Not so very long ago, the UK’s casual dining sector was booming. At one point, major restaurant chains were expanding at a rate of one new opening every single week in the UK. Popular high street food chains won awards for the quality of their food. Restaurants such as Zizzi, Jamie’s Italian, Pizza Express, Byron Burger and Five Guys were springing up everywhere; and could be found on every high street in the country.
However, the trend turned sharply and unexpectedly. In late 2017, the UK witnessed a string of these casual dining chains beginning to struggle badly; with many top names, such as Jamie Oliver with his 25 restaurants entering full-blown administration.
The number of restaurants falling into insolvency in the year to the end of June 2019 increased by 25% to 1,412 compared to 2018. This is the highest number of insolvencies since at least 2014. Numerous factors have been blamed for the decline. Many restaurant chains experiencing cumulative issues which have left them in a financial mess.
When the trend for restaurant chain expansion was at its strongest, private equity companies were eager to invest. Billions of pounds were spent after 2013 on turning small chains into fixtures on every UK high street, with renowned restaurants vying for business in very concentrated spaces.
Now these investors want a return on their investment that simply is not available due to heightened business rates (which have been rising above inflation for over four years), increased energy costs and labour and imported foodstuff costs. Then take into consideration the average wage of the majority of the UK’s working population; more of us have had to scale back on luxury spending.
Furthermore, quality has become a big issue. Many restaurant chains offered an unchanged menu from five years ago. People are beginning to realise that there are cheaper, fresher alternatives than the mass-produced pizza or burger. More vegan and vegetarian options have admittedly been introduced on menus but not much else has altered.
Meanwhile, over the last five years, new cuisines have become popular in the group restaurant scene. The Caribbean cuisine chain Turtle Bay for example, now has more than 40 restaurants in the UK. It’s showing a 144% five-year growth. Within the last 12 months, Indian group restaurants saw an 9% increase, bringing the total to 159.
Effectively, the alarming rate of restaurant closures shows that the eyes of these casual dining chains were literally bigger than their bellies. There were simply far too many to begin with.
But although the UK chain restaurant industry may be in decline, the right measures to reduce costs and a renewed focus on quality could yet revive these franchises. Diversity is key for the restaurant chains to bite back and entice customers to a better experience all round. There needs to be more diversification in the choice of menu and in the value of the meal as perceived by the customer.