News

News | Published March 02 2019

Tough times for the restaurant industry

2018 was a tough year for the restaurant trade, with many well-known brands having to cut branches or worse.

Industry website bighospitality.co.uk called it “the year of the CVA”, standing for “company voluntary arrangement”, a new legal option for insolvent companies that allows for a more managed payment of creditors than a traditional insolvency.

In January Jamie’s Italian got a CVA after closing nearly a third of its 37 restaurants nationally. Burger chain Byron saw similar difficulties and its creditors also opted for the CVA.

Prezzo followed suit in February, with a planned restructure underway that could also see a third of its restaurants close.

Carluccio’s, another Italian chain, also entered a CVA in May. The chain will close 30 loss-making restaurants and invest £10 million in revamping the rest of its 100 sites.

The BBC reported that “The casual dining sector of the restaurant trade has been suffering from a general fall in consumer spending. Chains have also faced higher rents and rates, as well as rising wages with the increase in the National Living Wage” and added that Italian ingredients had become more expensive since the devaluation of the pound following the result of the EU referendum in 2016.

The BBC quoted Restaurant Consultant Stephen Minnall saying: “They have been caught in a perfect storm. Food costs have gone up. Dairy has gone up 10 per cent – when you order a coffee, it’s the milk that costs the money, not the coffee.

“Then the government says you have to pay a higher wage, and then the apprenticeship levy. So the answer is to start a CVA and try to reduce your rental bill.”

In September The Telegraph said restaurants were “on the ropes because supply has outstripped demand”.

The paper’s business “agony uncle” Sir John Timpson said: “It doesn’t seem long ago that you had to queue to get into the latest Italian eatery. These busy restaurants seemed assured of long-term success, but nothing is forever in business and most major strategic mistakes are made when things are going well.

“Successful chains expanded rapidly, so others entered the market hoping to benefit from the latest trend. But their enthusiasm created too many restaurants at a time when lots of pubs realised that they had to attract more diners to survive.”

Sir John pointed out that “even in the 21st century, the law of supply and demand continues to apply.”

Industry website bighospitality.co.uk called it “the year of the CVA”, standing for “company voluntary arrangement”, a new legal option for insolvent companies that allows for a more managed payment of creditors than a traditional insolvency.

In January Jamie’s Italian got a CVA after closing nearly a third of its 37 restaurants nationally. Burger chain Byron saw similar difficulties and its creditors also opted for the CVA.

Prezzo followed suit in February, with a planned restructure underway that could also see a third of its restaurants close.

Carluccio’s, another Italian chain, also entered a CVA in May. The chain will close 30 loss-making restaurants and invest £10 million in revamping the rest of its 100 sites.

The BBC reported that “The casual dining sector of the restaurant trade has been suffering from a general fall in consumer spending. Chains have also faced higher rents and rates, as well as rising wages with the increase in the National Living Wage” and added that Italian ingredients had become more expensive since the devaluation of the pound following the result of the EU referendum in 2016.

The BBC quoted Restaurant Consultant Stephen Minnall saying: “They have been caught in a perfect storm. Food costs have gone up. Dairy has gone up 10 per cent – when you order a coffee, it’s the milk that costs the money, not the coffee.

“Then the government says you have to pay a higher wage, and then the apprenticeship levy. So the answer is to start a CVA and try to reduce your rental bill.”

In September The Telegraph said restaurants were “on the ropes because supply has outstripped demand”.

The paper’s business “agony uncle” Sir John Timpson said: “It doesn’t seem long ago that you had to queue to get into the latest Italian eatery. These busy restaurants seemed assured of long-term success, but nothing is forever in business and most major strategic mistakes are made when things are going well.

“Successful chains expanded rapidly, so others entered the market hoping to benefit from the latest trend. But their enthusiasm created too many restaurants at a time when lots of pubs realised that they had to attract more diners to survive.”

Sir John pointed out that “even in the 21st century, the law of supply and demand continues to apply.”

Authored by

The Parliamentary Review

@theparlreview
March 02 2019

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