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Restaurant numbers fall for sixth consecutive quarter

19 August 2019 by
Restaurant numbers fall for sixth consecutive quarter

Restaurant numbers in the UK have fallen for the sixth quarter in a row, with independent operators bearing the brunt of closures.

Despite several high-profile restaurant groups shedding sites, the Market Growth Monitor from CGA and AlixPartners suggests brands are in fact proving more resilient than independent operators.

A survey of the country's supply of licensed premises showed a 3.4% drop in restaurant numbers in the 12 months to June 2019, an average of about 18 net closures a week. Group-owned restaurants, with more than one site, saw a smaller reduction of 1.2% - which has been in part attributed to some operators continuing expansion plans.

Warning that further contraction could be on the horizon Karl Chessell, business unit director for food and retail at CGA, said: "These are turbulent times for the restaurant, pub and bar sectors. As our new research shows, conditions are especially tough for independents, leased pubs and Italian restaurant operators. But while licensed sites are clearly in overall decline, things may not be quite as bleak as recent media commentary has suggested.

"You don't have to look too far to find bright spots in the market. The emergence of dynamic young restaurant brands, the soaring popularity of certain cuisines and the revival of managed pubs in many parts of the country all provide grounds for optimism, and operators that can respond nimbly to shifting consumer tastes have a lot to look forward to."

Sites serving Italian, Indian and Chinese cuisine recorded the largest amount of net closures in the period. The number of Italian restaurants fell by 3.2%, including the collapse of Jamie's Italian. However, Middle Eastern, Turkish and Caribbean restaurant numbers have increased by more than 60% in the last five years, while vegetarian sites have increased by a third.

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 merger and acquisition activity.

"We would expect to see private equity 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."

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