups hurting, shuttering outlets

MONEY LOSING:It is not just mid-market chains that have been hit by rising staff and food costs. Analysts said there is little sign of relief any time soon

The Guardian

A waiter lays a table for lunch in a Bar and Block restaurant in London, England, on Jan. 17.

Photo: Bloomberg

One in three of the UK’s top 100 restaurant groups are lossmaking, a rise of 75 percent in the past year as the casual dining crunch continues with little respite in sight, according to a study.

A combination of higher staff costs, rising business rates and falling consumer confidence have conspired to slash profit margins and force high street closures.

Accountants UHY Hacker Young, which conducted the study, said oversaturation in the market was also a significant factor.

The mid-market chains Jamie’s Italian, Prezzo and Strada are among the restaurants to have announced recent closures.

“More than a third of the biggest companies in the restaurant sector are losing money, and there is little respite on the horizon,” UHY Hacker Young partner Peter Kubik said. “Pressures on the restaurant sector have been building for years, and the last year has pushed a number of major groups to breaking point. With Brexit hanging over consumers like a dark cloud, restaurants cannot expect a bailout from a surge in discretionary spending.”

“Consumers only have a finite amount of spending power when it comes to eating out, and the oversaturation of the market means that groups that fall foul of changing trends can very easily fail,” he said.

“The government has ratcheted up costs with a series of above-inflation rises in the minimum wage and we are just weeks away from another 4.4 percent rise in April. That will be tough for a lot of restaurants to absorb,” he added.

Many mid-market chains face challenges. The Prezzo chain last week announced plans to close about a third of its outlets — 94 restaurants, including all 33 in its Tex-Mex chain Chimichanga — in an attempt to rescue the business. The chain employs about 4,500 people.

Earlier this year the Jamie Oliver Restaurant Group announced it was shutting 12 of its 37 remaining Jamie’s Italian restaurants, affecting at least 200 jobs — after having closed six outlets the previous year. Oliver’s Barbecoa steakhouses went into administration last month.

Also in January, the Italian chain Strada announced plans to close 10 sites and Square Pie, the gourmet pie and mash chain, went into administration.

Rising food costs, exacerbated by a weaker pound following the EU referendum, and increased competition from supermarkets were also possible factors.

In a recent report, Deloitte said that changes in consumer tastes and the way diners engaged with restaurants, particularly through technology, could provide opportunities for growth.

Key consumer trends included more healthy eating, informal and experiential dining and increased consumer focus on food provenance and sustainability, it said.

Home delivery in Britain was growing 10 times faster than the total eating-out market, it said.

Restaurant magazine editor Stefan Chomka said the huge growth in the casual dining market has led to too many restaurants at the same time as food costs, staff costs, rents and business rates have gone up.

“If you’re operating 100 sites, your margins are being squeezed and squeezed. And times are tough,” he told the Guardian last month. “Even if they spend a little more when they do, people are eating out less often. So there are greater costs, more competition, fewer people and, consequently, the shit is hitting the fan.”

It is not just mid-market chains that are likely to be affected. Bosses at Heston Blumenthal’s celebrated Fat Duck, the three Michelin-starred eatery in Berkshire, acknowledged the potential impact on profit margins.

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