That’s according to the new edition of the Market Growth Monitor from CGA and AlixPartners. Despite branded operators drastically cutting site numbers and in some cases disappearing completely - the last few months have seen the demise of Jamie’s Italian and Spudulike - the report states that independents have borne the brunt of the closures.
The quarterly survey of the country’s supply of licensed premises reports a 3.4% drop in restaurant numbers in the 12 months to June 2019 — an average of around 18 net closures a week.
For group-owned restaurants, defined as businesses with more than one site, the reduction in numbers was smaller at 1.2%, a figure that reflects the fact that some groups, especially small to medium sized operations, continue to open new sites.
In an new review of cuisine types, the Market Growth Monitor shows that the Italian, Indian and Chinese sectors have recorded the most net closures in the last 12 months.
The number of group-owned restaurants specialising in Italian food fell by 3.2% after site closures and some high-profile business restructuring - including Prezzo and Carluccio’s - with the collapse of Jamie’s Italian the most prominent casualty.
“The trend suggests that more market contraction could follow,” says Karl Chessell, business unit director for food and retail at CGA.
But many other cuisine types have been in strong growth. CGA research reveals that Middle Eastern, Turkish and Caribbean sectors all have at least 60% more restaurants than they did five years ago, and the total number of number of vegetarian restaurants in Britain has increased by more than a third in just 12 months.
“The rapid growth of restaurants focused on certain cuisine types highlights how they can quickly find favour in response to the fast-changing tastes of British diners,” says AlixPartners managing director Graeme Smith.
The Asian-led part of the restaurant market is of particular interest to investors. It is popular with consumers and there is a comparative lack of chains with national scale, making it ripe for further M&A activity.”
“We would expect to see Private Equity be increasingly active in this segment of the market, in response to this consumer-led demand. However, overall market pressures can still result in valuations and terms falling short of sellers’ expectations. This was shown by the owners of Thai restaurant brand Giggling Squid choosing not to sell at the current time after its recent marketing process.”
Across the licensed sector as a whole, Britain’s number of premises dropped 2.4% in the 12 months to June 2019, to just under 117,000, with the rate of closures of pubs and bars lower than the market average at 2%.
The report also indicates a further drop in leased pub sites. The number of drink-led leased pubs fell by 25% in the five years to June 2019, to just under 13,000 — partly a reflection of moves by major pub companies to switch to directly managed sites and a switch to food.
“These are turbulent times for the restaurant, pub and bar sectors,” says Chissel. “As our new research shows, conditions are especially tough for independents, leased pubs and Italian restaurant operators. But while licensed sites are clearly in overall decline, things may not be quite as bleak as recent media commentary has suggested.
You don’t have to look too far to find bright spots in the market. The emergence of dynamic young restaurant brands, the soaring popularity of certain cuisines and the revival of managed pubs in many parts of the country all provide grounds for optimism, and operators that can respond nimbly to shifting consumer tastes have a lot to look forward to.”
