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Creditors should give leeway to struggling restaurants, says accountant

27 July 2009
Creditors should give leeway to struggling restaurants, says accountant

Suppliers and creditors are being urged to give leeway to restaurant owners as the recession tightens its grip, or see more businesses go to the wall completely.

John Cullen, insolvency practitioner at Harris Lipman chartered accountants, said the sector as a whole has severe problems. Firms feel unable to pass on higher food bills, utility costs and rent in their prices to customers already feeling the effects of the economic downturn, resulting in a squeeze on profits.

He added: "People are spending less or staying at home, meaning that increasing costs are matched by decreasing turnover."

Landlords in particular needed to take a more understanding attitude if they wanted to avoid being left with empty properties on their hands.

"However, we've also seen examples where otherwise viable businesses have been forced to close because of the very high rents still being charged in the sector, and it seems some landlords are more willing to pay empty rates, insurance and security costs for a property, than show a little flexibility to help a professional business to continue."

On a more positive note, Cullen said some restaurant owners were coming up with innovative solutions to their current problems, such as tapping into one-off sporting events or concerts.

But he warned that under-resourcing these events, either with staffing or food, could damage the chance of repeat business.

He said: "In a more difficult world, the restaurant has to be different to its rivals, whether that be cheaper, more exclusive, better, trendier or friendlier.

"There are signs now that customers are beginning to venture out again, at least those who do not feel insecure in their own job. Those restaurants that survive will be stronger and fitter for the future."

More diners are eating out but are spending less, says survey >>

London restaurants see first green shoots of recovery >>

January takings drop at 60% of London restaurants >>

By Janie Stamford

E-mail your comments to Janie Stamford here.

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