Overall profits fell by 1% to £244.1m in 2024, down from £246.5m the previous year, according to new research by accountancy group UHY Hacker Young.
This was despite turnover at the UK’s top 100 restaurant groups increasing sharply in the past year, reaching £9.6bn in September 2024, a 21% increase from £7.9bn in the previous year.
However, the benefits of that increase in turnover have been largely eroded by the impact of inflation on food and drink costs and a higher interest burden on debt, says UHY Hacker Young.
The results are described by UHY Hacker Young as 'a creditable performance' considering the challenges the sector has faced from the cost-of-living crisis and years of losses the sector has suffered from during the pandemic. The top 100 UK restaurant companies reported a loss of £673m in 2021, it says.
“The sector's ability to maintain profitability despite the impact of the spike in inflation and weak consumer confidence is a very encouraging sign for the hospitality sector," says Martin Jones, partner at UHY Hacker Young.
"It highlights the resilience of restaurant groups in adapting to both volatile trading conditions and rising overheads, which have had a huge impact on the industry overall.”
The return to what UHY Hacker Young calls 'reasonable levels of profits' among the UK’s biggest 100 restaurant groups comes after years of cost cutting that has seen many chains shrink their number of venues and cut staff numbers, shift more sites to suburban areas to reduce overheads, and renegotiate lower rents with landlords, it says.
This lower cost base has enabled many restaurant companies to maintain profits, despite the cost-of-living crisis leading to flat or falling expenditure on restaurants when adjusted for inflation.
“The industry has done a good job of stripping out excess capacity. That has been a really painful process for everyone concerned but the industry is in a better place for it.”
“Over the last few years, many operators in the sector have become much more focused on their cost base rather than just hoping that a growth in sales would eventually repair their margins. As a result many of the UK’s biggest restaurant groups are now in good financial health.”
“With overheads beginning to ease and softening inflation, UK restaurant groups can now focus on growing their revenue, which understandably is what restaurateurs have much more passion for.”