Publication featured in The Times
The UK’s Top 100 restaurant groups have seen their profits dip in the last year from £246.5 million in 2023, to £244.1 million in 2024*.
The slight dip in profits is a creditable performance considering the challenges the sector has faced from the cost-of-living crisis and years of losses the sector has suffered from during the pandemic. The Top 100 UK restaurant companies reported a loss of £673 million in 2021.
The turnover of the UK’s Top 100 restaurant groups also increased sharply in the past year, reaching £9.6 billion in September 2024, a 21% increase from £7.9 billion in the previous year. However, the benefits of that increase in turnover have been largely eroded by the impact of inflation on food and drink costs and a higher interest burden on debt.
The return to reasonable levels of profits amongst the UK’s Top 100 restaurant groups comes after years of cost cutting that has seen many chains shrink their branches and cut staff numbers. This lower cost base has enabled many restaurant companies to maintain profits, despite the cost-of-living crisis leading to flat or falling expenditure on restaurants when adjusted for inflation (source ONS).
Martin Jones, partner in our London office, comments below:
"The sector's ability to maintain profitability despite the impact of the spike in inflation and weak consumer confidence is a very encouraging sign for the hospitality sector. It highlights the resilience of restaurant groups in adapting to both volatile trading conditions and rising overheads, which have had a huge impact on the industry overall."
"The industry has done a good job of stripping out excess capacity. That has been a really painful process for everyone concerned but the industry is in a better place for it."
Martin Jones also identifies several key measures which restaurant groups have undertaken to increase profitability, including:
- Shifting more sites to suburban areas to reduce overheads and renegotiating lower rents with landlords
- Negotiating short-term contracts with food and drink suppliers to benefit from falling inflation
- Investing in technology, such as touchscreen ordering in fast food outlets, to reduce reliance on labour
- Incentivising consumer spending with use of loyalty programmes
Martin Jones adds that: “Over the last few years, many operators in the sector have become much more focused on their cost base rather than just hoping that a growth in sales would eventually repair their margins. As a result many of the UK’s biggest restaurant groups are now in good financial health.”
“With overheads beginning to ease and softening inflation, UK restaurant groups can now focus on growing their revenue, which understandably is what restaurateurs have much more passion for.”
*Analysis of UK restaurant group accounts filed in the year ending September 30 2024