Restaurants at higher risk of going bust than any other business

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Restaurant businesses have a higher risk of failure than any other key sector in the North West, new data shows.

According to the UK’s insolvency trade body, R3, 38% of restaurant companies in the region are considered at higher than average risk of failure in the next 12 months – equivalent to almost 1,800 businesses.

By comparison, 36% of pubs were considered at risk and 23% of hotels.

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Restaurants had a higher risk score than any other sector including technology (37%), transport (32%), construction and retail (31%), professional services (29%) and manufacturing (22%).

The figures are also supported by statistics from the Insolvency Service, which show that restaurants are one of the few  business categories where insolvencies have been steadily rising in recent years.

The number of restaurant failures in the UK rose by 42% between 2010 and 2014, from 585 to 833.

Richard Wolff, North West chair of R3 and head of corporate recovery and insolvency at law firm JMW, said: “The restaurant trade remains under pressure, despite the increase in consumer spending. Restaurants are one of the most popular choices for start-up businesses and the high number of new entrants means the market is very competitive.

“Running a successful restaurant also requires an incredible amount of skill – from developing the initial concept and choosing the right location to getting the key things right, such as marketing, the ambience of the venue and of course the quality of both the food and the levels of service. By way of example I have seen one recent case where the owner invested heavily both in the fit-out and launch of the venue but ultimately failed to get the basics right and has been unable to recoup the outlay.”

The ‘at risk’ figures were compiled using Bureau van Dijk’s Fame database. The average risk of failure for all North West businesses was 27%.

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One Comment;

  1. Martin Lee said:

    Why are Restaurants more at risk? Many do not make one simple calculation when looking at potential site: Take the rent or the mortgage and divide by 52 weeks of the year and you end up with a figure that you have to make, every single week before anything else e.g Rent £20,000 per year equates to £385 per week before wages, heating, lighting etc etc This calculation should be done before considering a property £385 is a fair amount of food profit which has to be made prior to anything else

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