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Morning Briefing for pub, restaurant and food wervice operators

Mon 19th Aug 2019 - CGA and AlixPartners survey shows sixth consecutive quarterly drop in UK restaurant numbers
CGA and AlixPartners survey shows sixth consecutive quarterly drop in UK restaurant numbers: UK restaurant numbers have fallen for the sixth quarter in a row, the new edition of the Market Growth Monitor from CGA and AlixPartners has revealed. Independent operators have borne the brunt of the closures, with group-owned restaurants proving more resilient despite some major brand failures. The quarterly survey of the country’s supply of licensed premises reports a 3.4% drop in restaurant numbers in the 12 months to June 2019 – an average of about 18 net closures a week. For group-owned restaurants, defined as businesses with more than one site, the reduction in numbers was smaller, at 1.2%, reflecting the fact some groups, especially small to medium-sized operations, continue to open sites. In a new review of cuisine types, the Market Growth Monitor shows the Italian, Indian and Chinese sectors have recorded the most net closures in the past 12 months. The number of group-owned restaurants specialising in Italian food fell 3.2% after site closures and some high-profile business restructuring – with the collapse of Jamie’s Italian the most prominent casualty. “The trend suggests more market contraction could follow,” said Karl Chessell, business unit director for food and retail at CGA. However, many other cuisine types have been in strong growth. CGA research reveals Middle Eastern, Turkish and Caribbean sectors all have at least 60% more restaurants than they did five years ago, while the number of vegetarian restaurants has increased more than a third in only 12 months. AlixPartners managing director Graeme Smith added: “The rapid growth of restaurants focused on certain cuisine types highlights how they can quickly find favour in response to the fast-changing tastes of British diners. The Asian-led part of the restaurant market is of particular interest to investors. It is popular with consumers and there is a comparative lack of chains with national scale, making it ripe for further M&A activity. We would expect private equity to be increasingly active in this segment of the market in response to this consumer-led demand. However, overall market pressures can still result in valuations and terms falling short of sellers’ expectations. This was shown by the owners of Thai restaurant brand Giggling Squid choosing not to sell at the current time after its recent marketing process.” Across the licensed sector as a whole, Britain’s number of premises dropped 2.4% in the 12 months to June 2019 to less than 117,000, with the rate of closures of pubs and bars lower than the market average at 2.0%. The report also indicates a further drop in leased pub sites. The number of wet-led leased pubs fell 25% in the five years to June 2019 to less than 13,000 – partly a reflection of moves by major pub companies to switch to directly managed sites and a switch to food.

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