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More casual dining casualties to come, restructuring experts predict

19 January 2018 by
More casual dining casualties to come, restructuring experts predict

More casual dining casualties will be reported as diners opt for independents offering "unique experiences", restructuring experts have predicted.

This month casual dining restaurants Jamie's Italian and Byron have embarked on restructuring initiatives while other chains, including Strada, have announced mass closures.

David Campbell, partner at KPMG, believes that the current crisis is down to over-expansion of chain restaurants. He said: "There was huge availability a few years ago and a lot brands were bought by private equity and their models require a fast pace of growth, so they were pushed into opening a great number of sites. They have got too many sites in the wrong locations and the CVA as a process is very effective at trimming that and getting back to a profitable core."

George Mills, part of the restructuring team at EY, said he is "expecting to see more casualties" adding that businesses which "have the ability to cut will". The forecast comes as a rise in business rates, staff and food costs as well as the introduction of the apprenticeship levy put pressure on the industry.

Mills explained: "It makes sense to cut once and cut deep because they can take the shock and recover from it quicker. If you look at some of the more well-positioned brands out there they will point to the fact that they have taken the pain and closed a lot of sites already so they're now leaner and leaner to go back into the storm after padding out their house.

"That said, when you look at the data there's about 20 years of growth you can point at so it's a relatively robust sector. When times are hard people want to prioritise, they still want to go out and have a pizza on a Friday night because it's good for the soul."

Campbell explained that a change in the winds may see independent sites take the lead, appealing to younger generations who seek experiences.

He said: "Millennials want to spend their money on unique experiences that they can share with their friends which makes them look like they've done something unusual and different rather than mainstream. We are expecting growth over the next year or two to be coming out of independents rather than chains."

But, Mills said there is still a place for chains, especially in areas where there are fewer independent restaurants.

Byron could close dozens of restaurants under CVA plans >>

Jamie's Italian restaurants ‘under threat' in restructure plans >>

Strada closes 11 branches due to ‘disappointing trading and rising costs' >>

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