Major branded restaurant groups remain confident about the outlook for their business and expect to out-perform the economy over the next couple of years, according to our recent survey of major UK restaurant groups conducted in partnership with the British Hospitality Association.
Restaurants in our survey reacted swiftly and decisively to the first signs of the downturn. Typically they renegotiated food and beverage contracts, reduced headcount, re-engineered menus and offered attractive promotions without eroding margins or compromising customer service. As a result they have been able to trade their way through the recession.
Over a third said they would need additional funding in the next 12 months and half would need more in 2010/11. A significant number are keen to push ahead with roll out plans and still have an appetite for borrowing. Currently they are seeing some very attractive opportunities in the commercial property market to acquire new sites with incentives from landlords that would help reduce fit-out costs.
However lack of available finance could inhibit these roll out plans. The vast majority of restaurant businesses said that over the past year, banks have hardened their attitude to both existing and new debt. Half experienced a tougher attitude towards current debt and 60 per cent found new finance harder to come by.
One of the fundamental issues for a capital restrained bank looking to lend to the restaurant sector is the relative lack of asset security that a typical restaurant provides. This combined with the general exposure to the consumer facing economy and related unemployment concerns may make obtaining new lending tough for restaurant businesses, increasing the importance of equity for funding roll outs in the short term.
This was the first survey the BHA and BDO have undertaken in this area and the aim of this annual survey, will be to provide a wide-ranging picture of the commercial restaurant industry from year to year, looking at the issues faced by restaurateurs and the actions they take.
In total the survey covered 24 brands including over 1,200 units employing 30,000 employees and with an aggregate turnover of over £1bn.
If you would like further information on the restaurants market or a copy of this survey, please contact David Campbell or Raj Patel on 0207 893 3610 or 0208 893 2656.