The shit has hit the fan. Excuse my language but it really has done.
The UK restaurant and casual dining scene has been booming for quite some time, and as with every boom. there must be a bust. That bust has begun. The shit has officially hit the fan.
It has been a ticking time bomb for the last few years, the demise of numerous family run independent business was the start. Unfortunately when they suffer and have to shut up shop it doesn’t make headline news, but when more than just a few close their doors, it’s a sure fire indication that a storm is brewing.
Lets start with some facts, the number of UK restaurants going bust skyrocketed last year.
In 2017, the government’s Insolvency Service reported a 20% rise in restaurant failures. To put that into perspective there were almost 1,000 insolvencies across the restaurant industry in 2017 compared with 825 the year before. This I fear is only the beginning.
The pain and suffering has continued into 2018, notably with Jamie’s Italian planning to close 12 of its 37 UK branches, whilst burger chain Byron is planning to 20 (almost a third of its outlets) Again, this is only making the headlines because they are chains, and have a big high street presence, now consider all the small independents that have vanished from your high-street and town centre.
What’s causing it?
Well for starters, rising costs, increased competition and a big squeeze on consumer spending.
What a delightful combination.
A cocktail of costs have skewered the restaurant industry, the kind you would only get in a movie, unfortunately though there is no movie-esk happy ending in sight.
The rise in the legal minimum wage, rise in rent and business rates and the fall in the value of the pound (and as a result the increased price of food and drink) have meant that running a restaurant is becoming increasingly challenging, this however is somewhat of an understatement.
To this delightful mixture add into it a somewhat oversaturated market. Restaurants chains and independent alike feeling the strain of stiff competition in the over crowded casual dining sector.
The rise in competition (I use the term loosely) is due to an influx of private-equity backed firms, this I fear may be the final nail in the coffin of the restaurant industry.
When all theses factors come together, it’s like a house of cards collapsing.
Let’s recap. First, there’s the over saturation, Byron expanded rapidly as did Jaimies, Prezzo and many others, there are just too many restaurants. Simultaneously, food costs, staff costs and business costs are all rising, which means as a consequence margins (whats left of them) are being squeezed and squeezed and squeezed.
Times are tough.
Quite how the restaurant sector became so popular and over saturated is a moot point. It’s happened and is still happening regardless of the state of the market. It’s easy to blame a sudden gush of private equity money when it seemed that the restaurant business would be the leisure economy of the future. To an extent it is still true.
In 2016 a YouGov poll commissioned by the shopping centre management company Intu, rated eating out as Britain’s favourite leisure activity. Although people like to eat out, they simple are not doing it as often as they used to.
Private equity backers want to expand rapidly, then sell up while a brand is still popular. Essentially take a wonderful small profitable business, expand it across the country, squeeze the margins as much as possible (as a consequence reduce quality) then whilst its still popular sell up before your loyal customers realise they’ve been had. All this occurring in a three-to-five-year cycle.
The expansion is doing more harm than they realise, the availability of cheap bank debt to the backers combined with a willingness from retail landlords to fill failed former shop units with restaurants has allowed unprecedented growth, everyone thinking the restaurant leisure industry is the sure fire way to make a quick buck, so much so that operators are now trying to financially outmuscle one another for sites, as a result forcing rent up. No wonder the landlords are happy to allow the change of use! The amount chains are prepared to pay for ‘prime locations’ has risen and risen, consequently whole streets and areas of towns and cities alike are now filled with too many samey mid-market chains. If this were animals in the wild, unfortunately we would be at the point where a cull would need to occur to manage the population, ensuring there is enough income for everyone to survive. It looks like market forces will take care of it on their own terms.
What is annoying, sickening to an extent is the fact that the game is rigged, even if us independents wanted to expand, how can we, we cant compete with the chains who can afford the big bucks, and even if we could, the landlords don’t want us. We recently enquired about the availability of a unit in a new development and were categorically told that we don’t have a chance, even if we can afford it. The first phase has to be ‘big brands’ household names, names that they think will automatically bring footfall into the area. We left there gobsmacked, our money is simply not good enough. Forget our local reputation, forget the fact we’ve been trading over 9 years at our current site and we serve quality food, none of that matters because some guy, in a suit, in his office, 200miles away doesn’t know our name.
We never celebrate people’s downfall that’s just not cricket, however, the notion that large chains are permanently whittling away at their costs, has, as a consequence fueled huge resentment among diners and restaurateurs. If I had told you that Jamie’s Italian, a restaurant which (according to branding) is supposedly rustic, artisanal and serves traditional mediterranean cooking – would share a meat supplier with (the now-collapsed Russell Hume) with budget pub chain Wetherspoons? Would you have believed me? I doubt it.
It’s the biggest bait and switch con ever pulled off, start with quality, gain your customers trust then switch it out for product half the cost and run your margins up.
The notion that a highstreet brand is reliable, consistent and will always serve the quality you initially had is unfortunately untrue.
I was reading an article in the Guardian (yes the Guardian, no I’ve not had a stroke) and I came across this from Chef Gary Usher, he owns and runs four bistros in the north west, all of which pride themselves on “proper” cooking. Much like we do at Franco’s.
As I said before, I never take satisfaction from seeing others fail, it’s just not right, but I cant help finding myself agreeing with Gary, and who knows, perhaps some good will come of the chains failing.
“Strada being in trouble doesn’t surprise me one bit: it’s fucking awful,”
“Why do they deserve to stay open? Strada, Côte – I despise Côte – Carluccio’s, Jamie’s, they should be fucking closing. I ate in the Liverpool Jamie’s two months ago and it was possibly the worst meal I’ve ever had. It was appalling. I ordered what was supposed to be sausage ragout. It looked like boiled tomatoes with overcooked pasta, and it tasted the same.”
Please support your local independent restaurants, we do things properly, we do it because we love it. Running a restaurant is a calling, it’s a vocation, much like people who are drawn to the priesthood or to medicine. We don’t do it to make millions, if we want to do that we’d do something else, trust me, we do it because it makes us happy.
We take pride in our work, we take joy from seeing you happy dining with us.