Why are restaurants closing in the UK?

So far in 2018 we have seen many high street closures and the restaurant chains are the hardest hit.

1. January: Jamie’s Italian (12 restaurants)
2. February: Jamie Oliver’s Barbecoa (2 restaurants)
3. March: Prezzo (94 restaurants)
4. May: Carluccio’s (34 restaurants)

These are just some of the major chains that have gone bust, however check the list HERE . It’s unimaginable. Closures every day.

So, unsurprisingly the question arises, why are so many restaurants closing in the UK, especially in London? Let’s look at some of the major reasons supported by news and articles.

Brexit

According to an article published on Independent in Oct 2017, “20% of the restaurants or 14,800 outlets will face closure due to Brexit”. Low Pound (£) value, hence rising cost and low profit margin. So far, this research seems to be true. It seems, Brexit certainly is one of the major reasons for the closure.

Increase in Minimum Wage

Staff cost is the highest cost in restaurant business alongside rent and business rate. Since April 2018 an increase of 33p or 4.4% from £7.50/hr to £7.83/hr. Majority of restaurant employees are on minimum wage, so the increase has certainly added more pressure on restaurant owner and operators.

Change in Consumer Behaviour or Eating Habits

Blame Netflix or Amazon Prime or Just Eat or Deliveroo, they have certainly changed consumer eating habits. People are ordering more delivery and takeaways as compared to dining out. Profit margin on delivery is equal to none because restaurant owners pay 15-20% to companies like Just Eat & Deliveroo. Besides that, on takeaway and delivery the chances of up-selling alcohol are minimal, which of course has the highest profit margin.

Over Expansion

An article published on Telegraph in 2014 says “Celebrity chef Jamie Oliver’s restaurant group has served up a rise in annual turnover but had to swallow a reduction in profits as it invested in expansion and set up a loyalty scheme for customers”. So the signs were there because loyalty scheme itself wouldn’t force closure. The story with Carluccio’s seems to be very similar. Check this out.

Brand Fatigue or Saturation or Lack of Adaptability

All of them represent same meaning when it comes to restaurant industry. “Brand fatigue is a marketing term which refers to a situation where consumers are bombarded with same message from several brands in such a level that consumers disconnect themselves with the brand.” In context to restaurant industry, it implies saturation or over crowded or unable to change and provide fresh dining experience. For e.g. unable to adapt the demand of “Vegan” or change the menu into healthy dishes, high streets crowded with restaurants and most of them serve same food and experience.