Restaurants | Business Outlook 2020
Restaurants updates from Business Outlook 2020
During 2019, we saw an increase in the amount of distressed sales across the restaurant sector, as a result of a record number of restaurants, including household names such as Byron, Strada and Gourmet Burger Kitchen falling into insolvency. This market trend was reflective of the alleged ‘casual dining crunch’ which began to sweep the UK in 2017 and has been driven by an overcapacity of casual dining venues, following a period of rapid growth.
Ongoing news of new CVAs (Company Voluntary Arrangements) and administrations, economic uncertainty fuelled by Brexit negotiations, and predictions there will be more high street casualties in 2020 suggest challenging times ahead. Confidence amongst lenders has been reduced, with traditionally aggressive lenders announcing a more cautious approach, and resulting in operators resorting to alternative forms of funding.
Increasing cost pressures remains a key challenge for the restaurant sector, including wage costs, business rates, utilities and rent. Disparities in the rental market remain a particular challenge, with those rents agreed to in the 2015/16 boom causing issues for companies who have not gone through a CVA or rent review process.
Market predictions for 2020
- There will be a rise in the number of vegetarian and vegan offerings available to consumers, with specialist menus becoming increasingly mainstream for the environmentally conscious consumer.
In these turbulent times, there is an opportunity for independent operators to thrive, as consumers favour niche, local eateries over large chains. We expect to see limited interest from traditional institutional investors, with a growth in interest from specialist investors including private equity, incubator investors etc. On a positive note, there has never been a better time to acquire sites, with plentiful supply, reduced premiums, and landlords offering significant inducements.
Most notably, we were instructed on behalf of joint administrators, Will Wright and Mark Orton from KPMG to market Jamie’s Italian, Barbecoa and Fifteen, a group of 20 restaurants operating as part of the Jamie Oliver Restaurant Group. Located in prime locations across the UK, the properties were offered on an individual, sub-group or group basis.