In good news, the UK’s Top 100 restaurant groups recorded double-digit growth in annual sales and profit up to mid-2025, following two years of adjustments, cost-cutting, and site rationalisation. Many operators adopted a cautious ‘wait and see’ approach ahead of the Autumn Budget, and optimism was dented following November’s announcements which will have an impact through higher wages and rates bills.

Despite some brands reducing store numbers by as much as 50%, scale continues to deliver benefits. Operators are increasingly leveraging technology and AI to improve efficiency both front of house and behind the scenes.

Independent operators, representing around 80% of the market, have faced greater challenges from food inflation and are less able to raise funds for investment and marketing. However, they are typically better at generating loyalty, sourcing locally, providing more flexible and niche menus, and generating a wider following through more personalised social media – these are all important factors for attracting the less cost-conscious diner.

Customer retention strategies such as loyalty schemes and promotions are now critical, influencing roughly a third of dining occasions where consumers return to trusted venues. Legacy brands who face a more discerning customer base are under pressure to innovate: those unable or unwilling to adapt, risk further decline, with potential casualties through strategic reviews, discounted transactions, and consolidation in the year ahead.

Headwinds persist. Food inflation remains above RPI, utility costs are still up around 10% year-on-year, and higher business rates loom as relief measures are withdrawn. Wage inflation, driven by National Insurance contribution increases, has exacerbated staff turnover, which is up from around 3% to 38%, as well as staff shortages which are estimated at 100,000, impacting service quality and consumer satisfaction.

Adding to the challenge is the rise of supermarket ‘grab and go’ options. As consumers tighten their belts, many are dining out less and opting for shop-bought, dine-in alternatives. Discretionary spend for a night out in 2026 is likely to shift toward fewer visits, but potentially higher spend per occasion.

Still, optimism persists. Prospective restaurateurs remain resilient, and those who execute well are seeing positive KPIs. In 2025, we saw local and regional operators adding one or two sites to their portfolios, either through brand roll outs or new concepts supported by strong back-of-house teams. Despite our sentiment survey showing that 62% of stakeholders feel negative about the sector, only one in five are looking to sell, showing a dogged determination to succeed.

Demand for leased premises is more subdued, even in London, except where landlords offer rent and fit-out concessions. Drive-thru and takeaway sites are an exception, with rents accelerating to potentially unsustainable levels amid high demand and planning restrictions. Franchising continues to attract hospitality entrepreneurs seeking certainty, with many franchisees diversifying across multiple brands to mitigate risk.

Lifestyle businesses also remain popular, supported by underlying freehold value. With some funding available, and accommodation often included, freehold sales accounted for 44% of our restaurant transactions in 2025, with a total value exceeding £12 million.