Writing for Business Advice, Anx Patel, CEO and founder of GoKart, lays out the challenges facing small restaurant businesses and outlines a roadmap for saving independent high street eatieries before it’s too late.
The UK has seen a wave of high-profile restaurant closures over the past few months. Well-known chains such as Byron and Jamie’s Italian have come under massive financial strain, forcing them to close their doors. Others have filed for administration – Cau’s Gaucho steakhouses, for instance, was recently rescued by its lenders after initially closing down all 22 restaurants in July.
There’s no denying that restaurants across the country are struggling amidst what has been a difficult trading period. A report from the government’s insolvency service last year revealed the full extent of the issue; it discovered that 984 restaurants had fallen into administration in 2017 – a 20% rise on the previous year’s figures.
Despite the media attention surrounding the downfall of recognised restaurant chains, it is actually small, independent establishments that are facing the biggest challenges. In fact, according to a recent report by GoKart – two out of every five UK adults said they have seen a favourite local independent restaurant close down this year.
The pressure on smaller businesses is certainly taking its toll, yet the struggles being faced by these important, independent eateries are all too often overshadowed by the financial hardship of larger restaurant chains.
The main factors contributing to high street restaurant closures
With the UK’s food and restaurant industry facing testing conditions, it’s important to understand what has triggered the demise of so many formerly popular and well-attended establishments.
One of the key factors is the steadily rising financial costs that restaurant managers must deal with.
Escalating business rates, for example, represent a major threat to UK high streets, and have made it increasingly difficult for smaller businesses to operate. Unfortunately, business rates will continue to place a heavy burden on small businesses for the foreseeable future, with Altus estimating that restaurants will pay an extra £653m in business rates over the next five years.
Meanwhile, rents for residential and commercial properties across the UK continue to rise – this is particularly true for restaurants located in prime retail areas. Add to this the introduction of the higher National Living Wage and it is easy to see how costs are mounting.
Of course, the final factor impacting on restaurants’ ability to thrive at present is Brexit. The UK’s impending departure from the European Union (EU) has created a feeling of anxiousness and uncertainty amongst many business leaders.
Such ambiguity has already contributed to the fall in the value of the pound, which has two consequences. Firstly, it affects consumer spending – in fact, the aforementioned GoKart research revealed that more than half of the UK public are currently deterred from eating in restaurants due to the price.
The second consequence is the price of ingredients; a weaker pound means the country’s restaurants must pay more for produce that comes from overseas. This, in turn, means they must increase their prices or sacrifice their profits.
How is the government supporting local, independent businesses?
Despite the significance of these challenges, the government has so far failed to provide the adequate support for small restaurants at this pressing time. In fact, the implementation of new regulations – like increased business rates and a proposed measure to force restaurants to display calorie counts on their menus – could, in fact, add to the financial pressures already being faced by local, independent eateries.
Consumer demand for independent restaurants nevertheless remains strong, with 42% of people wanting to see the government enforce limits on the number of national or multinational chain restaurants opening on the UK’s high streets. Higher emphasis must, therefore, be placed by Westminster on ensuring the survival of the country’s cherished local restaurants.
Proposed measures to prevent the closure of more UK restaurants
Faced with several obstacles, independent establishments need to utilise the resources available to them to remain competitive. Luckily, the recent rise of FoodTech means that businesses can adopt new technology that allows them to operate efficiently, be it sourcing new ingredients or attracting a new customer base.
While bigger companies and restaurant chains are better placed to manage the costs associated with rising food prices – particularly as a result of long-standing contracts with suppliers and discounts for bulk buying – smaller establishments feel the repercussions of higher prices much more. Fortunately, solutions like GoKart enable restaurants to order ingredients from high-quality suppliers easily, quickly, and for less money.
By bringing together hundreds of independents to buy from selected suppliers via a single platform, GoKart is able to offer restaurants savings of up to 20%, allowing independent restaurants to enjoy the same discounts offered to larger chains.
Taking advantage of the UK’s booming takeaway sector is another fantastic way for smaller establishments to expand their customer base and appeal to new audiences who might otherwise be unaware of their restaurant. The soaring popularity of apps such as Deliveroo and UberEats means that restaurants can cater to changing consumer preferences – which now include a greater reliance on home delivery services. Being alert to new opportunities offered by FoodTech is therefore critical for businesses that are looking to operate more efficiently and attract a higher number of regular clientele.
Given the current landscape, the government needs to support local restaurants to ensure they can continue providing interesting, affordable and high-quality food to UK consumers. With new establishments undeterred from setting up base around the country – particularly in London, which sees an abundance of new restaurants opening their doors every year – small businesses need to utilise new tech to lower their costs. Doing so will improve their efficiency, ensuring they can weather the current market conditions and are able to compete with larger chains on a more level playing field.
Anx Patel is the CEO and founder of GoKart, an app that enables restaurants to order ingredients from high quality suppliers easily, quickly and for less money.
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