‘Dramatic’ rise in kitchen equipment costs is crippling operators, warns restaurant boss

Peter Borg-Neal, CEO

The boss of one of the fastest-growing pub and restaurant chains in the UK has warned there will be a “significant slowing” of investment from the industry if the cost of items such as catering equipment keep increasing.

Peter Borg-Neal, CEO of Oakman Inns & Restaurants, said an increase in capital expenditure costs, including new kitchen equipment, over the past 12 months has had the “biggest impact” on its business.

The vast majority of catering equipment suppliers have tweaked their prices since last summer’s EU referendum as they’ve wrestled with the fall-out of huge currency volatility. Even UK-based manufacturers have been exposed to such challenges as many purchase components or steel from overseas.

Mr Borg-Neal warned this week that there was only so much that operators could take.

“The key challenge we are experiencing is the increase in input prices driven by sterling weakness. We have seen a large increase in food prices whilst being very wary of passing them on to the consumer. However, the biggest impact on us is being seen in our capital expenditure costs.

“Items such as kitchen equipment and building materials have increased dramatically. When this is set against some of the other challenges to our trading it seems to us very likely that, without government intervention, there will be a significant slowing of investment in our industry.”

While Oakman has had to contend with the cost of kitchen projects increasing, it has made an impressive attempt of balancing the books. Like-for-like sales during the first half of its current fiscal year, which spans the six months to 1 October, grew 27% to £13.5m.

“We are absolutely delighted with our performance over the first half of the year and we have a real sense of momentum as we approach the vital Christmas trading period,” Mr Peter Borg-Neal said.

“The recent acquisition of The Anchor in Hullbridge and the reopening of The Betsey Wynne have added to that momentum – both are trading ahead of expectation. We are now on-site at the Beech House, Amersham, The Cherry Tree, Olney and The Royal Foresters, Ascot – all of which will open in the first half of 2018.”

‘The Oakman Collection’ comprises 20 contemporary Inns with letting rooms and ‘all-day’ pubs across Berkshire, Bedfordshire, Buckinghamshire, Essex, Hertfordshire, Northamptonshire, Oxfordshire, Warwickshire and the West Midlands.

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4 Comments

  1. Stefan said:

    Dramatic drop in catering equipment supplier margins, due to internet suppliers is causing many bricks & mortar companies to go to the wall. End users over recent years have had their catering equipment at not much more that cost price.

  2. Tim said:

    As a distributor of catering equipment, unfortunately, we are being squeezed from both sides. Understandably customers want to minimise their expenditure and manufacturers want to maintain their margins. We’ve seen our margins eroded but, and I’m sure they will say otherwise, we’ve generally seen manufacturers margins temporarily eroded until that make a pricing adjustment, bringing them back to their desired margin. It’s then left to us to decide whether we increase our margins or take the hit.

    We either need to see some intervention or manufacturers need to consider taking a bit of a dent in their margins whilst the market adjusts, even if it is for a longer term than hoped.

    We are witnessing customers either making do, repairing ageing equipment which isn’t really cost effective, or starting to switch to cheaper alternative brands. Not great in the long term but if the money isn’t there it isn’t there.

    My understanding is that we are about to see another round of increases across a number of manufacturers. Distributor margins have already been eroded to due to the weakness of the Pound and other market pressures which will leave us with no choice but to pass the increases on. And so the cycle will continue.

  3. Afdyce said:

    I am crying crocodile tears for Mr Borg-Neal. 27% growth in 6 months? All that expensive kit is obviously paying off!
    EVERYTHING has gone up since we decided to leave the EU and the pound weakened, not just building work and catering equipment. Sir, you need a reality check.

  4. Ian said:

    Tough, Peter, you’re just going to have to increase your prices….like eveyone else….

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