Restaurant chains have been vociferous in denouncing the hike in costs they have faced across multiple fronts during the past year.
From increases in the price of catering equipment and fitting out kitchens to the high-profile issue of business rates and rents, financial directors the industry over have had to earn their crust like never before as they seek to balance the books.
A recent report into the financial pressures facing the industry has just laid bare the unprecedented times that operators find themselves in. According to the latest Benchmarking Report from ALMR Christie & Co, operating costs in the sector have now passed 50% for the first time.
The study asked respondents for percentage changes in like-for-like turnover. On average, a 1.1% rise in sales was reported in the year, continuing the gradual slowing in growth rates seen in the past three years.
This in itself wouldn’t normally be a major concern given the market’s famed resilience, but it comes as operating costs across all trading styles now stand at 51.5% of turnover, with growth across the entire survey at 1.1%.
Although the report points to signs of confidence in the market, it is clear that the competitive trading environment, currency volatility and general economic pressures are taking their toll on the bottom line.
Surely something has to give?
Well, perhaps it already has. Restaurant industry veteran and Fulham Shore chairman, David Page, suggested this month that more restaurant space is now appearing on the market than for many a year.
“This is largely a function of larger businesses trying to sell poor-performing locations, newly-created developments and administrators selling sites for broken companies,” he said.
He believes that operators with ‘me-too’ offerings, over-rented sites, bags of unprofitable sites, dated menus, too much debt, poor concepts and unincentivised staff will struggle.
It could well be those companies for whom the steep rise in operating costs serves as the final nail in the coffin.