Even before the Covid-19 crisis the casual dining sector was in serious trouble the last couple of years with the loss of Jamies Italian, the mass closures or planned closures of restaurants run by
- Frankies and Bennys
- Gourmet Burger Kitchen
- Las Iguanas
- Cafe Rouge
- Pizza Express
The list just keeps on growing. The reasons for the problems keeps growing as well
- Brexit ( Jamie Oliver cited as main reason )
- Business Rates
- Wage costs with new minimum wage
The last one of course is a complete game changer for the industry if there are going to be some social distancing measures going forward. At current wages, rents and other costs these businesses will not be sustainable unless they can operate at near full capacity at least at some times of the week. It may be that the only way they can survive is by raising prices. Will the public pay increased prices?
Commentators from the world of corporate restructuring have said that the industry is going to lose at least 25% of its capacity. This should leave space for some lean operators to do well. Lean is the key of course. So many operators backed by private equity or venture capital are carrying huge levels of debt. Maybe small independent restaurants will become more part of the landscape. They won't have economies of scale but if demand is right they could thrive. The alternatively maybe only a few large operators will hoover up all the struggling sites?
Will Wright, head of regional restructuring at KPMG, said the combination of a high fixed-cost base, “zero revenues coming in” and social distancing made it very difficult to forecast future demand and “plot a return to normality”.
Some of the very high-end Michelin starred restaurants have also said that they do not think they will survive as they rely on rich foreign visitors as well as locals to make money. Until international visitors are coming back to the UK they face a difficult future even with 1m distancing rules.