Net loss of 670 chain restaurants in 2020

17 March 2021 by
closed sign restaurant

Chain restaurants were among the hardest hit by coronavirus restrictions last year, with a net loss of 670 sites.

The sector was among those with the highest net closure rates, according to research by the Local Data Company and PwC UK, while takeaways and coffee shops have continued to grow in number despite the uncertain climate.

The findings showed an acceleration in the restaurant closures seen in 2018-19, following several years of rapid roll-out which resulted in many locations ending up with over-supply.

While 2018 saw a 5.2% net drop in restaurants and 2019 a 4.5% decrease, the Local Data Company's tracking of 208,057 outlets operated by multiple operators (with more than five outlets) across Britain between 1 January and 31 December 2020 saw an 11.2% decline.

The high number of company voluntary arrangements and administrations across the sector can explain some of the decline in restaurant numbers. However, the real impact of the pandemic is yet to be felt as some sites ‘temporarily closed' during lockdowns, but considered as open in the research, are also unlikely to return.

There are some areas of hospitality that have bucked the trend; for example, takeaway restaurants were one of the best performing categories, seeing continued growth through 2020, with the sector benefiting from fewer operating restrictions than dine-in sites. Increased demand for meal deliveries over the last year has also supported this segment. The number of coffee shops increased, with openings in retail parks and standalone drive-ins offsetting high street closures.

Amid the closures, the research showed that American and Italian restaurants have been most severely impacted. Although among the most popular cuisines in the UK, the large number of sites and multiple operators has led to over-saturation in the market and increased competition.

The outlook for the sector is consistent across the country, with the number of net restaurant closure rates at a similar level. However, given the lack of footfall in city centres since the start of the pandemic and changing working patterns as more people work from home, this could still materialise in the coming months.

David Trunkfield, hospitality and leisure leader at PwC, said: "It has been a difficult year for the hospitality and leisure industry with enforced closures, operating restrictions and consumer caution over Covid-19 all impacting performance. We can expect more change to come as the real impact of the pandemic is inevitably felt once government support schemes unwind and sites become operational, and financial pressures on businesses will become more acute.

"Not all the news is bad though, as new sites continue to open across leisure segments such as foodservice. New and up-and-coming concepts will bring innovation and variety to the marketplace. For those operators in a position to roll-out, there will be a lot of opportunities that wouldn't have been available a year ago. Thinking further ahead, these sectors will emerge stronger than they went into this crisis period, with a healthier and right-sized base of operators."

Lucy Stainton, head of retail and strategic partnerships at the Local Data Company said: "The hospitality sector has been hit hard by the Covid-19 pandemic, especially those businesses reliant on the night-time economy as changing restrictions including curfews and limits on serving alcohol made trading challenging or impossible. These challenges are reflected in the latest LDC data, which demonstrate the scale of decline across chain hospitality operators, which were already experiencing the effect of market saturation pre-Covid.

"The pace at which the workforce returns to offices will have a further impact on hospitality venues in city centre locations, which could leave more businesses vulnerable when government support comes to an end. However, after the best part of a year cooking or ordering takeaways to eat in their homes, pent-up demand from consumers to visit restaurants and other venues with people outside of their household will return and give this sector a much-needed boost once the sector reopens."

Photo: Shutterstock

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