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Rising food costs herald the end of mid-market restaurant boom

01 April 2008 by

Rising food costs and too many mid-market eateries is likely to lead to a high number of business casualties later this year one analyst has warned.

The so-called perfect storm of credit crunch, smoking ban, rising energy and food prices and tightening consumer spending as the UK economy slows, is set to hit restaurant margins hard.

Peter Backman, managing director of Horizons, said: "Since the smoking ban many pubs have switched their focus from the sale of drink to food, meaning they are now competing with high street restaurants. This has led to an over-capacity of outlets in the mid-spend sector.

Backman also warned that operators' food costs were rising by approximately 5% presently and this rate was set to increase to 6.5% in the coming months. However restaurant prices are set to increase just 3.5% during the next half year and this shortfall would put a "great strain on operators' already slender margins.

Average spend in pubs, restaurants and fast-food outlets is £6.01 per head with customers eating out on average 1.3 times per week. Inflation raises the per-head spend to £6.21.

Average spend on a meal in a UK restaurant is now £11.09 per head, including drink, while consumers spend £5.22 on the average pub meal. Average spend at fast food outlets is £4.60.

Adnams warns of tough 2008 for pubs >>

More high profile pub failures predicted >>

Administrators warn of further licensed trade failures >>

UK consumers set to eat more fast food than ever >>

Horizons website >>

by Christopher Walton

E-mail your comments to Christopher Walton here.

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