Restaurant closures in the UK has accelerated by 25%!!
According to the Guardian’s Rupert Neate, between July 2018 – June 2019, 1,412 more restaurants closed when compared to the previous year. We look at some of the factors contributing to the loss of well-known and well-liked brands from Britain’s high streets
The uncertainty surrounding Brexit is deeply affecting the Food & Beverage (F&B) industry. Low Pound (£) has led to rising cost and low profit margin. So far, this research predicts that 14,800 outlets will face closure due to Brexit. It seems, Brexit certainly is one of the major reasons for the closure.
Increase in Minimum Wage:
Staff cost is the highest in F&B industry alongside rent and business rate. Since April 2018 an increase of 33p or 4.4% from £7.50/hr to £7.83/hr. Majority of restaurant employees are on minimum wage and so the increase has certainly added more pressure on restaurant owner and operators.
Changing consumer spending habits:
Netflix / Amazon Prime in combination with Just Eat / Deliveroo have certainly changed consumer eating habits. People are ordering more delivery and takeaways as compared to dining out. Profit margin from using delivery services is equal to none because restaurant owners pay 15-20% commission to companies like Just Eat & Deliveroo. Factor in the costs of raw materials, rent, business rate and wages, and you can begin to understand why a large number of businesses are struggling to maintain their brick-and-mortar operations.
Brand Fatigue / Saturation / Lack of Adaptability
All of the above terms are the same, when it comes to the F&B industry. “Brand fatigue is a marketing term which refers to a situation where consumers are bombarded with same message from several brands in such a level that consumers disconnect themselves with the brand.” Simply put, walk down your nearest high street and you will see brands such Pret-A-Manger, Costa Coffee, Pizza Hut, Nandos etc. If you happen to live in London, you will notice these same brands every 2 miles!
And while each brand has its unique selling point, it certainly lacks the novelty of being the only outlet in the city or town.
Also, the larger the business, the longer it takes to adapt to change. For e.g. the growing demand for “Vegan” or organic menu is difficult to implement in a multi-outlet business.
Spiralling Business Costs
It would be unfair to point the finger solely at private capital here, though. There are a number of macroeconomic factors that have created a much more difficult environment for mid-range eateries to operate in. For one thing, business costs have been rising above inflation for at least the past four years. The cost of renting a venue has almost doubled in some cities since 2010.
Running costs such as electricity and gas have also been putting immense pressure on the margins of some companies. Smaller businesses, in particular, are vulnerable to these rises, which is why business owners are advised to always consult a price comparison platform like Business Energy in order to get the most appropriate rates for utilities. The cost of labour and imported raw materials have also spiralled, which definitely makes a bigger impact when your business operates in multiple locations.
So, how would restaurants, especially standalone and family-owned businesses sustain themselves against this grim backdrop? The key as here, as you may have figured out from the above points, is localised innovation.
In our next article series, we will look at how restaurants and cafes can innovate, incentivise and automate themselves towards profitability!
About the AuthorSarang Mandke – Sarang is a CharteredAccountant with 5+ years experience.He owns and manages Wolfe Strategies,a consulting firm specializing inproviding real time operationalefficiency solutions to restaurants, cafesand bars. Wolfe Strategies has its offices in Singapore, Australia and the U.K.Sarang can be reached firstname.lastname@example.org
Disclaimer The views expressed in this article are those of the author and are based on existing publications as well as limited research. Market conditions and factors may differ foreach business and hence, these views should not be solely relied on when making decisions.