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Cooking Up Trouble In The UK Restaurants Market

Published on: 7/08/2018

Gaucho is the latest UK restaurant chain operator to call in administrators as the consequences of shifting customer preference and oversaturation in the market continues. The group which operates the Gaucho and Cau chains, is the latest high-profile restaurant group to hit troubles, after Prezzo, Jamie's Italian, Byron and Carluccio's all revealed plans to close branches this year.

According to Plimsoll, the market analysis company, the following are key measures of performance across the Restaurant market:

Measure

No of companies

Change

Companies in financial danger   

465

UP

Companies making a loss

364

UP

Companies making a loss for the 2nd consecutive year

196

UP

Companies ripe for takeover

151

UP

Industry average Sales Growth

2.4%

DOWN

Industry average Profit Margins

1.5%

DOWN

 

Christopher Evans, Senior Analyst at Plimsoll explains some of the detail from their latest assessment of the UK Restaurant market, “A fairly toxic mix of changing demand and oversaturation has ramp up pressure in the industry. As a result, sales growth has gone into reverse, profits are down and debts are up. If ever there was a market in need of consolidation it’s the Restaurant sector”.

“The UK consumer has almost limitless choices of places to eat and little loyalty. Too many companies competing for an increasingly cost conscious and value driven customer does nothing for an operators’ bottom line. Average profit margins were already wafer thin across the industry at 19% but the latest figures show that figure has fallen to 1.5%”.

So, what next for the UK market? Evans explains, “The UK’s restaurant industry will face more failures over the next 12 months with 465 companies already rated as Danger in our analysis. There could be a wave of acquisitions as well. We have already picked out 151 with good potential for an interested buyer”.

“However, the elephant in the room is Brexit. Businesses existing on 1.5% margins, are not well placed to cope with disruption and cost increases. If the cost of supplies increases or the supply of labour shrinks significantly, costs could soar and catch out even the more stable operators. In such a competitive market, passing on higher costs will be difficult and some will run out of cash and credit to carry on”.

More details about Plimsoll’s latest study of the UK Restaurants industry can be found here…… 

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