Despite the help given during the pandemic, many restaurants find themselves struggling to recover. A recent survey by UHY Hacker Young revealed that an incredible 70% of the top 100 restaurants in the UK are making a loss. In many cases the difficulty was attributed to the cost of restructuring exercises and the overhang of debt repayments to landlords.
In the case of small restaurants and groups, anecdotal evidence suggests that many were able to negotiate rent holidays during the pandemic and thus avoid some of the debt burden that better known chains had to suffer. Landlords realistically judged that it was better to keep a small tenant solvent rather than look forward to a future income gap.
Now, however, restaurants find themselves suffering a new set of economic setbacks which I have listed below:
- Not all restaurants are trading at pre pandemic levels. For our hospitality clients in London there is a mixed bag depending on their audience. Many workers in the city are still in hybrid or fully work from home mode and thus are missing. On the other hand, London restaurants depending on local residents are doing extremely well and often trading above their previous levels.
- Staff shortages caused by Brexit were further exasperated by the pandemic. This has impacted many restaurants’ ability to generate revenue, particularly by having to limit bookings at peak times. Competing for staff also has, in many cases, required restaurants to pay higher wages.
- Raw materials availability and cost has required changes in recipes and selling prices.
- Higher prices together with the cost-of-living crisis made worse by media and Bank of England messages of doom will curtail consumer spending. How much that affects the eating out sector is unknown but could be significant.
All in all, the fittest will survive and innovation will be a crucial factor. It is more important than ever to have good management information to spot and fix problems before they do terminal damage.