What 3 vital lessons can every business in the Hotels and Leisure sector learn from the Casual Dining Crunch?

If you’re not familiar with the term ‘casual dining’ it’s just the latest term for those restaurants that sit in between fast food establishments and fine dining restaurants. Chains such as Byron, Strada, Prezzo and Jamie’s Italian are perfect examples … or at least they were.

Five years ago, casual dining was enjoying an unprecedented boom. Investment was pouring in and chains were opening new restaurants in locations all over the UK on an almost weekly basis. Add to this the prices being quoted to the larger hospitality conglomerates looking to purchase the leading brands were soaring.

Today, however, the forecast for the casual dining sector is a little different.

Over the last few months the so-called “casual dining crunch” has been devastating. Jamie’s has closed 12 branches and is over £70m in debt while Jamie Oliver’s Barbacoa restaurants are in worse shape having gone into administration. Meanwhile Byron is in the midst of trying to implement a financial rescue plan, Strada is closing branches at a steady rate and Prezzo has announced it is ‘restructuring’.

While statistics can of course be spun to illustrate any point, it is interesting to note that in 2016 a YouGov poll claimed eating out was Britain’s favourite leisure activity but only one year later the government’s Insolvency Service said failed restaurants had increased by 20%.

So why have things changed so dramatically so quickly?

It would probably be correct (if not a little simplistic) to blame Brexit door. Yes Brexit had had an effect on the spending power, consumer confidence not to mention employment and food costs but it is not the sole cause.

Oversaturation and over-expansion are also almost certainly contributory causes. This comes from too much choice often being as off putting to a potential customer as over pricing.

According to leisure and tourism sector experts, the answer could also be linked to a massive change in the average adult’s personal leisure preferences. People are apparently now more likely to stay in enjoying box sets and movies provided by low cost streaming services. They order in takeaways (again at a lower cost) via Just Eat and Deliveroo and increasingly they wash those takeaways down with bargain booze bought on the back of supermarket offers.

Stefan Chomka, editor of Restaurant magazine, thinks it’s likely to be a combination of all of these factors and more:

“There are several things in play that, when they come together, is like a house of cards collapsing. First, there’s the oversaturation. Byron expanded rapidly, Pizza Express kept adding as did Nando’s and Zizzi … there are just too many restaurants. Simultaneously, food costs, staff costs, rents and business rates have all gone up. If you’re operating 100 sites, your margins are being squeezed and squeezed. And times are tough. Even if they spend a little more when they do, people are eating out less.”

So taking all of this into consideration, what do aspiring bar owners, restauranteurs and hoteliers need to do to insulate themselves against the potential effects of a similar trend affecting their businesses?

Our research into the key tips being put forward by industry experts seem to be:
1. Be realistic – keep your plans manageable and achieve what you set out to achieve both for you and your investors. Overpromising and under delivering will only put unnecessary pressure on your business and your finances.

2. Be authentic – people know when they’re being over sold. The sense that a chain is cutting corners and putting profit ahead of quality and/or service will drive customers away. One only has to look at the immediate effect Jamie’s felt. This was after it became common knowledge they bought their meat from the same supplier as Weatherspoon’s as proof.

3. Be true to your brand – Don’t forget the personality of your restaurant is as important as your food. A bad experience will not only stop consumers from returning, it’s also likely they will put off their friends too. All brands have a natural life cycle so understand you need to review and refresh yours as required.

At Keebles our specialist Hotels and Leisure team work with restaurants, bars and hotels of every size, from ambitious local independents to national chains. If you are building a business in the hotels and leisure industry and have a legal question you’d like us to answer please email Craig Law at craig.law@keebles.com or call Craig on 0114 252 1440.

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