35 of the top 100 restaurant chains are unprofitable

Jamie’s Italian interior

A third of the UK’s top 100 restaurant groups are now loss-making, it has been claimed.

The figure is up some 75% from last year and comes as operators such as Jamie’s Italian, Byron and Prezzo close stores.

Accountancy firm UHY Hacker Young, which published the research, said the fall-out was the result of “increasingly difficult” trading conditions, with restaurant chains facing market oversaturation and rising costs.

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It said the pressures of competing with numerous similar ‘fast casual’ restaurants in an overcrowded high street were a major driver of many large restaurant groups registering losses over the past year.

The National Minimum Wage, which has risen by an above-inflation 19% to £7.50 per hour over the last five years, has added a substantial cost burden to large restaurant chains. From April 2018, the minimum wage will rise even further to £7.83.

Peter Kubik, partner in UHY Hacker Young London office, said: “More than a third of the biggest companies in the restaurant sector are losing money, and there is little respite on the horizon. Pressures on the restaurant sector have been building for years, and the last year has pushed a number of major groups to breaking point.”

“With Brexit hanging over consumers like a dark cloud, restaurants can’t expect a bailout from a surge in discretionary spending. Consumers only have a finite amount of spending power when it comes to eating out, and the oversaturation of the market means that groups that fall foul of changing trends can very easily fail.”

Mr Kubik added: “The government has ratcheted up costs with a series of above-inflation rises in the minimum wage, and we are just weeks away from another 4.4% rise in April. That will be tough for a lot of restaurants to absorb.”

The struggles of some high-profile major restaurant chains have been well-documented in recent weeks.

Jamie’s Italian, started by Jamie Oliver, has closed 12 branches as part of a Company Voluntary Arrangement (CVA) to restructure its £71.5m debt, while Byron, the burger chain, may close up to 20 of its 67 branches following a period of paying reduced rent.

Prezzo, the Italian chain, is expected to close almost a third of its 300 branches as part of a restructuring, Strada recently shut 11 branches and Barbecoa, another Jamie Oliver chain, entered administration in mid-February. EAT, the sandwich chain, meanwhile, was rumoured in early February to be considering closing some of its 100 branches.

Tags : restaurant chainsUHY Hacker Young
Andrew Seymour

The author Andrew Seymour

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