Casual dining crunch: why are so many restaurants closing?

Analysts say there is a “casual dining crunch” after more than 1,400 UK restaurants collapsed in the year since June 2018.

The Guardian says customers are “turning their backs” on chains such as Byron, Strada and Gourmet Burger Kitchen as it is revealed that number of restaurants falling into insolvency in the year to the end of June 2019 increased by 25% compared to 2018, with 1,412 outlets shutting their doors for good.

Researchers also found that the UK’s top 100 restaurants made an £82m loss in the last year, down from a pre-tax profit of £102m 12 months earlier, City AM says.

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Several reasons have been offered in explanation. The uncertainty over Brexit has certainly tamed consumer spending and there are also rising costs for owners because of the related collapse in the value of the pound.

The accountancy firm UHY Hacker Young said the rapid rise of the casual dining sector since 2008 financial crisis has led to an oversaturated mid-market, but a spokesman insisted that it is not only the household-name chains that are suffering.

“The crisis in the restaurant sector has been presented as a problem only for the chains that had lost touch with their customers,” said Peter Kubik. “That’s overlooking the hundreds of small independent restaurants that have become insolvent.”

He adds that “good restaurants and bad” have been hit by “overcapacity, weak consumer spending and surging costs” in recent times.

“Having a loyal following is great,” he continues, “but if that loyal following stops going out then you have a problem. The number of restaurants whose sales are at or near capacity is pretty small – they’re the exception.”

He believes that “aggressive management of cashflow will be key in the coming months,” particularly as struggling outlets cannot “expect banks to be as generous with their lending” because of the sector’s well-publicised woes.