There is no doubt that a well-run restaurant with a loyal customer base has the potential to develop in to a “cash cow”.

However, with competition as fierce as it has even been, rising costs and a fall in sterling means that restaurants are finding it much harder to survive. With the added pressure of the Brexit vote thrown in to the mix as well, the future looks uncertain for some restaurant companies in the short term at least.

A recent report conducted by the Financial Times pointed out that over 200 new restaurants opened in London alone last year, providing an even broader and more diverse choice for consumers, especially with the introduction of pop up restaurants. However, of those 200 plus restaurants, 76 have already closed, signifying the difficulties facing such businesses. With more and more people appearing less loyal to their favourite restaurant, times are certainly harder for the industry, which has resulted in the closure of several restaurants. In fact, evidence of this had already emerged when The Restaurant Group announced last August that 33 restaurants across the UK had closed including 11 Chiquito outlets and 14 Frankie & Benny’s branches.

A rise in restaurant insolvencies?
So what is causing this, in what should be a buoyant industry benefitting from a revival of interest in food and the dining experience? The answer is that the sector is facing challenges from several angles.

Direct Costs are increasing
The recent revaluation for Business Rates has seen rates bills for some licenced premises increase by as much as 400% in some parts of the country. Whilst this may not affect every business, combined with the other pressures highlighted above, the restaurant sector is clearly facing some real challenges.

The cost of labour increasing in line with the National Minimum and Living Wage rates has certainly had an effect, meaning that times are tougher for those who are already struggling to remain profitable. With the UK importing almost half of its food, the fall in sterling has heaped further pressure on the sector by increasing cost of sale and squeezing margins. With consumers’ already likely to be more price conscious due to Brexit uncertainty, an increase in price is certainly not going to go down well with many. Alternatively, just as challenging for the restaurant sector would be to absorb the costs and reduce margins, implying that the precarious trade-off facing the industry is likely to signify a real danger of getting in to financial distress either way.

Competition and Consumer Trends - Technology contributing to the problem?
The saying “staying in is the new going out” has never been more prevalent, and the advancement in technology is one of the contributing factors which is harming the restaurant industry. App based companies such as Deliveroo and Uber Eats mean that people can quickly and easily order online from their favourite restaurant or takeaways in a matter of minutes, which tends to result in lower average spend and delivery to your door. Supermarkets have also become problematic to restaurants and pubs, with many now stocking far more diverse ranges at cheaper prices according to the British Beer and Pub Association. Changing consumer habits have resulted in pubs losing even more trade, leading to an alarming rate of pub closures.

How we can help
With all of the above in mind, it is difficult not to conclude that the restaurant sector will face uncertainly and potential distress in the short term at least. However, it may not all be doom and gloom if you seek advice before it becomes too late. At PCR, we can assist with a turnaround or a recovery which may ultimately save your business going forward. Additionally, we can assist with the understanding of some of the legal and commercial complexities that may arise when dealing with businesses in the restaurant sector.

We can assist by:

  • Proposing funding options you may not previously have considered
  • Managing cash-flow in order to ease pressure
  • Assisting with financial forecasting and restructuring
  • Analysing the company structure and its viability

At PCR we offer a free initial consultation and company health check. The health check will provide answers to SMEs and their owners as to the ability to continue to trade, their viability and available options.

Accessing our offer
Simply telephone your nearest PCR office. Our telephone numbers and advisory team members can be found on the website. You can also access and complete a contact form. Please quote RESTAURANT17 in your correspondence.

Once we are contacted, we will discuss your business with you in more detail and if appropriate arrange for one of our experienced qualified advisors to visit on a day that is convenient to you.

Our promise
Please note this service is free and confidential with no hidden costs or obligations.

Contact Information

Middlesex Office: St. Martin’s House, The Runway, South Ruislip, Middlesex, HA4 6SE
0208 841 5252

Bristol Office: 77A Alma Road, Clifton, Bristol, BS8 2DP
0117 239 0343

Kent Office: Unit 39 The Joiners Shop, Chatham Historic Dockyard, Chatham, Kent, ME4 4TZ
01634 816 066

London Office: 1-7 Harley Street, London, W1G 9QD
0207 291 4465

Milton Keynes Office: 2-14 Margaret Powell House, Midsummer Boulevard, Milton Keynes, MK9 3BN
01908 309 950

Newcastle Office: Suite 108, Collingwood Buildings, 38 Collingwood Street, Newcastle upon Tyne, NE1 1JF
0191 229 9656

Sussex Office: 50 Ham Way, Worthing, West Sussex, BN11 2QH
01903 366 020

Ask for your free health check using our priority contact form ››

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