The UK’s top 100 restaurants recorded a £93m loss in the last year, down from a profit of £37m for the 12 months previously, new research has revealed.
Accountancy firm UHY Hacker Young, which conducted the research, said that rising overheads, such as wages, raw materials and falling sales, were to blame for the category’s stagnation.
Peter Kubik, partner at the group, explained that – following the Brexit vote – restaurants are finding that the cost of imported goods has risen due to the weaker pound.
“The restaurant sector in the UK is still suffering from the sharp chop in profitability earlier this year,” he said.
“Many restaurant groups are finding it difficult to raise capital from their shareholders – they are finding their patience for putting in more money has run out.
The firm’s research did, however, highlight the growing popularity of home delivery services, which, according to Kubik, comes as a “mixed blessing” for restaurants.
“Restaurant owners can also look to extend credit terms with their suppliers where possible – this can help to improve cash flow,” he affirmed.
“However, despite all the bad news there is still opportunity in the market for restaurants that can meet a clear consumer demand.
“There are plenty of big success stories in the market – it’s just more challenging than ever to maintain success as tastes and budgets change.”
While these services provide an additional channel for sales, for some dining groups, they have come at the cost of a fall in more profitable in-person visits.
This has, according to Kubik, cut sales of alcohol, which is often a restaurant’s “highest-margin product”.
Meanwhile, in order to meet upcoming financial obligations, some restaurant groups have been forced to raise capital from shareholders.
“There are now few restaurant chains that aren’t either considering a strategic restructuring or a reduction of their branch networks,” Kubik concluded.
“Restaurants are also taking action at a micro-level, such as simplifying their menus to reduce waste, cut costs and focus on their most popular dishes.”
Several major restaurant groups are now closing loss-making branches in order to restructure their debts.
Recent examples include Flat Iron, which was forced to close its Notting Hill site due to large rent increases in July 2019 – it had only been open for two years.
Steakhouse and cocktail bar chain Hawksmoor announced the closure of its remaining two branches of Foxlow, its sister restaurants, in June.
Chiquito and Frankie & Benny’s owner announced this September that it will close at least 88 of its branches over six years. And Giraffe and Ed’s Easy Diner revealed in March that it will close 27 of its restaurants, putting 340 jobs at risk.