There is no doubt that the past year has been an extremely challenging time for operators in this sector. We have all seen the news with established favourites such as Strada, Prezzo, Jamie’s Italian and Byron Burger being forced to close sites in the UK.
So is it all doom and gloom or are there still opportunities out there for those who innovate and get their concepts right?
Although we may all be bored talking about it there is no doubt that the food and drink sector has more concerns than most about the effects of us leaving Europe. In an industry that already has huge pressures in seeking to attract and retain staffing levels because of unsociable hours amongst other considerations, the uncertainty about EU nationals and their immigration status is a massive concern. Together with the constant rise in the cost of supplies, this is proving a challenge for owners to not only keep services running smoothly with a strong and happy team creating the right atmosphere but also having to decide on how to save costs to maintain profit or how such additional expenses can be passed onto customers.
According to a report from Big Hospitality last month, the Jamie Oliver Restaurant Group saw a 28% hike in its business rates over the past year and rates at the Brighton Restaurant alone rose by 154% last year. Prezzo, who in the past week announced a programme of closures of its eateries, likewise cites rises of up to 100% at some of its central London locations. From this it is abundantly clear that business rates have a very significant impact on the operation of restaurant businesses in the UK.
Some restaurant chains, particularly those backed by private equity, have for years been seeking to cash in on what seemed a never-ending burgeoning market and have simply opened too many outlets too fast and as a result have suffered. Industry research shows that the younger generation eats out most frequently but millennials are renowned for being fickle. They are constantly looking for the next new experience and they tire easily of the same concept.
Also, interestingly, some restaurant businesses, (such as Polpo’s Russell Norman and Jamie’s CEO Jonathan Knight) have openly admitted to getting things wrong by moving away from their core strategies in recent years as being a reason they have suffered.
Both independents and chains are looking at new ways to develop their business through delivery services, just look at Just Eat who have just revealed that in 2017 their sales are up 45% to a staggering figure of £546,000,000. The Casual Dining Group are also looking to deliver more from their brand Café Rouge concept, focusing on items that travel well such as burgers and croque monsieurs.
Those businesses that are getting their clientele to and enjoy their food in different ways can maximise sales, for example the Deliveroo Editions concept operating from “Dark Kitchens”, which offers warehouse/factory type operations in tired industrial locations to cater for big brands such as Gourmet Burger Kitchen or Franca Manca. The cost savings are obvious and can be more flexible so they also attract new business concepts looking to dip their toe in the UK restaurant market.
Although it may be tough out there, the difficult market conditions can benefit the brave, the agile and those who continue to get it right. It is an interesting time with plenty of opportunities for those who keep innovating.