Despite ‘golden age' of restaurant openings, its still a tough market

Talk of a boom-time in restaurant openings ignores the similarly high number of failures. The operators know it's still tough out there. Joanna Wood reports

Pronouncements on the state of the restaurant industry have come thick and fast in recent months.

They range from the Amex-commissioned reports in June and July, which told us that confidence among European and UK restaurateurs was sky-high, to the predictions of food service analyst Horizons for Success, which forecast that, by 2011, £45b of what we spend on food and drink will be in restaurants, take-aways and pubs.

Now there's an assertion from London restaurant guide Harden's that we are entering a "golden age" of dining out in our capital city. The annual guide, in its 17th edition out next week, bases its assumption on the fact that the number of new restaurant openings "of note" leapt significantly against the previous year.

Cancel out

In fact, Harden's lists 22 more new openings for the 2006-07 year than in 2005-06. But interestingly, that number is closely mirrored in the number of restaurant closures over the same two years - 24 more closures in the past 12 months, to be exact. The two cancel each other out. So is there a correlation between the two?

"That's the 64,000-dollar question," guide publisher Richard Harden told Caterer. He continued: "It's not obvious which way round it works. There could be more closures in boom times because people see it as the right time to cash in and go off to the Costa Brava, or it could be a more malign symptom resulting from businesses not getting enough people through the doors."

The anecdotal wisdom among operators supports the view that there is a link between openings and closures. Chris Galvin, who, with his brother and business partner Jeff, has opened two London restaurants since 2005 (Galvin Bistrot de Luxe, and Galvin at Windows), said: "There's definitely a correlation. When there is more competition down the road, you have to raise your game."

Galvin backs the idea of a London restaurant boom, citing the fierce competition for good restaurant sites around the capital as one indicator. "Prime sites are like gold dust," he said.

Fellow London operator and 2007 Independent Restaurateur of the Year Catey winner Pascal Aussignac concurs about site competition. He recently found himself up against 24 other operators for a location in London's West End. He didn't win the bidding war.

Commenting on the high number of restaurant failures, Aussignac said: "Rents in London are massive, and you have to think of the long term when you look at a site - people don't always do that. Sometimes they put the wrong concept in, and often they don't deliver value for money. I don't think you need ‘clever' restaurants to be successful."

The move away from wannabe top-end fine-dining restaurants has been seen over the past two years in London. Notable successes include Anthony Demetre and Will Smith's brasserie Arbutus, which launched just over a year ago in Soho. The duo have just launched their second stylish brasserie, Wild Honey, just off Oxford Street.

Smith commented: "Business is strong for the right product. We saw there was a gap in the market for a quality, but not special occasion, restaurant - that's why we went for offering great food at reasonable prices."

The trend suits the so-called "gastropub" market, as restaurateur Ed Martin testified. He and his brother Tom have launched four foodie pubs over the past seven years in and around the City of London. They're preparing to launch the Prince Arthur in London Fields in November. "There's a massive market opening up if you put forward a quality offering at a reasonable price," Martin said. "But you have to work hard - competition keeps you on your toes."

Dynamic environment

The footfall in London is high and makes for a dynamic environment, but there is an argument to be made for it being a boom time for restaurants around the country.

Lancashire restaurateur Paul Heathcote, for instance, recently announced that he was not only refurbishing his flagship restaurant at Longridge but opening new restaurants in Manchester city centre, Clitheroe and Cheadle Hulme.

Meanwhile, in the West Country, the boom in restaurant openings shows no sign of abating - one of the latest being Ode, opened by former Waterside Inn chef Tim Bouget in Shaldon, near Torquay.

However, even in fast-moving Manchester, you have to work harder to make your profit margins. "The market here and in Liverpool is tightish," Heathcote confirmed to Caterer. "There's been a slowdown in trade over the past six to nine months, it has definitely been tougher this year."

Diners in Lancashire, like those in London, want both quality and value for money from their restaurants, Heathcote said. It's a trend that is apparent at Bouget's Devon base and in Bristol, where Toby Gritten, formerly of the Albion in the same city, has just opened up at the Pumphouse near the old docks. "Value for money is very, very important," he said.

As in London, there is great competition for sites in Bristol: Gritten beat 11 other chefs to take over the Pumphouse, whose freehold is owned by Scottish & Newcastle.

In villages such as Shaldon, the competition for sites is not as hot. There is certainly a niche for quality restaurants such as Ode in counties like Devon, with a growing percentage of second-home owners with disposable income, but the "very, very small" profit margins mean that many chef-proprietors aren't willing take the leap and operate their own business.

The lesson to be drawn is that there are opportunities for restaurateurs both in and out of London, but you must research your market thoroughly and not pitch your business too high.

Moreover, golden ages have a habit of disappearing overnight if the economy takes a dive, and who knows what will happen over the next few months?

If recent stock market events become more than a temporary blip, the disposable income of many of the dining-out public could shrink drastically.

Number of UK restaurants

(excludes fast-food restaurants and pubs)

Source: Horizons for Success