Oversaturated market, minimum wage hike put pressure on restaurants
35 of the UK’s Top 100 restaurant groups are now loss-making, up 75 per cent from just 20 last year, shows research by UHY Hacker Young, the national accountancy group.
UHY Hacker Young says that trading conditions have become increasingly difficult for restaurant chains dealing with oversaturation in the market as well as rising costs.
The firm adds that this research comes on the back of the high-profile struggles of several major restaurant chains in recent weeks, including:
- Jamie’s Italian, started by Jamie Oliver, which has closed 12 branches as part of a Company Voluntary Arrangement (CVA) to restructure its £71.5m debt
- Byron, the burger chain, which may close up to 20 of its 67 branches following a period of paying reduced rent
- Prezzo, the Italian chain, which is expected to close some of its 300 branches as part of a restructuring
- Strada, another Italian chain, which closed 11 branches over the festive period
- Barbecoa, another Jamie Oliver chain, which entered administration in mid-February
- EAT, the sandwich chain, which was rumoured in early February to be considering closing some of its 100 branches
UHY Hacker Young says that pressures of competing with numerous similar ‘fast casual’ restaurants in an overcrowded high street are a major driver of many large restaurant groups registering losses over the past year.
It adds that the National Minimum wage, which has risen by an above-inflation 19 per cent to £7.50 per hour over the last five years, has added a substantial cost burden to large restaurant chains. From April 2018, the minimum wage will rise even further to £7.83.