Battered restaurant industry has good reason to be fed up
Comment Martin Flanagan
Restaurants are giving retail a run for its money in the perfect storm stakes. Since the turn of the year we have seen woe from the retail industry, covering the pessimistic gamut from slowing sales through to profit warnings, company voluntary arrangements (CVAS) and administration.
But it is clear that muted consumer spending and fierce promotional activity have taken a substantial toll in the restaurant sector as well. This has been exacerbated by restaurant chains themselves, somewhat unaccountably, taking leaseholds in upmarket city-centre districts at commercially high rents.
The chickens have come home to roost. Two other issues for the sector are that some of the chains are not sufficiently differentiated offerings, rather more me-too. And the pub trade, increasingly dependent on food sales, has defended their turf vigorously on price, Tim Martin’s JD Wetherspoon chain and Mitchells and Butlers being typical.
The latest Red Flag Alert research from Begbies Traynor, the business recovery specialists, has revealed that the number of restaurants experiencing significant financial distress jumped 8 per cent to more than 11,000 in March.
One might have guessed it with several high-profile CVAS (which typically involve outlet closures, job losses and a squeeze put on landlords for substantial rent reductions to stave off disaster). These CVAS include celebrity chef Jamie Oliver’s Jamie’s Italian, trendy burger chain Byron and another currently being voted on for Prezzo.
The dire straits of a large chunk of the industry, thousands of restaurants, will be accentuated this weekend with the sector’s Quarter Day falling on 25 March when the rent becomes due for the following three months.
Begbies reckons this could prove to be a stormy Rubicon for many owners already caught between rising costs and weak consumer confidence. Leaps in business rates, energy bills and the National Living Wage have all wreaked damage in chefand-waiter land.
The horizon is little better, with concerns Brexit will see the industry’s lifeblood of a ready stream of EU workers dry up. Currently, it is not so much about leaving tips at the table, more the tipping points at the front door.