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Sector spotlight: the restaurant trade

Defying received wisdom, the restaurant sector performed surprisingly well during the downturn - and there's scope for growth ahead.

Facts and figures

  • The UK eating out market is worth over £40bn
  • The average UK adult now eats out approximately 1.5 times a year
  • There are over 30,526 businesses in the UK
  • The sector employs over 554,660 people
  • And has seen an annual growth of 5% from 2012-2017

The way that we dine out has transformed in the last decade with cafes, restaurants and street food stalls cropping up on every corner.

And the resilience of the eating-out market amid the darkest economic period for 80 years has been nothing short of staggering.

Food's an essential good, of course, but Britons have demonstrated a willingness to pay a premium for table service, forgoing other luxuries instead – making buying a restaurant business a lucrative option.

Untamed growth

The UK's restaurant sector is booming and eating out has become a part of everyday life for many Brits, even during periods of economic uncertainty.

"I've never seen a recession like this - what's been surprising is the resilience of the dining-out market," Andrew Page, chief executive of The Restaurant Group, which achieved like-for-like sales growth throughout the downturn, told the Financial Times.

"It has become a small-ticket item," he continued. "We're seeing a shift towards less stuff and more experiences: not another carpet or kitchen but people are prepared to go out for a family meal."

Jon Lake, a finance director in Deloitte's leisure team, agreed: "There has been a cultural change towards eating out more and we're reluctant to give it up when times are hard," he said.

Andrew Page, chief executive of The Restaurant Group

"If you look at our level of eating out compared to the US, there's still some way to go," he argues. "I'm very firmly of the view that we've got another generation of growth in the dining-out market."

If the sector as a whole has considerable room for growth yet, then some types of restaurants have more room than others.

A wider range of cuisines

The range of cuisines available has widened at a dizzying rate in recent years. Thai restaurants have quickly gone from exotic to commonplace, while Peruvian cuisine, among others, have recently been tipped as the Next Big Thing'. Coupled with the increased buying power of millennials, there has also been an explosion in street food, healthier alternatives and ‘slow’ food but with fast service.

Restaurateurs who can credibly brandish labels like 'sustainable', 'ethical', 'free range' can prosper. While the organic label has lost its lustre, consumers are increasingly concerned about the provenance of their food, particularly in relation to air miles and the welfare of both animals and the humans involved in the supply chain.

Challenges facing the sector

Despite its robustness amid challenging trading conditions, the restaurant trade remains a difficult one and still faces a number of challenges.

Economy

Peter Martin, Vice President of CGA Peach states that:

"Eating out has become a near-universal habit for British consumers, and restaurant and pub operators have responded with incredible energy, dynamic new concepts and speedy brand roll-outs.

But that has led to the twin challenges of intense competition for market share and heightened expectations among consumers. Add in developments like soaring property costs, the National Living Wage and Brexit and we start to see how tough it is out there for the operators."

However, consumer spending across the board has remained relatively firm since the UK decided to leave the EU – the amount spent on dining out is still rising faster than other sectors.

Staff

Working as part of a team is an integral part of any hospitality business and restaurants can end up spending over a third of their revenue on staffing costs.

Absenteeism is a major problem, with a preponderance of waiting staff who see the job as a short-term occupation rather than a career.

And a large number of posts to fill - there are over 30,000 restaurants across the UK - plus a trade characterised by long hours and modest pay, equals a shortage of quality kitchen and waiting staff.

Reputation

In a sector where word of mouth can make or break an establishment, the stakes are high when it comes to the challenge of recruiting the right staff.

Restaurants in prime, high street locations or - even better - touristy areas, are less troubled by word of mouth. Indeed, eateries serving appalling fare at extortionate prices can thrive for years if they enjoy proximity to the Royal Mile or Canterbury Cathedral.

Cost of ingredients

With the changing climate wreaking havoc on global food production with increasing regularity, the rising cost of ingredients is another emerging challenge - particularly for eateries whose modus operandi is to offer value.

But then again, the rising cost of food is a key factor behind the rising cost of living generally, a trend which is sure to guarantee growing demand for restaurants which can offer good value.

Cashing in on the tech boom

The boom in tech-driven restaurant delivery services has revolutionised the way that restaurants operate, as the consumer appetite continues to grow for chef-made meals on demand. With companies like Deliveroo, UberEats and Michellin-starred delivery service, Supper.

Deliveroo, for example, has raised over £130m and expanded to over 32 cities in the UK alone.

Essential skills

Being a restauranteur can be a gruelling task, involve a level of financial risk, however, it can also be an extremely satisfying and exciting way to earn a living.

If you are willing to work hard and manage your money, owning a restaurant could be the business for you. But there are certain characteristics that define a good restauranteur.

Multitasking – As a restaurant owner, you will need to be able to do a number of things at the same time. Whether it’s answering the phone, looking after customers, tracking your inventory, paying your suppliers or just catching up on admin.

Creativity and passion – Owning a restaurant requires a level of creativity. In order to attract repeat customers, good reviews and publicity your menu and the dining experience will have to be second to none.

Customer service – Customer service skills are essential in the hospitality trade. Besides your food, this will be one of the main reasons your customers will return.

Problem-solving – As a restaurant owner you need to be able to think on your feet. Any disruption to your business equals potentially lost profit, so it’s down to you to get any issues fixed as soon as possible.

Ability to cope under pressure – If you can’t handle pressure, then buying a restaurant certainly isn’t for you!



Jo Thornley

About the author

Jo joined Dynamis in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between BusinessesForSale.com, FranchiseSales.com and PropertySales.com and likeminded companies.

@BusinessMaiden

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