Article featured in: The Times, The Telegraph, The Guardian, Metro, the Daily Mail, The Caterer and the i.
The restaurant sector had expected a post-pandemic recovery in profits, but this has been put on hold by spiralling food inflation and a fall in consumer confidence caused by interest rate rises.
Labour shortages have also impacted the sector, causing restaurants to restrict covers and therefore reducing the amount of revenue they are able to generate, especially at peak times.
Increasing concern over an expected drop in consumer spending
Peter Kubik, partner, says that many in the restaurant sector are anxious over further falls in consumer spending as a possible recession gets closer. This is likely to push restaurant groups further away from a return to profitability:
“It may be a case of ‘out of the frying pan, into the fire’ for many UK restaurant groups. They expected, and needed, higher consumer spending as we put COVID further behind us, but this spending is now likely to fall when it is needed most.”
The restaurant sector was facing difficulties even before the pandemic. Many groups took on large amounts of debt to fuel aggressive expansion campaigns, which meant many were trading at a loss even in ‘normal’ pre-COVID conditions.
However, in the longer term, many restaurant groups are expecting to return to profitability. The restructuring programmes undertaken by many restaurant groups have reduced the size of their debts, while several major chains have closed unprofitable branches.
Peter Kubik says: “The restaurant sector has been left reeling by successive economic setbacks. The pandemic, shortly followed by soaring inflation and supply chain issues hit the sector when many restaurant groups were already vulnerable.”
“Promising signals for the sector are coming through, despite the current difficulties restaurant companies are facing. The success of restructuring campaigns being undertaken, unprofitable branches closing and debts shed through CVAs brings hope for a sunnier future for the restaurant sector.”
A record high 66% of the UK’s Top 100 restaurant groups are making a loss- (percentage of Top 100 restaurant companies that are loss making)
The next step
If you would like to discuss the topics raised in this blog in more detail, please contact Peter Kubik, or your usual UHY automotive adviser.