Publications that covered this story include The Financial Times.
The UK’s Top 100 restaurants made a £93m loss in the last year*, down from a profit of £37m 12 months ago, our research shows.
Peter Kubik, T&R partner in our London office, says: “The restaurant sector in the UK is still suffering from the sharp chop in profitability earlier this year.”
Restaurants have come under pressure from a combination of rising overheads, such as wages and raw materials and falling sales. The average household now spends £967.20 per year on dining out, down from £988 the previous year.
Restaurants are finding that the cost of imported goods has risen due to the weaker pound following the Brexit vote.
Growing popularity of home delivery services has come as a mixed blessing for restaurants. While these services provide an additional channel for sales, for some restaurants they have come at the cost of a fall in more profitable in-person visits. This has cut sales of alcohol, which is often a restaurant’s highest-margin product.
Several major restaurant groups are now closing loss-making branches in order to restructure their debts. Recent examples include:
- Flat Iron was forced to close its Notting Hill site due to large rent increases in July 2019, the restaurant had only been open for two years
- Hawksmoor announced the closure of its remaining two branches of Foxlow, its sister restaurants, in June 2019
- Chiquito and Frankie & Benny’s owner announced in September 2019 it will close at least 88 branches over six years
- Giraffe and Ed’s Easy Diner announced in March 2019 it will close 27 of its restaurants affecting 340 jobs
In order to meet upcoming financial obligations, some restaurant groups have been forced to raise capital from shareholders.
Peter Kubik adds: “Many restaurant groups are finding it difficult to raise capital from their shareholders – they are finding their patience for putting in more money has run out.”
“There are now few restaurant chains that aren’t either considering a strategic restructuring or a reduction of their branch networks. Restaurants are also taking action at a micro level such as simplifying their menus to reduce waste, cut costs and focus on their most popular dishes.”
“Restaurant owners can also look to extend credit terms with their suppliers where possible – this can help to improve cash flow.”
“However, despite all the bad news there is still opportunity in the market for restaurants that can meet a clear consumer demand. There are plenty of big success stories in the market – it’s just more challenging than ever to maintain success as tastes and budgets change.”
The UK’s Top 100 restaurants made a £93 million loss in the last 12 months
* Top 100 restaurant companies ranked by revenue. Based on an analysis of company accounts filed as of September 30 2019, compared with accounts filed as of September 30 2018
** Source: ONS