The UK’s top restaurant chains fell to a loss of £82m in the last year as they struggle to stay afloat in the increasingly competitive casual dining sector.
The top 100 restaurant groups fell to the hefty loss in the year to the end of March, compared to a pre-tax profit of £102m the previous year, according to accountancy firm UHY Hacker Young.
The sharp decline in fortunes comes after a string of restaurant chains have been forced into radical restructuring plans as they race to shut down loss-making branches.
Many of the chains had gone through a period of rapid expansion, funded by large private equity-backed firms. But the growth has outpaced demand and the groups have been forced to make cuts amid a crash in profit, according to the report.
The casual dining sector has also been hit by increased rates and labour costs, as well as a fall in the pound and consumer uncertainty. Of the top 100 restaurant groups, 48 are now making a loss, up from 37 last year.
High street stalwarts such as Prezzo and Carluccio’s have been forced to close dozens of restaurants and slash hundreds of jobs in recent months after entering into company voluntary arrangements (CVA).
Last week Jamie Oliver’s restaurant chain fell into administration after failing to secure additional investment following its CVA last year.
“Restaurant groups are having to undergo radical restructuring surgery just to stay afloat,” said Peter Kubik, partner at UHY Hacker Young.
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“Cutting down the number of branch chains is financially stressful for restaurant companies but in the long term it is essential they get to the right size.”
But some restaurant chains have defied tough conditions in the casual dining sector. The Restaurant Group, which owns Frankie & Benny’s and Wagamama, posted a 57 per cent rise in sales in the year to May, while peri-peri chicken chain Nando’s also reported a bumper year of sales in 2018.